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on Cognitive and Behavioural Economics |
| By: | Jose Apesteguia; Miguel Angel Ballester |
| Abstract: | We propose a rule of decision-making, the sequential procedure guided by routes, and show that three influential boundedly rational choice models can be equivalently understood as special cases of this rule. In addition, the sequential procedure guided by routes is instrumental in showing that the three models are intimately related. We show that choice with a status-quo bias is a refinement of rationalizability by game trees, which, in turn, is also a refinement of sequential rationalizability. Thus, we provide a sharp taxonomy of these choice models, and show that they all can be understood as choice by sequential procedures. |
| Keywords: | individual rationality, bounded rationality, behavioral economics |
| JEL: | D01 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:615&r=cbe |
| By: | Stéphane Robin (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Agnieszka Rusinowska (CES (Centre d'Economie de la Sorbonne), Paris School of Economics – CNRS, 106-112 Bd de l'Hôpital, 75647 Paris, France); Marie-Claire Villeval (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France) |
| Abstract: | We provide experimental evidence of workers’ ingratiation by opinion conformity and of managers’ discrimination in favor of workers with whom they share similar opinions. In our Baseline, managers can observe both workers’ performance at a task and opinions before assigning unequal payoffs. In the Ingratiation treatment, workers can change their opinion after learning that held by the manager. In the Random treatment, workers can also change opinion but payoffs are assigned randomly, which gives a measure of non-strategic opinion conformism. We find evidence of high ingratiation indices, as overall, ingratiation is effective. Indeed, managers reward opinion conformity, and even more so when opinions cannot be manipulated. Additional treatments reveal that ingratiation is cost sensitive and that the introduction of performance pay for managers as well as a less noisy measure of performance increase the role of relative performance in the assignment of payoffs, without eliminating the reward of opinion conformity. |
| Keywords: | Ingratiation, opinion conformity, favoritism, discrimination, social distance,experiment |
| JEL: | C7 C92 D03 D86 M51 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1207&r=cbe |
| By: | Uri Gneezy; Pedro Rey-Biel |
| Abstract: | In contrast to the simplifying assumption of selfishness, social incentives have been shown to play a role in economic interactions. Before incorporating social incentives into models and policies, however, one needs to know their efficiency relative to standard pay-for-performance incentives. We report evidence from a large field experiment comparing the effectiveness of contingent and non-contingent (social) incentives in eliciting costly effort. The company with which we worked sent 7,250 letters asking customers to complete a survey. Some letters contained cash amounts ranging from $1 to $30, whereas others promised to pay upon compliance. We compare the response rates and cost effectiveness of these contingent and social incentives with each other and with a no-incentives control. In line with previous findings, we find that social incentives generated some effort: small amounts increased the response rate with respect to the control, but the size of the reward had a relatively minor effect. In contrast, the response rate for contingent incentives was low for small amounts but increased rapidly as incentives increased. Importantly, for (almost) any given response rate social incentives were more costly than contingent incentives. |
| Keywords: | contingent incentives; gift exchange |
| JEL: | C72 C91 D81 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:585&r=cbe |
| By: | Grimalda, Gianluca (Universitat Jaume I, Castelló, Spain.); Kar, Anirban (Delhi School of Economics, University of Delhi); Proto, Eugenio (University of Warwick) |
| Abstract: | Fairness emerges as a relevant factor in redistributive preferences in surveys and experiments. We study experimentally the impact of varying the probability with which players are assigned to initial positions in Ultimatum Games (UGs). In the baseline case players have equal opportunities of being assigned the proposer position –arguably the more advantaged one in UGs. Chances become increasingly unequal across three treatments. We also manipulate the inter-temporal allocation of opportunities over rounds. We find that : (1) The more initial chances are distributed unequally, the lower the acceptance rates of a given offer ; consequently, offers increase ; (2) Being assigned a mere 1% chance of occupying the proposer role compared to none, significantly increases acceptance rates and decreases offers ; (3) Players accept even extreme amounts of unequal chances within each round in exchange for overall equality of opportunities across rounds. Procedural fairness – both static and dynamic - has clear relevance for individuals. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:989&r=cbe |
| By: | Geng Li |
| Abstract: | Gambling behavior can serve as an informative indicator of important household heterogeneity that is difficult to observe directly in data. We present, to the best of our knowledge, the first comprehensive study of the consumption and personal finance of gamblers using a nationwide representative household survey. We find that consumers are more likely to gamble when income is higher than its normal level predicted by observable characteristics, and that nongambling expenditures tend to increase with gambling activities. In addition, gamblers are more likely to concurrently have various types of debt and assets, assuming a more active position on household balance sheets. However, gamblers do not necessarily have a higher net worth than comparable nongamblers. Gamblers also tend to engage in health-wise risky behaviors, such as smoking and heavy drinking, while paying out-of-pocket on life and health insurance. We present extensive evidence that such behavior differences observed in the data are not primarily due to different degrees of careless reporting to the survey. Rather, we argue that our findings are consistent with the notion that certain consumers, namely, the active participants in personal finance markets, take on gambling as a form of entertainment. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2012-18&r=cbe |
