nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2012‒10‒20
fourteen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Income effect and altruism By Subhashish Modak Chowdhury; Joo Young Jeon
  3. Motivational cherry picking By Regner, Tobias; Riener, Gerhard
  4. Joint-Liability vs. Individual Incentives in the Classroom. Lessons from a Field Experiment with Undergraduate Students By Alejandro Cid; José María Cabrera
  5. Effects of Visual and Aural Communication of Categorical Response Options on Answers to Survey Questions By Lynn, Peter; Hope, Steven; Jäckle, Annette; Campanelli, Pamela C.; Nicolaas, Gerry
  6. The freeze-out bond exchange offer. An experimental approach By Flavio Bazzana; Luigi Mittone; Luciano Andreozzi
  7. Security of Property as a Public Good: Institutions, Socio-Political Environment and Experimental Behavior in Five Countries By Francisco Campos-Ortiz; Louis Putterman; T. K. Ahn; Loukas Balafoutas; Mongoljin Batsaikhan; Matthias Sutter
  8. Moral cleansing and moral licenses: experimental evidence By Brañas-Garza, Pablo; Bucheli, Marisa; García-Muñoz, Teresa; Espinosa Alejos, María Paz
  9. A Theory of Choice Under Internal Conflict By Ritxar Arlegi
  10. Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device By Felipe Kast; Stephan Meier; Dina Pomeranz
  11. Collaborative Learning is Better By Hélène Le Cadre; Bedo Jean-Sébastien
  12. Giving versus Taking: A “Real Donation” Comparison of Warm Glow and Cold Prickle in a Context-Rich Environment By Philip J. Grossman; Catherine C. Eckel
  13. The Friends Factor: How Students’ Social Networks Affect Their Academic Achievement and Well-Being? By Victor Lavy; Edith Sand
  14. The effects of financial literacy training: Evidence from a field experiment with German high-school children By Lührmann, Melanie; Serra-Garcia, Marta; Winter, Joachim

  1. By: Subhashish Modak Chowdhury (University of East Anglia); Joo Young Jeon (University of East Anglia)
    Abstract: We investigate the consequences of a pure income effect on the altruistic behavior of donors. Inequity aversion theories predict either no effect or a decrease in giving, whereas warm-glow theory predicts an increase in giving with an increase in the common income of donor and receiver. Theoretical predictions being contradictory, we run a dictator game in which we vary the common show-up fee of both the dictator and the recipient, but keep an extra amount to be shared the same. The prediction of the warm-glow theory is supported.
    Keywords: dictator game, altruism, income effect, inequity aversion, warm-glow
    JEL: C91 D03 D64
    Date: 2012–10–01
  2. By: Nicola Lacetera (Rotman School of Management, University of Toronto); Mario Macis (Carey Business School, Johns Hopkins University); Angelo Mele (Carey Business School, Johns Hopkins University)
    Abstract: We present preliminary results from a small-scale natural field experiment aimed at exploring online social contagion, with an application to charitable giving. We worked in partnership with Heifer International, a non-profit organization aimed at fighting poverty in developing countries, and HelpAttack!, the developer of a Facebook application that facilitates donations to charities while broadcasting such activities to the donors’ Facebook contacts. We ran a series of marketing campaigns, and randomized the broadcasting of users’ pledges, thereby creating exogenous variation in the information that users’ contacts were receiving. Although our campaigns reached as many as about 13 million Facebook users, 6,000 users clicked on the ad and only 18 pledges were made, without any subsequent pledge from these users’ contacts. We offer potential explanations for this finding on the absence of network effects, and outline our plans for future developments of this on-going project.
