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on Cognitive and Behavioural Economics |
| By: | Shakun D. Mago (Department of Economics, Robins School of Business, University of Richmond, USA); Anya C. Savikhin (Becker Friedman Institute for Economic Research, The University of Chicago, USA); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University, USA) |
| Abstract: | We experimentally investigate the effect of social identification and information feedback on individual behavior in contests. Identifying subjects through photo display decreases efforts. Providing information feedback about others’ effort does not affect the aggregate effort levels but it does change the dynamics of individual behavior. We develop a behavioral model based on relative payoff maximization, and use it to estimate the degree of pro-social/status-seeking behavior. We find that decrease in ‘social distance’ between group members through photo display promotes pro-social behavior. Information feedback reduces the within-group volatility in effort level and facilitates greater adherence to the ‘group norm.’ Finally, in contrast to standard theoretical predictions, we find significant over-expenditure of efforts in all treatments. This overdissipation can be explained by a combination of non-monetary utility of winning and relative payoff maximization. |
| Keywords: | contest, information, identification, over-dissipation, experiments |
| JEL: | C72 C91 D72 D74 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:12-15&r=cbe |
| By: | Kuhnen, Camelia M. |
| Abstract: | The goal of this study is to ask whether investors learn differently from gains (positive news) versus losses (negative news), whether learning performance is better or worse when people are actively investing in a security or passively observing the security’s payoffs, and whether there are personal characteristics that correlate with learning performance. The experimental evidence documented here indicates that the ability to learn from financial information is on average worse in the loss domain, in particular if the investor has personally experienced the prior outcomes of the financial asset considered. Within individual, learning from gains versus losses, or during active versus passive involvement, are not perfectly correlated, indicating that there exists heterogeneity across people with respect to the type of financial information or context to which they are the most sensitive. Learning performance is determined by acquired financial expertise as well as by genetic factors related to memory and cognitive control. |
| Keywords: | financial decision making; learning; gains; losses; genes; COMT; neuroeconomics |
| JEL: | G11 D83 C91 |
| Date: | 2012–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:39412&r=cbe |
| By: | Klaus Abbink (Department of Economics, Monash University, Clayton, Australia); David Masclet (University of Rennes 1, CREM-CNRS, France); Daniel Mirza (Université François Rabelais de Tours, France) |
| Abstract: | In this paper, we study the determinants of inter-groups conflicts, focusing our attention on the role of inequality aversion. First, we experimentally investigate whether inequality is a driving force of inter-group conflicts. Second, we investigate the factors that make preferences for conflict translate into actions. Inter-group conflicts require both coordination and necessary financial material resources. Our experiment consists of a two-stage game. First, subjects play a proportional rent-seeking game to share a prize. In a second stage players can coordinate with the other members of their group to reduce (“burn”) the other group members’ payoff. Treatments differ in the degree of social inequality set between the two groups by attributing to some subjects (the advantaged group) a larger share of the price than other subjects (the disadvantaged group) for the same amount of effort. We observe frequent conflicts, where, as expected, disadvantaged groups “burn” more money than advantaged groups. Surprisingly, however the frequency of conflicts decreases with the degree of inequality. Our data allow us to identify resignation as the driving force behind this phenomenon. |
| Keywords: | Design of experiments, Experimental economics, Social Inequality, Conflicts |
| JEL: | D72 C91 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cccrwp:2012-07-ccr&r=cbe |
| By: | Rita van Deuren (Maastricht School of Management, Maastricht, the Netherlands (deuren@msm.nl)); Sicco C. Santema (Technische Universiteit Delft, Delft, the Netherlands) |
| Abstract: | In recent years the higher education sector (HE) has been influenced by a marketised approach in which students are perceived as customers and in which student satisfaction is used as a measure of educational quality. Demand-driven education can be looked at as one of the consequences of this marketisation. In response to this phenomenon Dutch universities of applied science have designed their undergraduate professional bachelor programs education in majors and minors thereby offering students the possibility to customize their educational program. However, hardly any knowledge is available on minor choices of students. This paper presents the results of a survey looking into decision making variables influencing the minor choice of undergraduate students from a consumer behaviour perspective. Bachelor students from a large university of applied sciences in the Netherlands participated in the survey. Analysis of the data led to the discovery of nine decision making attributes and five sources of information & advice. The learning value of the minor proved to be the most important minor characteristic students take into consideration when selecting a minor. The contribution of the minor to