nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2012‒12‒06
seventeen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Cognitive Skills, Gender and Risk Preferences By Booth, Alison L.; Katic, Pamela
  2. Peer Pressure in Multi-Dimensional Work Tasks By Felix Ebeling; Gerlinde Fellner; Johannes Wahlig
  3. The Effects of Group Composition and Fractionalization in a Public Goods Game: An Agent-Based Simulation By Lucas, Pablo; de Oliveira, Angela C.M.; Banuri, Sheheryar
  4. You Owe Me By Malmendier, Ulrike; Schmidt, Klaus M.
  5. On the Nature of Reciprocity: Evidence from the Ultimatum Reciprocity Measure By Andreas Nicklisch; Irenaeus Wolff
  6. Endogenous Leadership: Selection and Influence By Emrah Arbak; Marie-Claire Villeval
  7. Reconciling economics and psychology on intrinsic motivation By Bruno, Bruna
  8. A Physician With A Soul Of A Cook? Entrepreneurial Personality Across Occupations By Alina Sorgner
  9. Linking Beliefs to Willingness to Compete. By Noémi Berlin; Marie-Pierre Dargnies
  10. Nobody Likes a Rat: On the Willingness and Consequences of Reporting Lies By Reuben, Ernesto; Stephenson, Matt
  11. How responsive are people to changes in their bargaining position? Earned bargaining power and the 50–50 norm By Nejat Anbarci; Nick Feltovich
  12. Incentive Effects of Funding Contracts: An Experiment By J. Philipp Reiß; Irenaeus Wolff
  13. Use and Abuse of Authority By Bartling, Björn; Fehr, Ernst; Schmidt, Klaus M.
  14. Educational aspirations and attitudes over the business cycle By Rampino, Tina; Taylor, Mark P.
  15. Heterogeneous treatment effects in groups By Riener, Gerhard; Wiederhold, Simon
  16. Yoga beyond wellness: Meditation, trust and cooperation By Di Bartolomeo Giovanni; Papa Stefano; Bellomo Saverio
  17. Linking Beliefs to Willingness to Compete By Noémi Berlin; Marie-Pierre Dargnies

  1. By: Booth, Alison L. (Australian National University); Katic, Pamela (Australian National University)
    Abstract: In this paper we utilise data from a unique new birth‐cohort study to see how the risk preferences of young people are affected by cognitive skills and gender. We find that cognitive ability (measured by the percentile ranking for university entrance at age 18) has no effect on risk preferences measured at age 20. This is in contrast to experimental studies that use IQ measures to proxy cognitive skills. However we do find that gender matters. While young women are significantly more likely than young men to assess themselves as being prepared to take risks, women choose to invest significantly less when they are confronted with a clearly specified investment decision based on hypothetical lottery winnings. This difference between the impact of gender on risk attitudes and the hypothetical lottery investment suggests that impatience and framing affect young women and men differently.
    Keywords: cognitive ability, risk preferences, risk attitudes, gender
    JEL: D01 D80 J16 J24
    Date: 2012–11
  2. By: Felix Ebeling; Gerlinde Fellner; Johannes Wahlig
    Abstract: We study the influence of peer pressure in multi-dimensional work tasks theoretically and in a controlled laboratory experiment. Thereby, workers face peer pressure in only one work dimension. We find that effort provision increases in the dimension where peer pressure is introduced. However, not all of this increase translates into a productivity gain, since the effect is partly offset by a decrease of effort in the work dimension without peer pressure. Furthermore, this tradeoff is stronger for workers who run behind in the dimension of peer pressure. Finally, we analyze the optimal group composition to harness peer pressure. Effort in the dimension of peer pressure and overall productivity seem to be unaffected by group composition, but the effort reduction in the dimension that is not subject to peer pressure is stronger when workers’ skills are highly diverse. Hence, it seems like optimal group composition depends on work environment. While existing literature recommends maximizing worker-groups’ skill diversity in one-dimensional work tasks, our results suggest to mix similar workers in multi-dimensional tasks.