    Keywords: Online networks, diffusion, pro-social behavior, network effects
    JEL: C93 D64 O33 M31
    Date: 2012–09
  3. By: Regner, Tobias; Riener, Gerhard
    Abstract: We construct a simple three person trust game with one trustor and two trustees. The trustor has the possibility to either trust both trustees or none, while the trustees make their decisions either sequentially or simultaneously, depending on the treatment. When trustees play sequentially, follower trustees who are informed about the leader's choice are significantly more selfish than in the simultaneous move treatment, independent of the leader's choice. Leaders do not behave significantly different than in the baseline treatment. Follower trustees cherry pick the motivation that materially serves them best. When the leader trustee plays selfish, they tend to conform. When the leader makes a pro-social choice, followers seem to perceive the duty as already fulfilled by the leader. While guilt works well as a motivational force in a dyadic situation, it gets alleviated easily when the situation allows a shifting of responsibility. --
    Keywords: Team production,Trust,Choice architecture,Guilt aversion,Conformity,False consensus effect,Lab experiment,Cherry picking
    JEL: D03 D71 C79 C92
    Date: 2012
  4. By: Alejandro Cid; José María Cabrera
    Abstract: We evaluate the impact of joint-liability incentives in the classroom using a randomized field experiment. The instructor designs groups of three students in the classroom and provides a premium to their homework's grade only if all three members of the group meet some requirements. To isolate the joint-liability effect from selfish motivations, we also design an individual incentives treatment. We find that joint-liability incentives impact positively on the grades attained in homework and midterm exams both in experimental courses and in other courses taken by the students in the semester. Though the average positive effect seems to disappear in final exams, the overall impact of joint-liability incentives on the academic achievements in the semester is still positive. A drawback of this program is a decrease in classmate satisfaction. The significant effectiveness of the peer monitoring developed by joint-liability incentives in a group provides novel implications for the design of grading policies in the classroom and for other social settings where incentives may be based in peer monitoring or joint liability.
    Keywords: field experiment; randomization; education; joint liability; student incentives
    JEL: I20 I23
    Date: 2012
  5. By: Lynn, Peter; Hope, Steven; Jäckle, Annette; Campanelli, Pamela C.; Nicolaas, Gerry
    Abstract: Whether questions and answers are transmitted between interviewer and respondent by visual or aural communication can affect the responses given. We hypothesise that communication channel can affect either the respondents understanding of the question or the tendency to satisfice. These effects may be mediated by the cognitive ability and motivation of the respondent and by the type and difficulty of the question. We test our hypotheses using data from a large-scale controlled experiment. We find support for the notion that visual presentation improves understanding of the question and reduces the tendency to satisfice. We also find that effects are stronger for respondents of higher cognitive ability and for motivated respondents.
    Date: 2012–10–05
  6. By: Flavio Bazzana; Luigi Mittone; Luciano Andreozzi
    Abstract: A freeze-out bond exchange offer can occur when a firm wants to replace an exist- ing bond, issued with a covenant, with a new bond that does not have this type of restriction. If the bondholders are not fully coordinated, the shareholders can make the exchange offer unfair to capture wealth from the bondholders. We perform two experiments using the freeze-out game proposed by Oldfield (2004) to isolate (i) the level of information in the exchange offer and (ii) the role of the experience of the bondholders. The results are statistically significant. In the first experiment, they show that experience is a dominant factor with respect to information. Conversely, in the second experiment, the information becomes dominant with respect to expe- rience. The percentages of the choices for the symmetric Nash equilibria are greater in the first experiment. However, in the second experiment, the choices of the asymmetric Nash equilibrium, which is Pareto superior in the game, are greater than in the first experiment. These results have policy implications that may affect exchange offers in the bond market.
    Keywords: freeze-out, covenant, bond, experimental finance
    JEL: G32 G12 C91
    Date: 2012
  7. By: Francisco Campos-Ortiz; Louis Putterman; T. K. Ahn; Loukas Balafoutas; Mongoljin Batsaikhan; Matthias Sutter
    Abstract: We study experimentally the protection of property in five widely distinct countries-Austria, Mexico, Mongolia, South Korea and the United States. Our main results are the correlations between experimental choices with indicators regarding the security of property, trust and the quality of government. We show that subjects from countries with: (1) higher levels of trust or perceptions of safety are more prone to abstain from plundering and devote less resources to protect their property; and (2) high-quality political institutions support collective protection of property through taxation more often. Our results highlight the relevance of socio-political factors in determining countries' success in addressing collective action problems including safeguarding property rights.
