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on Cognitive and Behavioural Economics |
| By: | Katerina Straznicka (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France) |
| Abstract: | We examine the temporal stability of risk preference measures obtained by different elicitation methods in a controlled laboratory experiment at two distinct times. Our results indicate remarkable temporal stability of risk measures at the aggregated level and temporal instability at the individual level. We control for the impact of, first, personality traits, and second, performance realized in a market game. When better market performers demonstrate more stable risk preferences, the impact of personality traits is marginal. |
| Keywords: | Time stability, Risk Preferences, Personality Theory, Experimental economics |
| JEL: | C9 D8 D9 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1236&r=cbe |
| By: | Nadja Dwenger; Dorothea Kübler; Georg Weizsäcker; |
| Abstract: | We investigate violations of consequentialism in the form of the stochastic dominance property. The property is shared by many theories of choice and implies that the decision-maker prefers receiving the best outcome for sure over all lotteries that involve multiple outcomes. We run experiments to demonstrate that dominated randomization can be attractive. In treatments where decision-makers are asked to submit multiple decisions without knowing which one is relevant, many participants submit contradictory sets of decisions and thereby induce a dominated lottery between outcomes. Explicit choice of non-consequentialist randomization is observed in a separate treatment. A possible reason for the eect is the desire to avoid having to make the decision. A large data set on (high-stake) university applications in Germany shows patterns that are consistent with a preference for randomization. |
| Keywords: | Stochastic dominance violations, individual decision making, university choice, matching |
| JEL: | D03 D01 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2013-004&r=cbe |
| By: | Engelmann, Dirk; Nikiforakis, Nikos |
| Abstract: | We investigate whether peer punishment is an efficient mechanism for enforcing cooperation in an experiment with a long time horizon. Previous evidence suggests that the costs of peer punishment can be outweighed by the benefits of higher cooperation, if (i ) there is a sufficiently long time horizon and (ii ) punishment cannot be avenged. However, in most instances in daily life, when individuals interact for an extended period of time, punishment can be retaliated. We use a design that imposes minimal restrictions on who can punish whom or when, and allows participants to employ a wide range of punishment strategies including retaliation of punishment. Similar to previous research, we find that, when punishment cannot be avenged, peer punishment leads to higher earnings relative to a baseline treatment without any punishment opportunities. However, in the more general setting, we find no evidence of group earnings increasing over time relative to the baseline treatment. Our results raise questions under what conditions peer punishment can be an efficient mechanism for enforcing cooperation. |
| Keywords: | altruistic punishment , counter-punishment , public good game , feuds |
| JEL: | C92 D70 H41 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:mnh:wpaper:32651&r=cbe |
| By: | Brice Corgnet (Argyros School of Business and Economics, Chapman University); Roberto Hernán González (Universidad de Granada); Stephen Rassenti (Economic Science Institute, Chapman University) |
| Abstract: | Holmström (1982) established that free riding behaviors are pervasive whenever people are paid according to aggregate measures of output such as team incentives. However, team incentives have been found to be particularly effective both in the lab and in the field. In this paper we show, in line with Holmström (1982), that shirking behaviors in teams are indeed pervasive. Production levels were significantly lower under team incentives than under individual incentives while the time dedicated to on-the-job leisure activities (Internet usage) was significantly larger under team incentives than under individual incentives. Subsequently, we find that a very weak form of peer monitoring (anonymous and without physical proximity, verbal threats or face to face interactions) allowed organizations using team incentives to perform as well as those using individual incentives. This provides strong evidence for the conjecture of Kandel and Lazear (1992) that peer pressure may resolve the moral hazard in teams problem. |
| Keywords: | Incentives, free-riding, monitoring, peer pressure, organization theory |
| JEL: | C92 D23 M52 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:13-01&r=cbe |
| By: | Alger, Ingela (TSE (LERNA, CNRS) Univesité Toulouse 1 Capitole); Cox, Donald (Boston College) |
| Abstract: | What can evolutionary biology tell us about male-female differences in preferences concerning family matters? Might mothers be more solicitous toward offspring than fathers, for example? The economics literature has documented gender differences—children benefit more from money put in the hands of mothers rather than fathers, for example—and these differences are thought to be partly due to preferences. Yet for good reason family economics is mostly concerned with how prices and incomes affect behavior against a backdrop of exogenous preferences. Evolutionary biology complements this approach by treating preferences as the outcome of natural selection. We mine the well-developed biological literature to make a prima facie case for evolutionary roots of parental preferences. We consider the most rudimentary of traits—sex differences in gamete size and internal fertilization—and explain how they have been thought to generate malefemale differences in altruism toward children and other preferences related to family behavior. The evolutionary approach to the family illuminates connections between issues typically thought distinct in family economics, such as parental care and marriage markets. |