    Keywords: Peer Effects, Multi Tasking, Incentives, Laboratory Experiment
    JEL: D03 D2 J21
    Date: 2012–11–15
  3. By: Lucas, Pablo; de Oliveira, Angela C.M.; Banuri, Sheheryar
    Abstract: Behavioural economics highlights the role of social preferences in economic decisions. Further, populations are heterogeneous; suggesting that group composition may impact the ability to sustain voluntary public goods contributions. This parallels researc
    Keywords: social preferences, agent-based simulation, group composition, beliefs
    Date: 2012
  4. By: Malmendier, Ulrike; Schmidt, Klaus M.
    Abstract: In many cultures and industries gifts are given in order to influence the recipient, often at the expense of a third party. Examples include business gifts of firms and lobbyists. In a series of experiments, we show that, even without incentive or informational effects, small gifts strongly influence the recipient’s behavior in favor of the gift giver, in particular when a third party bears the cost. Subjects are well aware that the gift is given to influence their behavior but reciprocate nevertheless. Withholding the gift triggers a strong negative response. These findings are inconsistent with the most prominent models of social preferences. We propose an extension of existing theories to capture the observed behavior by endogenizing the “reference group†to whom social preferences are applied. We also show that disclosure and size limits are not effective in reducing the effect of gifts, consistent with our model. Financial incentives ameliorate the effect of the gift but backfire when available but not provided.
    Keywords: Gift exchange; externalities; lobbyism; corruption; reciprocity; social preferences
    JEL: C91 D73 I11
    Date: 2012–11
  5. By: Andreas Nicklisch (Max Planck Institute for Research on Collective Goods, University of Bonn, Germany); Irenaeus Wolff (Thurgau Institute of Economics at the University of Konstanz, Department of Economics, Germany)
    Abstract: We experimentally show that current models of reciprocity are incomplete in a systematic way using a new variant of the ultimatum game that provides second-movers with a marginal-cost-free punishment option. For a substantial proportion of the population, the degree of first-mover unkindness determines the severity of punishment actions even when marginal costs are absent. The proportion of these participants strongly depends on a treatment variation: higher fixed costs of punishment more frequently lead to extreme responses. The fractions of purely selfish and inequity-averse participants are small and stable. Among the variety of reciprocity models, only one accommodates (rather than predicts) parts of our findings. We discuss ways of incorporating our findings into the existing models.
    Keywords: Distributional fairness, experiments, intention-based fairness, reciprocity, ultimatum bargaining
    JEL: C91 D03 D63
    Date: 2012–11–19
  6. By: Emrah Arbak (CEPS - Centre for European Policy Studies - Centre for European Policy Studies); 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: In social dilemmas, leading a team by making heroic efforts may prove costly, especially when the followers are not adequately motivated to make similar sacrifices. Attempting to shed light on what drives people to lead, we devise a two-stage public good experiment with endogenous timing. We show that leading by making generous contributions is widespread and relatively persistent. At least three motives explain this behavior. Some use leadership strategically to distill personal gains, with the expectation that others will respond by being at least as generous. Others are more altruistic, volunteering to lead even though this may come at a personal cost. Yet for another fraction of volunteers, a concern for maintaining a positive social image appears to be responsible. We also find that voluntary leaders are not necessarily more influential than randomly-chosen leaders.
    Keywords: leadership, endogenous selection, influence, voluntary contribution, experiment
    Date: 2012
  7. By: Bruno, Bruna
    Abstract: The paper analyzes how the debate on intrinsic motivation was imported from psychology into economics. The most important differences between the two disciplines are in the definition of intrinsic motivation and in the timing of the undermining effect of rewards. The economic framework of inter-temporal choices is proposed to reconcile the different empirical and theoretical results arising in the literature, and it is shown how rewards induce substitution and income effects depending on whether they are transitory or permanent. Furthermore, a distinction between input and output oriented intrinsic motivation is introduced.
    Keywords: intrinsic motivation; rewards; crowding out; undermining
    JEL: D03 Z1 D90
    Date: 2012–11
  8. By: Alina Sorgner (Friedrich Schiller University Jena, School of Economics and Business Administration)
    Abstract: There is a debate in the literature backed by ambiguous empirical evidence whether personality is useful at predicting entrepreneurship behavior. However, little is known about the role of the context in the relationship between personality and entrepreneurship. This paper draws on the well-established psychological theory of vocational behavior, which emphasizes the crucial role of personality for peoples' vocational choices, in order to shed more light on the interplay between personality, occupational environment, and the decision to become self-employed. Empirical findings suggest that personality is associated with both vocational and entrepreneurial choices. An entrepreneurial personality profile is positively related to the choice of Holland's enterprising and artistic occupations, which contributes to above-average self-employment rates in these occupations. Personality also seems to play an important role in entrepreneurial choice, however, in a way which varies substantially across occupations.
