nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2012‒09‒30
eight papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Social context and fairness perceptions: The role of status By Albrecht, Konstanze; von Essen, Emma; Falk, Armin; Fliessbach, Klaus; Ranehill, Eva
  2. Mistakes, Closure and Endowment Effect in Laboratory Experiments By Anmol Ratan
  3. Healthy Habits: The Connection between Diet, Exercise, and Locus of Control By Cobb-Clark, Deborah A.; Kassenböhmer, Sonja C.; Schurer, Stefanie
  4. Incentives and Group Identity By Masella, Paolo; Meier, Stephan; Zahn, Philipp
  5. Level-k reasoning and incentives By Larbi Alaoui; Antonio Penta
  6. Do I Care if You Know I Betrayed You? By James C. Cox; Danyang Li
  7. Evolving to the impatience trap: the example of the farmer-sheriff game By David K. Levine; Salvatore Modica; Federico Weinschelbaum; Felipe Zurita
  8. Who wants paternalism? By Sofie Kragh Pedersen; Alexander K. Koch; Julia Nafziger

  1. By: Albrecht, Konstanze (University of Bonn, Germany); von Essen, Emma (Dept. of Economics, Stockholm University); Falk, Armin (University of Bonn, Germany); Fliessbach, Klaus (University of Bonn, Germany); Ranehill, Eva (University of Zurich, Switzerland)
    Abstract: This study investigates how induced relative status affects fairness perceptions measured by satisfaction from different relative payoffs. We find that participants with lower status are less dissatisfied with disadvantageous payoff inequalities than equal or higher status participants. In contrast, when receiving an advantageous payoff, status does not influence satisfaction. Our findings suggest that relative social status has important implications for the acceptance of income inequalities.
    Keywords: status; fairness perceptions; satisfaction
    JEL: A13 C91 D31 D63
    Date: 2012–07–19
  2. By: Anmol Ratan
    Abstract: In this paper, we relax the hard closure property of experiments that have been used to study endowment effect in laboratory. We study differences in benchmark environments (hard closure) and an environment that allows participants to reverse the decisions taken in the laboratory (soft closure). We find that “endowment effect†is not observed in the soft closure treatment. The procedures in our experiment allow us to circumvent the critique of altered expectations. Our results call for a careful interpretation of experiments that suggest “endowment effect†in laboratory conditions. Other implications pertain to external validity of experiments with hard closure.
    Keywords: prospect-theory, endowment effect, reference-dependence, loss aversion, lab experiments,field experiments, external validity
    JEL: C91 C93 D81
    Date: 2012–09
  3. By: Cobb-Clark, Deborah A. (University of Melbourne); Kassenböhmer, Sonja C. (Melbourne Institute of Applied Economic and Social Research); Schurer, Stefanie (Victoria University of Wellington)
    Abstract: This paper analyzes the relationship between individuals' locus of control and their decisions to exercise regularly, eat well, drink moderately, and avoid tobacco. Our primary goal is to assess the relative importance of the alternative pathways that potentially link locus of control to healthy habits. We find that individuals with an internal locus of control are more likely to eat well and exercise regularly. This link cannot be explained by the extent to which they are future-orientated and value their health, however. There are important gender differences in explaining the link between perceptions of control and healthy habits. Men with an internal locus of control expect to have higher health returns to their investments in diet and exercise. In contrast, women with an internal locus of control maintain healthy habits because they derive greater satisfaction from those activities than women with external control tendencies.
    Keywords: non-cognitive skills, locus of control, health behavior, health diet, exercise
    JEL: I14 J3 C18
    Date: 2012–08
  4. By: Masella, Paolo (University of Mannheim); Meier, Stephan (Columbia University); Zahn, Philipp (University of Mannheim)
    Abstract: This paper investigates in a principal-agent environment whether and how group membership influences the effectiveness of incentives and when incentives can have “hidden costs”, i.e., a detrimental effect. We show experimentally that in all interactions control mechanisms can have hidden costs for reasons specific to group membership. In within-group interactions control has detrimental effects because the agent does not expect to be controlled and reacts negatively when being controlled. In between-group interactions, agents perceive control more hostile once we condition on their beliefs about principal's behavior. Our finding contributes to the micro-foundation of psychological effects of incentives.