| By: | John Bone; Michalis Drouvelis; Indrajit Ray |
| Abstract: | We consider 2 x 2 games like Battle of the Sexes and Chicken, to test whether or not players are able to coordinate on pure Nash equilibria following recommendations from correlation devices. We use two different correlation devices, public and private, for these games, with the same expected payoffs, in equilibrium. We find that the players overall do achieve coordination by playing the recommended strategies. However, coordination and following recommendations vary significantly among these games. |
| Keywords: | Coordination, Public message, Recommendation, Correlated Equilibrium |
| JEL: | C72 C92 D83 |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:12-04&r=cbe |
| By: | Damien Besancenot (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris XIII - Paris Nord - CNRS : UMR7234); Delphine Dubart (ESSEC Business School - ESSEC Business School); Radu Vranceanu (Economics Department - ESSEC Business School) |
| Abstract: | Humans often lie strategically. We study this problem in an ultimatum game involving informed proposers and uninformed responders, where the former can send an unverifiable statement about their endowment. If there are some intrinsically honest proposers, a simple message game shows that the rest of them are likely to declare a lower-than-actual endowment to the responders. In the second part of the paper, we report on an experiment testing this game. On average, 88.5% of the proposers understate the actual endowment by 20.5%. Regression analysis shows that a one-dollar gap between the actual and declared amounts prompts proposers to reduce their offer by 19 cents. However, responders appear not to take such claims seriously, and thus the frequency of rejections should increase. The consequence is a net welfare loss, that is specific to such a "free-to-lie" environment. |
| Keywords: | Ultimatum game; Asymmetric information; Lying costs; Strategic lies; Deception; Welfare loss |
| Date: | 2012–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00692139&r=cbe |
| By: | Benito Arruñada; Marco Casari; Francesca Pancotto |
| Abstract: | Through an experiment, we investigate how the level of rationality relates to concerns for equality and efficiency. Subjects perform dictator games and a guessing game. More rational subjects are not more frequently of the self-regarding type. When performing a comparison within the same degree of rationality, self-regarding subjects show more strategic sophistication than other subjects. |
| Keywords: | steps of reasoning, other-regarding preferences |
| JEL: | C91 C92 D63 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:611&r=cbe |
| By: | Jérôme Busemeyer (Indiana University - Indiana University); Ariane Lambert-Mogiliansky (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | The Type Indeterminacy model is a theoretical framework that uses some elements of quantum formalism to model the constructive preference perspective suggested by Kahneman and Tversky. In a dynamic decision context type indeterminacy induces a game with multiple selves associated with a state transition process. We define a Markov perfect equilibrium among the selves with individual identity (preferences) as the state variable. The approach allows to characterize generic personality types and derive some comparative static results. |
| Keywords: | Indeterminacy ; Decision-making ; Self-control ; Identity |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-00692024&r=cbe |
| By: | Stéphane Robin (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon) |
| Abstract: | We provide experimental evidence of workers' ingratiation by opinion conformity and of managers' discrimination in favor of workers with whom they share similar opinions. In our Baseline, managers can observe both workers' performance at a task and opinions before assigning unequal payoffs. In the Ingratiation treatment, workers can change their opinion after learning that held by the manager. In the Random treatment, workers can also change opinion but payoffs are assigned randomly, which gives a measure of non-strategic opinion conformism. We find evidence of high ingratiation indices, as overall, ingratiation is effective. Indeed, managers reward opinion conformity, and even more so when opinions cannot be manipulated. Additional treatments reveal that ingratiation is cost sensitive and that the introduction of performance pay for managers as well as a less noisy measure of performance increase the role of relative performance in the assignment of payoffs, without eliminating the reward of opinion conformity. |
| Keywords: | Ingratiation; opinion conformity; favoritism; discrimination; social distance; experiment |
| Date: | 2012–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00694160&r=cbe |
| By: | Pedro Bordalo; Nicola Gennaioli; Andrei Shleifer |
| Abstract: | We present a theory of context-dependent choice in which a consumer's attention is drawn to salient attributes of goods, such as quality or price. An attribute is salient for a good when it stands out among the good's characteristics, in the precise sense of being furthest away in that good from its average level in the choice set (or more generally, an evoked set). A local thinker chooses among goods by attaching disproportionately high weights to their salient attributes. When goods are characterized by only one quality attribute and price, salience tilts choices toward goods with higher ratios of quality to price. We use the model to account for a variety of disparate bits of evidence, including decoy effects in consumer choice, context-dependent willingness to pay, balance of qualities in desirable goods, and shifts in demand toward low quality goods when all prices in a category rise. We then apply the model to study discounts and sales, and to explain demand for low deductible insurance. |
| Keywords: | consumer choice, salience |
| JEL: | D03 D81 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:622&r=cbe |