    Keywords: Property Rights, Efficiency, Experiment, Socio-Political Factors.
    JEL: C91 C92 D03 H41 P14
    Date: 2012–10
  8. By: Brañas-Garza, Pablo; Bucheli, Marisa; García-Muñoz, Teresa; Espinosa Alejos, María Paz
    Abstract: Research on moral cleansing and moral self-licensing has introduced dynamic considerations in the theory of moral behavior. Past bad actions trigger negative feelings that make people more likely to engage in future moral behavior to offset them. Symmetrically, past good deeds favor a positive self-perception that creates licensing effects, leading people to engage in behavior that is less likely to be moral. In short, a deviation from a “normal state of being†is balanced with a subsequent action that compensates the prior behavior. We model the decision of an individual trying to reach the optimal level of moral self-worth over time and show that under certain conditions the optimal sequence of actions follows a regular pattern which combines good and bad actions. We conduct an economic experiment where subjects play a sequence of giving decisions (dictator games) to explore this phenomenon. We find that donation in the previous period affects present decisions and the sign is negative: participants’ behavior in every round is negatively correlated to what they did in the past. Hence donations over time seem to be the result of a regular pattern of self-regulation: moral licensing (being selfish after altruist) and cleansing (altruistic after selfish).
    Keywords: moral self-licensing, moral cleansing, experiments, moral behaviour
    Date: 2012
  9. By: Ritxar Arlegi (Departamento de Economía-UPNA)
    Abstract: In this paper we argue, inspired by some psychological literature, that choices are the outcome of the interplay of different, potentially conflicting motivations. We propose an axiomatic approach with two motivations, which we assume to be single-peaked over a certain given dimension. We first consider the case in which motivations are given and stable, and then introduce the possibility for motivations to change. We show first that in the no-motivation change case, certain choice behaviours that appear to be inconsistent from the standard rational choice point of view may be explained in our framework as the outcome of conflicting motivations. Afterwards, in the case of motivation change, we present two psychologically-flavoured assumptions about how motivations are influenced by choices. We show that, with some additional weak assumptions of rationality, motivation change leads to a smaller range of potentially inconsistent choices and not to a larger one as one may think. In particular, conflicts between two motivations can eventually be resolved by choosing different actions and consequently a definite and final preference for an action be revealed.
    Keywords: Motivation, Pleasure, Self-Image, Conflict, Preference Reversal, Dissonance reduction.
    JEL: D01 D03
    Date: 2012
  10. By: Felipe Kast; Stephan Meier; Dina Pomeranz
    Abstract: We test the effectiveness of self-help peer groups as a commitment device for precautionary savings, through two randomized field experiments among 2,687 microentrepreneurs in Chile. The first experiment finds that self-help peer groups are a powerful tool to increase savings (the number of deposits grows 3.5-fold and the average savings balance almost doubles). Conversely, a substantially higher interest rate has no effect on most participants. A second experiment tests an alternative delivery mechanism and shows that effects of a similar size can be achieved by holding people accountable through feedback text messages, without any meetings or peer pressure.
    JEL: D00 D03 D11 D12 D14 E2 E20 E21 O2 O20 O54
    Date: 2012–10
  11. By: Hélène Le Cadre (LIMA - CEA, LIST, Laboratory of Information, Models and Learning - CEA : SACLAY); Bedo Jean-Sébastien (Orange/France-Télécom - Telecom Orange)
    Abstract: In this article, we focus on the identification of emerging economic organizations while agents are learning hidden individual sequences modeling renewable energy production and microgrid instantaneous needs in a decentralized hierarchical network. The network is made of 3 categories of agents: producers, providers and end users belonging to microgrids. In this uncertain context, providers are penalized in case where they cannot satisfy the entire demand of the associated microgrid. Identically, producers are penalized in case where they cannot deliver the quantity of energy booked by the providers. Service providers need to make efficient forecasts about the hidden individual sequences to optimize their decisions concerning the quantities of energy to book and the prices of the energy. We prove that there exists prices that provide to the producers a guarantee to avoid penalties. Additionally, under external regret minimization, collaborative learning through a grand coalition where the providers share their information and align their forecasts, enables them to minimize their average loss. As an illustration, we compare the convergence rates of the collaborative learning strategy with rates resulting from selfish learning based on external and internal regret minimization in a 2 producers, 3 providers network. The results confirm the theory: collaboration is better for the providers.