    Keywords: Entrepreneurship, vocational choice, Big Five, occupational environment
    JEL: L26 J24 J44
    Date: 2012–11–22
  9. By: Noémi Berlin (Centre d'Economie de la Sorbonne); Marie-Pierre Dargnies (Université Paris Dauphine - DRM Finance)
    Abstract: Men are known to have a higher taste for competition than women. This paper presents an experiment that analyses the different determinants of the choice to enter a competition : beliefs and the competition level. As far as entry in the competition is concerned, low-performing subjects adapt their decision entry to the level of the competition, whereas high-performers do no. However, the behaviors leading to these results are quite different for men and women : women mainly react to the information on their own performance while men seem to respond more to their beliefs concerning the level of the competition they will be evolving in. Finally, both men and women deviate from their bayesian beliefs and become too pessimistic (optimistic) after a negative (positive) feedback.
    Keywords: Experimental economics, beliefs, performance feedback, gender, competition.
    JEL: C91 D83 J16
    Date: 2012–11
  10. By: Reuben, Ernesto (Columbia University); Stephenson, Matt (Columbia University)
    Abstract: We investigate the intrinsic motivation of individuals to report, and thereby sanction, fellow group members who lie for personal gain. We further explore the changes in lying and reporting behavior that result from giving individuals a say in who joins their group. We find that enough individuals are willing to report lies such that in fixed groups lying is unprofitable. However, we also find that when groups can select their members, individuals who report lies are generally shunned, even by groups where lying is absent. This facilitates the formation of dishonest groups where lying is prevalent and reporting is nonexistent.
    Keywords: lying, lying aversion, whistleblowing, social norms, dishonesty
    JEL: D03 K42 M42 M14 C92
    Date: 2012–11
  11. By: Nejat Anbarci; Nick Feltovich
    Abstract: Previous research has shown that individuals do not respond to changes in their bargaining position to the extent predicted by standard bargaining theories. Most of these results have come from experiments with bargaining power allocated exogenously, so that individuals may perceive it as having been “unearned” and thus be reluctant to exploit it. Also, equal splits of the “cake” (the amount bargained over) have typically been equilibrium outcomes, leading to a powerful tendency toward 50-50 splits. We conduct a bargaining experiment in which subjects earn their bargaining power through a real–effort task. Treatments are based on the Nash demand game (NDG) and a related unstructured bargaining game (UBG). Subjects bargain over a fixed amount of money, with disagreement payments determined entirely by the number of units of the real–effort task successfully completed. Task parameters are set to allow disagreement payoffs above half the cake size, in which case 50–50 splits are not individually rational, and thus not consistent with equilibrium. We find that subjects are least responsive to changes in own and opponent disagreement payoffs in the NDG with both disagreement payments below half the cake size. Responsiveness is higher in the UBG, and in the NDG when one disagreement payment is more than half the cake size, but in both cases it is still less than predicted. It is only in the UBG when a disagreement payment is more than half the cake size that responsiveness to disagreement payoffs reaches the predicted level. Our results imply that even when real–life bargaining position is determined by past behaviour rather than luck, the extent to which actual bargaining corresponds to theoretical predictions will depend on (1) the institutions within which bargaining takes place, and (2) the distribution of bargaining power; in particular, whether the 50–50 norm yields a viable outcome.
    Keywords: Nash demand game, unstructured bargaining, real effort, disagreement, experiment.
    JEL: C78 C72 D81
    Date: 2012–11–16
  12. By: J. Philipp Reiß (Department of Economics, University of Maastricht, The Netherlands); Irenaeus Wolff (Thurgau Institute of Economics at the University of Konstanz, Department of Economics, Germany)
    Abstract: We examine the incentive effects of funding contracts on entrepreneurial effort decisions and allocative efficiency. We experiment with funding contracts that differ in the structure of investor repayment and, therefore, in the incentives for entrepreneurial effort provision. Theoretically the replacement of a standard debt contract by a repayment-equivalent non-monotonic contract reduces effort distortions and increases efficiency. Likewise the replacement of outside equity by a repayment-equivalent standard-debt contract mitigates distortions. We test both hypotheses in the laboratory. Our results reveal that the incentive effects of funding contracts need to be experienced before they reflect in observed behavior. With sufficient experience observed behavior is consistent with the theoretical predictions and supports both hypotheses. If we allow for entrepreneur-sided manipulations of the project outcome we find that non-monotonic contracts lose its appeal.
