nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2012‒12‒15
nine papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Of Coordinators and Dictators: A Public Goods Experiment By Jürgen Fleiß; Gernot Lechner; Stefan Palan
  2. Ability Dispersion and Team Performance: A Field Experiment By Sander Hoogendoorn; Simon C. Parker; Mirjam van Praag
  3. Incentives, Commitments and Habit Formation in Exercise: Evidence from a Field Experiment with Workers at a Fortune-500 Company By Heather Royer; Mark F. Stehr; Justin R. Sydnor
  4. Risk-sorting and preference for team piece rates By Vanessa Mertins; Agnes Baeker
  5. Best-of-Three Contest Experiments: Strategic versus Psychological Momentum By Mago, Shakun; Sheremeta, Roman; Yates, Andrew
  6. Mode-Switch Protocols: How a Seemingly Small Design Difference can affect Attrition Rates and Attrition Bias By Lynn, Peter
  7. Antecedents of Attitudes Towards Risky Career Choices By Verena Jung; Sascha L. Schmidt; Benno Torgler
  8. Generosity and Political Preferences By Dawes, Christopher T.; Johannesson, Magnus; Lindqvist, Erik; Loewen, Peter; Östling, Robert; Bonde, Marianne; Priks, Frida
  9. Fostering Cooperation through the Enhancement of Own Vulnerability By Anita Kopayni-Peuker; Theo Offerman; Randolph Sloof

  1. By: Jürgen Fleiß (Institute of Statistics and Opterations Research, Karl-Franzens-University Graz); Gernot Lechner; Stefan Palan (Institute of Banking and Finance, Karl-Franzens-University Graz)
    Abstract: We experimentally investigate whether human subjects are willing to give up individual freedom in return for the benefits of improved coordination. We conduct a modified iterated public goods game in which subjects in each period first decide which of two groups to join. One group employs a voluntary contribution mechanism, the other group an allocator contribution mechanism. The setup of the allocator mechanism differs between two treatments. In the coordinator treatment the randomly selected allocator can set a uniform contribution for all group members including herself. In the dictator treatment the allocator can choose different contributions for herself and all other group members. We find that subjects willingly submit to authority in both treatments, even when competing with a voluntary contribution mechanism. The allocator groups achieve strikingly high contribution levels in both treatments.
    Date: 2012–11–30
  2. By: Sander Hoogendoorn (University of Amsterdam); Simon C. Parker (University of Western Ontario, Richard Ivey School of Business); Mirjam van Praag (University of Amsterdam)
    Abstract: This paper studies the impact of diversity in cognitive ability among members of a team on their performance. We conduct a large field experiment in which teams start up and manage real companies under identical circumstances. Exogenous variation in - otherwise random - team composition is imposed by assigning individuals to teams based on their measured cognitive abilities. The setting is one of business management practices in the longer run where tasks are diverse and involve complex decision-making. We propose a model in which greater ability dispersion generates greater knowledge for a team, but also increases the costs of monitoring necessitated by moral hazard. Consistent with the predictions of our model, we find that team performance as measured in terms of sales, profits and profits per share first increases, and then decreases, with ability dispersion. Teams with a moderate degree of ability dispersion also experience fewer dismissals due to few er shirking members in those teams.
    Keywords: Ability dispersion; team performance; field experiment; entrepreneurship; knowledge pooling; moral hazard
    JEL: C93 D83 J24 L25 L26 M13 M54
    Date: 2012–11–29
  3. By: Heather Royer; Mark F. Stehr; Justin R. Sydnor
    Abstract: Rapidly growing health-care costs have fueled interest in using financial incentives to improve health behaviors. Most of the research on financial incentives outside of clinical studies has been observational, limiting our ability to make causal inferences on their effectiveness. The few carefully-designed studies have generally found little lasting effect on behavior after the incentive program ended. We report on a large field experiment with employees of a Fortune 500 company which offered incentives for using the company gym. In addition to understanding the effects of incentives alone, we investigate a novel approach to generate lasting behavior change using self-funded commitment contracts. At the end of incentive period, half of the incentive group were offered the opportunity to create a self-funded commitment contract to motivate their own behavior. Workers responded strongly during the incentive period, doubling their rate of use of the company gym. After the incentive period ended, we find that those offered incentives only continued to attend at higher rates, but the effect was quite modest in magnitude. The availability of a commitment contract, however, substantially improved the long-run effects of the incentive program both during the commitment period and well beyond, offering a promising new approach to increasing the long-run effect of incentive programs.
    JEL: D03 D9 I1
    Date: 2012–11
  4. By: Vanessa Mertins; Agnes Baeker (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: Incentive schemes not only influence the effort provision of workers, but might also induce sorting. As drivers of self-selection, the literature mainly focuses on measures of productivity; however, other variables, such as preferences, beliefs and personality, also play a role. With this paper, we contribute to the literature on drivers of self-selection by analyzing the role of perceived wage risks as potential influences on the sorting decision. To this end, we study a sorting decision between two variable compensation systems, where both options carry wage risks. Specifically, we look at sorting between individual piece rates and team piece rates. Using experimental data, we find evidence for both risk diversification considerations and free-riding concerns (i.e., risk of teaming-up with low-productive teammates) as drivers of self-selection. However, our data does not support the concern of our experimental subjects that others actually reduce their effort when working under team compensation, as compared to individual-based compensation.