    Keywords: Distributed Learning; Regret; Algorithmic Game Theory; Coalition
    Date: 2012–07–07
  12. By: Philip J. Grossman; Catherine C. Eckel
    Abstract: This paper revisits the question of framing and the provision of public goods. It also addresses the question, is giving in Dictator Games an expression of altruism or an artefact of experimentation? What is unique about this paper is that we employ a “real donation” lab experiment in a context-rich environment: contributions go to actual public goods (i.e. charitable organizations). Our study focuses directly on subjects’ willingness to contribute to and take from a charity. We do this by allocating the initial endowment in one of three ways: either all to the subjects, all to the charity, or evenly between the two. Subjects are allowed to either contribute or take back as little or as much as they wish. We find that framing is irrelevant when comparing the two extreme cases (i.e. the endowments initially allocated all to the subjects or all to the charity); the final amount allocated to the charity is independent of how the choice option is framed. On-the-other-hand, we find evidence suggesting that, when the endowments are evenly split between the two parties, the initial even split seems to act as a powerful focal point: the final outcome is insignificantly different from the initial allocation.
    Keywords: Warm Glow, Cold Prickle, Charity, Altruism
    JEL: H4 D64 C72 C91
    Date: 2012–09
  13. By: Victor Lavy; Edith Sand
    Abstract: In this paper, we estimate the influence of social relationships on educational attainment and social outcomes of students in school. More specifically, we investigate how losing different types of social relationships during the transition from elementary to middle school affect students' academic progress and general well-being. We use social relationships identified by the students themselves in elementary school, as part of a unique aspect of the Tel Aviv school application process which allows sixth-grade students to designate their middle schools of choice and to list up to eight friends with whom they wish to attend that school. The lists create natural “friendship hierarchies” that we exploit in our analysis. We designate the three categories of requited and unrequited friendships that stem from these lists as follows: (1) reciprocal friends (students who list one another); and for those whose friendship requests did not match: (2) followers (those who listed fellow students as friends but were not listed as friends by these same fellow students) and (3) non-reciprocal friends (parallel to followers). Following students from elementary to middle school enables us to overcome potential selection bias by using pupil fixed-effect methodology. Our results suggest that the presence of reciprocal friends and followers in class has a positive and significant effect on test scores in English, math, and Hebrew. However, the number of friends in the social network beyond the first circle of reciprocal friends has no effect at all on students. In addition, the presence of non-reciprocal friends in class has a negative effect on a student’s learning outcomes. We find that these effects have interesting patterns of heterogeneity by gender, ability, and age of students. In addition, we find that these various types of friendships have positive effects on other measures of well-being, including social and overall happiness in school, time allocated for homework, and whether one exhibits violent behavior.
    JEL: D8 J0
    Date: 2012–10
  14. By: Lührmann, Melanie; Serra-Garcia, Marta; Winter, Joachim
    Abstract: We report the results of a field experiment evaluating the impact of financial literacy training on teenagers of between 14 and 16 years of age in lower stream high schools in Germany. Before the training, teenagers in treatment and control groups show little interest in financial matters and low levels of self-assessed knowledge. After the training, teenagers exhibit a significant increase in both their interest in financial matters and their self-assessed knowledge. Their objective knowledge also increases in some dimensions, e.g. their ability to assess risks correctly. We find that after the training, the prevalence of impulse purchases decreases, so teenagers can be steered towards being more sovereign consumers. We also find an increase in intended savings in a hypothetical task. Finally, our data show that already at these young ages, there are strong gender differences in all dimensions of financial matters: financial knowledge, motivation, and behavior.
    Keywords: financial literacy; financial knowledge; field experiment
    JEL: C93 D14
    Date: 2012–10

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