the future career opportunities of the student and to the broadening horizon of the student also proved important when choosing a minor. The same goes for the contribution of the minor to the development of the competences required for the bachelor degree. Students use several sources of information & advice to form an impression of the minor of their choice. The digital information & advice from the department that offers the minor programme is most important in finding out about the relevant minor characteristics. Students use the information that is in the digital minor catalogue and they consult minor-specific websites. Non-digital information & advice seems less important. These results contribute to the theoretical knowledge about minor selection specifically and about student choices in higher education in general. The results of this study can be used by universities of applied sciences in developing the minor portfolio, in providing information and in coaching students. This study is one of the first into minor decision making variables. Further research is needed to test its results and to elaborate on aspects of minor-selection not dealt with in this study. |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:msm:wpaper:2012/06&r=cbe |
| By: | Loukas Balafoutas; Nikos Nikiforakis |
| Abstract: | Extensive evidence from laboratory experiments indicates that many individuals are willing to use costly punishment to enforce social norms, even in one-shot interactions. However, there appears to be little evidence in the literature of such behavior in the field. We study the propensity to punish norm violators in a natural field experiment conducted in the main subway station in Athens, Greece. The large number of passengers ensures that strategic motives for punishing are minimized. We study violations of two distinct efficiency enhancing social norms. In line with laboratory evidence, we find that individuals punish norm violators. Men are more likely than women to punish violators, while the decision to punish is unaffected by the violator’s height and gender. Interestingly, we find that violations of the better known of the two norms are substantially less likely to trigger punishment. We present additional evidence from two surveys providing insights into the determinants of norm enforcement. |
| Keywords: | norm enforcement, social norms, field experiment, altruistic punishment, cooperation |
| JEL: | C93 D63 H41 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2012-12&r=cbe |
| By: | Bonnefon, Jean-François (Centre national de la recherche scientifique); De Neys, Wim (Centre national de la recherche scientifique); Hopfensitz, Astrid (TSE) |
| Abstract: | The capacity to trust wisely is a critical facilitator of success and prosperity, and it has been conjectured that people of higher intelligence were better able to detect signs of untrustworthiness from potential partners. In contrast, this article reports five Trust Game studies suggesting that reading trustworthiness on the faces of strangers is a modular process. Trustworthiness detection from faces is independent of general intelligence (Study 1) and effortless (Study 2). Pictures that include non-facial features such as hair and clothing impair trustworthiness detection (Study 3) by increasing reliance on conscious judgments (Study 4), but people largely prefer to make decisions from this sort of pictures (Study 5). In sum, trustworthiness detection in an economic interaction is a genuine and effortless ability, possessed in equal amount by people of all cognitive capacities, but whose impenetrability leads to inaccurate conscious judgments and inappropriate informational preferences. |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:25848&r=cbe |
| By: | Franken, Jason R.V.; Pennings, Joost M.E.; Garcia, Philip |
| Abstract: | Researchers employ various measures of risk attitudes to investigate their relation to market behavior with mixed results. We find that a higher-order global risk attitude construct, developed using survey scales and experiments based on expected utility theory, is related to several marketing alternatives, but does not exhibit substantially greater explanatory power than underlying measures. With few exceptions, scales yield greater significance of risk attitudes for these choices, but experimental measures reveal other insights, e.g., differential attitudes in gain and loss domains. Given recent concerns with experimental measures in the literature, we suggest studies include scales as a low cost supplemental measure. |
| Keywords: | risk behavior, risk attitude, futures and options, forward contracts, marketing contracts, Marketing, Risk and Uncertainty, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea12:124471&r=cbe |
| By: | Frenkel, Sivan; Heller, Yuval; Teper, Roee |
| Abstract: | Experimental evidence and field data suggest that agents hold two seemingly unrelated biases: failure to account for the fact that the behavior of others reflects their private information (“winner's curse”), and a tendency to value a good more once it is owned (“endowment effect”). In this paper we propose that these two phenomena are closely related: the biases fully compensate for each other in various economic interactions, and induce an “as-if rational” behavior. We pay specific attention to barter trade, of the kind that was common in prehistoric societies, and suggest that the endowment effect and the winner's curse could have jointly survived natural selection together. |
| Keywords: | Bounded Rationality; Endowment Effect; Winner's Curse; Cursed Equilibrium; Evolution |
| JEL: | D82 C73 |
| Date: | 2012–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:39430&r=cbe |
| By: | Donja Darai; Silvia Grätz |