    Keywords: hidden information, funding contracts, incentives, experiment, standard debt contract, non-monotonic contract, state manipulation
    JEL: C91 D82 G21
    Date: 2012–09–30
  13. By: Bartling, Björn; Fehr, Ernst; Schmidt, Klaus M.
    Abstract: Employment contracts give a principal the authority to decide flexibly which task his agent should execute. However, there is a tradeoff, first pointed out by Simon (1951), between flexibility and employer moral hazard. An employment contract allows the principal to adjust the task quickly to the realization of the state of the world, but he may also abuse this flexibility to exploit the agent. We capture this tradeoff in an experimental design and show that principals exhibit a strong preference for the employment contract. However, selfish principals exploit agents in one-shot interactions, inducing them to resist entering into employment contracts. This resistance to employment contracts vanishes if fairness preferences in combination with reputation opportunities keep principals from abusing their power, leading to the widespread, endogenous formation of efficient long-run employment relations. Our results inform the theory of the firm by showing how behavioral forces shape an important transaction cost of integration – the abuse of authority – and by providing an empirical basis for assessing differences between the Marxian and the Coasian view of the firm, as well as Alchian and Demsetz’s (1972) critique of the Coasian approach.
    Keywords: theory of the firm; transaction cost economics; authority; power abuse; employment relation; fairness; reputation
    JEL: C91 D23 D86 M5
    Date: 2012–11
  14. By: Rampino, Tina; Taylor, Mark P.
    Abstract: Abstract: We use data from the youth component of the British Household Panel Survey to examine how educational attitudes and aspirations among 11-15 year olds vary across the business cycle. We find that the impact of the local unemployment rate on childrens attitudes and aspirations varies significantly with parental education level and parental attitudes to education children from highly educated families react more positively to low labour demand those from less educated families. Therefore the aspirations of children from low socioeconomic status backgrounds are more adversely affected by recessions than those from higher status backgrounds, representing a barrier to social mobility for a generation.
    Date: 2012–11–08
  15. By: Riener, Gerhard; Wiederhold, Simon
    Abstract: We show in a laboratory experiment that the same method of group induction carries different behavioral consequences. These heterogeneous treatment effects can be directly related to the quality of the relationship established between the subjects. Our results indicate the importance of manipulation checks in group-formation tasks in economic experiments. --
    Keywords: Group induction,Control,Laboratory experiment,Manipulation check
    JEL: C92 M54 D03 J22
    Date: 2012
  16. By: Di Bartolomeo Giovanni; Papa Stefano; Bellomo Saverio
    Abstract: Our research aims to find out whether meditation has a positive impact on trust and cooperation. By comparing the behavior of agents exposed to meditation before playing an investment game to others not exposed, we find that the formers show more trust on average than the latters. Meditation seems to reduce risk aversion and “competitiveness” among people inducing agents to behave in a more cooperative (and efficient) way.
    Keywords: Other-regarding preferences, trust, reciprocity, investment game, frame effect, polarization, meditation
    JEL: D03 C91 D83
    Date: 2012–11
  17. By: Noémi Berlin (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne); Marie-Pierre Dargnies (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)
    Abstract: Men are known to have a higher taste for competition than women. This paper presents an experiment that analyses the different determinants of the choice to enter a competition : beliefs and the competition level. As far as entry in the competition is concerned, low-performing subjects adapt their decision entry to the level of the competition, whereas high-performers do no. However, the behaviors leading to these results are quite different for men and women : women mainly react to the information on their own performance while men seem to respond more to their beliefs concerning the level of the competition they will be evolving in. Finally, both men and women deviate from their bayesian beliefs and become too pessimistic (optimistic) after a negative (positive) feedback.
    Keywords: Experimental economics, beliefs, performance feedback, gender, competition.
    Date: 2012–11

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