    Keywords: Risk perception, Sorting, Preferred rewards, Productivity
    JEL: M52 J33 C91 D81
    Date: 2012–10
  5. By: Mago, Shakun; Sheremeta, Roman; Yates, Andrew
    Abstract: We conduct an experimental analysis of a best-of-three contest. Intermediate prizes lead to higher efforts, while increasing the role of luck (as opposed to effort) leads to lower efforts. Both intermediate prizes and luck reduce the probability of contest ending in two rounds. The patterns of players’ efforts and the probability that a contest ends in two rounds are consistent with ‘strategic momentum’, i.e., momentum generated due to strategic incentives inherent in the contest. We do not find evidence for ‘psychological momentum’, i.e., momentum which emerges when winning affects players’ confidence. Similar to previous studies of contests, we find significantly higher efforts than predicted and strong heterogeneity in effort between subjects.
    Keywords: best-of-three contest; experiments; strategic momentum; psychological momentum
    JEL: D72 C72 C91
    Date: 2012–12–02
  6. By: Lynn, Peter
    Abstract: We consider the effect of a wave of mixed-mode data collection (telephone and face-to-face), in an otherwise face-to-face survey, on panel attrition and the extent to which this effect is dependent on the nature of the mode-switch protocol. Findings are reported from an experiment. One protocol involves making extended efforts to interview each household member by telephone before switching to face-to-face, while the other involves switching a household to face-to-face as soon as it is apparent that an interviewer visit will be needed for at least one household member. With both protocols response rate at the mixed-mode wave is lower than with face-to-face single mode data collection, but with the protocol involving extended efforts this response differential is eroded over the following two waves.
    Date: 2012–12–05
  7. By: Verena Jung; Sascha L. Schmidt; Benno Torgler
    Abstract: We explore the attitude towards risky career choices of young people in highly competitive environments. We empirically test which factors influence young elite athletes' tendency towards choosing a high-risk career option over a lower risk one; looking at the attitudes, of close to 1000 soccer players in the German "Bundesliga" professional clubs' Youth Academies, towards making real-life decisions. Generally, they face the decision early on as to whether or not they should risk quitting school to solely focus on a professional soccer career. Our study confirms that elements of expected utility, assessment of the likelihood of achievement of the aspired career as well as the potential benefit derived from this decision, explain risk-taking in competitive environments. The longer an individual survives the continuous selection process in the competitive environment, the more he thinks that he will eventually succeed - despite the increasing opportunity costs of quitting a low-risk alternative career. Initial success in the selection processes is a key trigger for the tendency to choose a career in winner-take-all markets.
    Keywords: Career choices; Risk attitude; Risk perception; Professional athletes; Young athletes; Opportunity cost; integration
    JEL: J24 J15 D81 D83 D84 L83
    Date: 2012–12
  8. By: Dawes, Christopher T. (Department of Politics); Johannesson, Magnus (Stockholm School of Economics); Lindqvist, Erik (Research Institute of Industrial Economics (IFN)); Loewen, Peter (Department of Political Science); Östling, Robert (Institute for International Economic Studies); Bonde, Marianne; Priks, Frida
    Abstract: We test whether generosity is related to political preferences and partisanship in Canada, Sweden, the United Kingdom and the United States using incentivized dictator games. The total sample consists of more than 5,000 respondents. We document that support for social spending and redistribution is positively correlated with generosity in all four countries. Further, we show that donors are more generous towards co-partisans in all countries, and that this effect is stronger among supporters of left-wing political parties. All results are robust to the inclusion to an extensive set of control variables, including income and education.
    Keywords: Generosity; Altruism; Political Preferences; Size of Government; Public Goods; Dictator Game; Ingroup Effect; Political Partisanship
    JEL: H11 H40
    Date: 2012–11–21
  9. By: Anita Kopayni-Peuker (University of Amsterdam); Theo Offerman (University of Amsterdam); Randolph Sloof (University of Amsterdam)
    Abstract: We consider the possibility that cooperation in a prisoner's dilemma is fostered by people's voluntarily enhancement of their own vulnerability. The vulnerability of a player determines the effectiveness of possible punishment by the other. In the "Gradual" mechanism, players may condition their incremental enhancements of their vulnerability on the other's choices. In the "Leap" mechanism, they unconditionally choose their vulnerability. In our experiment, subjects only learn to cooperate when either one of these mechanisms is allowed. In agreement with theory, subjects aiming for cooperation choose higher vulnerability levels in Gradual than in Leap, which maps into higher mutual cooperation levels.
    Keywords: D03; D81; D83
    Date: 2012–12–04

This nep-cbe issue is ©2012 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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