| Date: | 2012–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:26680&r=cbe |
| By: | Pedro Bordalo; Nicola Gennaioli; Andrei Shleifer |
| Abstract: | We present a theory of context-dependent choice in which a consumer's attention is drawn to salient attributes of goods, such as quality or price. An attribute is salient for a good when it stands out among the good's attributes, relative to that attribute's average level in the choice set (or generally, the evoked set). Consumers attach disproportionately high weight to salient attributes and their choices are tilted toward goods with higher quality/price ratios. The model accounts for a variety of disparate evidence, including decoy e ects, context-dependent willingness to pay, and large shifts in demand in response to price shocks. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:463&r=cbe |
| By: | DeVoe, Sanford E. (University of Toronto); Pfeffer, Jeffrey (Stanford University); Lee, Byron Y. (Renmin University of China) |
| Abstract: | The authors investigate how both the amount and source of income affects the importance placed on money using a longitudinal analysis of the British Household Panel Survey and evidence from two laboratory experiments. Larger amounts of money received for labor were associated with individuals placing greater importance on money, but this effect did not hold for money unrelated to work. The longitudinal survey analysis demonstrated these differential effects of the source of income on money's importance while holding constant stable individual differences. The experiments provide evidence that the source of income has a causal effect on the importance of money as well as on the effort expended to earn more money. Even as individual differences in the importance placed on money may affect peoples' income, our results suggests that, depending upon its source, income can also affect the importance people place on money. |
| Date: | 2012–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:2125&r=cbe |
| By: | Brice Corgnet (Argyros School of Business and Economics, Chapman University); Roberto Hernán González (Universidad de Granada); Praveen Kujal (Universidad Carlos III); David Porter (Economic Science Institute, Chapman University) |
| Abstract: | Can “house money” explain asset market bubbles? We test this hypothesis in an asset market experiment with a certain dividend. We compare experiments where the initial portfolio of cash and shares is given to subjects, i.e. house money, to a treatment in which individual initial portfolios are constructed using subject earned money from a real effort task. We find that bubbles still occur; however trading volumes are significantly abated and the dispersion of earnings is significantly lower when subjects earn their starting endowments. We further investigate the role of cognitive ability in accounting for the differences in earnings distribution across treatments by using the Cognitive Reflection Test (CRT). We find that high CRT subjects earned more money on average than the initial value of their portfolio while low CRT subjects earned less. Subjects with low CRT scores were net purchasers (sellers) of shares when the price was above (below) fundamental value while the opposite was true for subjects with high CRT scores. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:13-04&r=cbe |
| By: | Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University); Matthew W. McCarter (Argyros School of Business and Economics, Chapman University) |
| Abstract: | A common finding in social sciences is that member change hinders group functioning and performance. However, questions remain as to why member change negatively affects group performance and what are some ways to alleviate the negative effects of member change on performance? To answer these questions we conduct an experiment in which we investigate the effect of newcomers on a group’s ability to coordinate efficiently. Participants play a coordination game in a four-person group for the first part of the experiment, and then two members of the group are replaced with new participants, and the newly formed group plays the game for the second part of the experiment. Our results show that the arrival of newcomers decreases trust among group members and this decrease in trust negatively affects group performance. Knowing the performance history of the arriving newcomers mitigates the negative effect of their arrival, but only when newcomers also know the oldtimers performance history. Surprisingly, in groups that performed poorly prior to the newcomers’ arrival, the distrust generated by newcomers is mainly between oldtimers about each other rather than about the newcomers. |
| Keywords: | coordination, group performance, oldtimers, newcomers, trust, experiments |
| JEL: | C72 C91 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:13-02&r=cbe |
| By: | Matteo. Ploner (University of Trento, CEEL, Italy); Tobias Regner (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany) |