    Keywords: crowding out, motivation, incentives, social preferences, social identity, trust, experiment
    JEL: C91 D03 Z13
    Date: 2012–08
  5. By: Larbi Alaoui; Antonio Penta
    Abstract: Level-k theories are agnostic over whether individuals stop the iterated reasoning because of their own cognitive constraints, or because of their beliefs over the cognitive constraints of their opponents. In practice, individual level of play may be a function both of their own constraints and their beliefs over their opponents' reasoning process. Moreover, the rounds of introspection that players perform may depend on their incentives to think more deeply. We develop a theory which explicitly models players' reasoning procedure. The rounds of introspection that individuals perform and their actual level of play both follow endogenously. This model delivers testable implications as payoffs and opponents change, and it allows for comparisons across games. It also disentangles the cognitive bound of players for a given game from their beliefs about the play of their opponents. In conjunction with the framework, we present an experiment designed to test its predictions. We modify the Arad and Rubinstein (2012) `11-20' game to serve this precise purpose, and administer different treatments which vary beliefs over payoffs and opponents. The results of this experiment are consistent with the model, and appear to lend support to our theory. This experiment also confirms the central premise that individuals change their level of play as incentives to think more and beliefs over opponents vary.
    Keywords: beliefs, bounded rationality, cognitive cost , higher order beliefs, incentives, level-k reasoning, value of reasoning
    JEL: C72 C92 D80 D83
    Date: 2012–07
  6. By: James C. Cox; Danyang Li
    Abstract: It has been reported that betrayal aversion in influences the trust decision (Bohnet and Zeckhauser 2004; Bohnet et al. 2008). This paper adds to the literature by examining how concern for others' disutility from betrayal can affect the decision to repay trust. We compare trustees' behavior when betrayal is obfuscated to an identical monetary payoffs situation where betrayal is revealed. We find that more trustees choose to defect in our experiment when betrayal is obfuscated than when it is revealed. Our result suggests that concern for betrayal costs influences not only the decision to trust but also the decision to repay trust.
    Keywords: Experiments, Betrayal Cost, Trust, Cooperation
    JEL: C72 C91
    Date: 2012–09
  7. By: David K. Levine; Salvatore Modica; Federico Weinschelbaum; Felipe Zurita
    Abstract: The literature on the evolution of impatience, focusing on one-person decision problems, finds that evolutionary forces favor the more patient individuals. This paper shows that in the context of a game, this is not necessarily the case. In particular, it offers a two- population example where evolutionary forces favor impatience in one group while favoring patience in the other. Moreover, not only evolution but also efficiency may prefer impatient individuals. In our example, it is efficient for one population to evolve impatience and for the other to develop patience. Yet, evolutionary forces move the wrong populations.
    Keywords: Microeconomics
    Date: 2012
  8. By: Sofie Kragh Pedersen; Alexander K. Koch; Julia Nafziger (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: Abstract Little is known about the demand side of paternalism. We investigate attitudes towards paternalism among Danish students. The main question is whether demand for paternalism is related to self-control, either because people with self-control problems seek commitment devices to overcome these problems, or because people with good self-control want those who lack it to change their behaviors. We find no evidence linking self-control to attitudes towards weak forms of paternalism (e.g. nudges or information about health consequences). But respondents with good selfcontrol are significantly more favorable towards strong paternalism (e.g. restricting choices or sin taxes) than those struggling with self-control.
    Keywords: Self-control, paternalism, commitment, political attitudes
    JEL: D03 H11 C83 D6
    Date: 2012–09–21

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