| Abstract: | Physical attractiveness is associated with goodness in the literature. In particular, people think of attractive ones as being more socially skillful, trustworthy, or likeable. This "beauty-is-good" stereotype can induce a beauty premium in various economic interactions. Cooperative behavior might be one more such attribute that is elicited by physical attractiveness. In this paper we analyze this potential relationship. We combine data from 211 episodes of a television game show, in which contestants play a face-to-face prisoner's dilemma game, with data from independent facial appearance ratings of these contestants. The main finding is that attractiveness is an important factor for cooperative behavior even in an environment of very high stakes, communication, and past behavior. Although there is no difference between facially attractive and unattractive contestants regarding the decision to cooperate, facing a facially attractive opponent increases cooperation significantly. Especially, in mixed-gender interactions males and females are more likely to cooperate with a facially attractive counterpart. The marginal beauty premium for a one standard deviation increase in facial attractiveness amounts to an increase of a contestant's expected earnings of £2 153. Moreover, the probability to obtain positive earnings increases by 5.9 percentage points for facially attractive contestants. |
| Keywords: | Beauty premium, stereotypes, cooperation, prisoner's dilemma |
| JEL: | C71 D83 Z13 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:082&r=cbe |
| By: | Federica Alberti (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group, Jena) |
| Abstract: | Banning deception in economic experiments does not exclude experiments with participants in the role of experimenters who can gain by deceiving those in the role of participants. We compare treatments with and without possible deception by experimenter-participants to test whether deception aects behaviour of participant-participants in a dictator experiment and whether participants in the role of experimenters engage in deception. We nd no dierence in behaviour of participant-participants between the treatments whereas most participants in the role of experimenters engage in deception. |
| Keywords: | Experimental economic methods, Deception, Experiments |
| JEL: | A12 C90 |
| Date: | 2012–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2012-024&r=cbe |
| By: | Agnes Bäker (University of Tübingen, Faculty of Economics and Social Sciences, Germany); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Groupm Jena); Kerstin Pull (University of Tübingen, Faculty of Economics and Social Sciences, Germany); Manfred Stadler (University of Tübingen, Faculty of Economics and Social Sciences, Germany) |
| Abstract: | We consider three-person envy games with a proposer, a responder, and a dummy player. In this class of games, the proposer, rather than allocating a constant pie, chooses the pie size which the responder can then accept or reject while the dummy player can only refuse his own share. While the agreement payoffs for the responder and the dummy are exogenously given, the proposer acts as the residual claimant who - in case of responder acceptance - receives whatever is left after the two exogenously given agreement payoffs have been deducted from the pie. Consistent with earlier findings from three-person generosity games, we find inequality aversion to be strongly context-dependent and affected by the (in)equality of exogenously given agreement payoffs. Motivated by these findings, we present a stylized model on context-dependent inequality aversion that accounts for the observed effects. |
| Keywords: | Experimental economics, envy game |
| JEL: | C72 C91 D63 |
| Date: | 2012–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2012-023&r=cbe |
| By: | Heller, Yuval |
| Abstract: | Experimental evidence suggest that people only use 1-3 iterations of strategic reasoning, and that some people systematically use less iterations than others. In this paper, we present a novel evolutionary foundation for these stylized facts. In our model, agents interact in finitely repeated Prisoner's Dilemma, and each agent is characterized by the number of steps he thinks ahead. When two agents interact, each of them has an independent probability to observe the opponent's type. We show that if this probability is not too close to 0 or 1, then the evolutionary process admits a unique stable outcome, in which the population includes a mixture of “naive” agents who think 1 step ahead, and “sophisticated” agents who think 2-3 steps ahead. |
| Keywords: | Indirect evolution; cognitive hierarchy; bounded forward-looking; Prisoner's Dilemma; Cooperation |
| JEL: | D03 C73 |
| Date: | 2012–06–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:39429&r=cbe |
| By: | Karle, Heiko; Peitz, Martin |
| Abstract: | We address the effect of contextual consumer loss aversion on firm strategy in imperfect competition. Consumers are fully informed about match value and price at the moment of purchase. However, some consumers are initially uninformed about their tastes and form a reference point consisting of an expected match—value and price distribution, while others are perfectly informed all the time. We show that, in duopoly, a larger share of informed consumers leads to a less competitive outcome if the asymmetry between firms is sufficiently large and that narrowing the set of products which consumers consider leads to a more competitive outcome. |
| Keywords: | Contextual loss aversion , reference-dependent utility , behavioral industrial organization , imperfect competition , product differentiation |
| JEL: | D83 L13 L41 M37 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:mnh:wpaper:31642&r=cbe |