| Abstract: | In our experiment, a dictator game variant, the reported outcome of a die roll determines the endowment (low/high) in a subsequent dictator game. In one treatment the experimenter is present and no cheating is possible, while in another subjects can enter the result of the roll themselves. Moral self-image is also manipulated in the experiment preceding ours. The aim of this experimental set up is to analyze dynamic aspects of moral behavior. When cheating is possible, substantially more high endowments are claimed and transfers of high-endowed dictators are bigger than when cheating is not possible (mediated by the preceding moral self-image manipulation). The preceding manipulations also have a direct effect on generosity, when subjects have to report the roll of the die truthfully. Moral balancing appears to be an important factor in individual decision making. |
| Keywords: | honesty, moral balancing, self-image, dictator game, experiments, ethical behavior |
| JEL: | C91 D03 |
| Date: | 2013–01–08 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2013-002&r=cbe |
| By: | Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University); Jingjing Zhang (University of Zurich) |
| Abstract: | We examine behavior in a three-player trust game in which the first player may invest in the second and the second may invest in the third. Any amount sent from one player to the next is tripled. The third player decides the final allocation among three players. The baseline treatment with no communication shows that the first and second players send significant amounts and the third player reciprocates. Allowing insider communication between the second and the third players increases cooperation between these two. Interestingly, there is an external effect of insider communication: the first player who is outside communication sends 54% more and receives 289% more than in the baseline treatment. As a result, insider communication increases efficiency from 44% to 68%. |
| Keywords: | three-player trust games, experiments, reciprocity, communication |
| JEL: | C72 C91 D72 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:13-03&r=cbe |
| By: | Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Alina Sorgner (School of Economics and Business Administration, Friedrich-Schiller-University Jena) |
| Abstract: | We argue that entrepreneurial choice proceeds in at least in two steps, with vocational choice nearly always preceding choice of employment status, whether that be self-employment or dependent employment. Since the two decisions are interrelated, analysis of entrepreneurial choice as a single act may lead to inconsistent estimates of the factors that determine the decision to launch a business venture. Our empirical analysis utilizes a bivariate probit model that jointly estimates both decisions. The results support our argument that entrepreneurial choice is a two-stage decision process. |
| Keywords: | Entrepreneurial choice, vocational choice, personality traits |
| JEL: | L26 J24 D01 |
| Date: | 2013–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2013-004&r=cbe |
| By: | William Prieto Bustos |
| Abstract: | The following document describes an experimental methodological design implemented to test the cognitive synergy hypothesis regarding poverty reduction proposed by Boiser (2010). The cognitive synergy hypothesis refers to social, cultural accumulation altogether with informal and formal knowledge accumulation hidden in local environment nets as a key determinant in reducing poverty levels. Albeit cognitive synergy and social and cultural capital accumulation seem to be related, the former comes from an outsider regulator who induces latent resources for reaching development goals meanwhile the latter comes without inducing a development strategy upon a specific territory. The experimental methodological design is implemented where a continental sample of inhabitants is compared with an island sample of inhabitants that are exposed to an induced development strategy. Main findings indicate that cognitive synergy caused by a development strategy based on capital, social and technological accumulation in the islander population carried on by a non-profit organization is statistically significant reducing poverty in a data panel model adjusted for 2007 and 2009 economic and social data for the islander population. |
| Date: | 2012–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:col:000444:010349&r=cbe |
| By: | Stéphane Robin (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Katerina Straznicka (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Marie Claire Villeval (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France) |
| Abstract: | We explore the effects of competitive incentives and of their time horizon on the evolution of both asset prices and trading activity in experimental asset markets. We compare i) a no-bonus treatment based on Smith, Suchanek and Williams (1988) ; ii) a short-term bonus treatment in which bonuses are assigned to the best performers at the end of each trading period ; iii) a long-term bonus treatment in which bonuses are assigned to the best performers at the end of the 15 periods of the market. We find that the existence of bonus contracts does not increase the likelihood of bubbles but it affects their severity, depending on the time horizon of bonuses. Markets with long-term bonus contracts experience lower price deviations and a lower turnover of assets than markets with either no bonuses or long-term bonus contracts. Short-term bonus contracts increase price deviations but only when markets include a higher share of male traders. At the individual level, the introduction of bonus contracts increases the trading activity of males, probably due to their higher competitiveness. Finally, both mispricing and asset turnover are lower when the pool of traders is more risk-averse. |
| Keywords: | Asset market, bubbles, incentives, bonuses, risk attitudes, experiment |
| JEL: | C92 M52 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1235&r=cbe |