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on Cognitive and Behavioural Economics |
| By: | Evelyn Korn (University of Marburg); Stephan Meisenzahl (University of Marburg); Johannes Ziesecke (University of Marburg) |
| Abstract: | Conventional wisdom has it that economic training and education tends to produce less cooperative people – where cooperation means following group-oriented goals. This issue has attracted particular attention in discussions of the current economic crisis where it was asked if increasing marketization of societies has created an environment encouraging amoral selfish behavior of financial intermediaries and other economic agents. We provide some evidence against this claim with the help of an experiment, using an investment game with a public-goods character. Modest guidance of strategic abilities increases the degree of cooperation if the institutional setting permits reputation building. We thus conclude that economic practice can enhance cooperation in a socially stable environment. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201316&r=cbe |
| By: | María Errea (Departamento de Economía-UPNA); Juan M. Cabasés (Departamento de Economía-UPNA) |
| Abstract: | The decision to donate blood and living organs is considered voluntary and altruistic. However, the shortage of donors has opened an interesting debate in recent years, considering offering economic incentives to donors. This paper analyzes theoretically and empirically, the effects of incentives over individuals when facing the decision of becoming donors. Results show that crowding-in of blood donors would be more likely by offering "Information concerning blood donations" or "Blood Tests". In both, blood and living organ donations, "Money" would be very likely to crowd-out individuals from donating. Concerning living organs, we do not find good evidence for crowding-in. We conclude donation policies, properly designed, could help to increase the number of donors, and more specifically suggest implementing non-monetary incentives. |
| Keywords: | social preferences, incentives, altruism, blood and living organ donations |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:nav:ecupna:1302&r=cbe |
| By: | Binswanger, Johannes (Tilburg University); Salm, Martin (Tilburg University) |
| Abstract: | We investigate the relationship between subjective probabilities of future stock market returns and decisions about stockholding. Specifically, we examine whether acting upon subjective probabilities is confined to individuals with high cognitive skills. We explore this question using data from the U.S. Health and Retirement Study (HRS). Our empirical analysis is guided by a novel and simple model based on the dual-systems framework from psychology (Kahneman, 2003). In our model, individuals with low cognitive skills make decisions in an intuitive non-probabilistic way based on cues and feelings. Individuals with high cognitive skills make decisions akin to the expected utility model. As predicted by our model, in our empirical analysis we find that there is a significantly stronger association between subjective return probabilities and stockholding decisions for individuals with high cognitive skills, compared to individuals with lower cognitive skills. The paper contributes to a better understanding of the role of cognitive skills in decision making under uncertainty. |
| Keywords: | subjective expectations, probabilities, dual system decision making, cognitive skills, cognitive economics |
| JEL: | D03 D81 D84 G11 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7265&r=cbe |
| By: | Ivo Bischoff (University of Kassel); Thomas Krauskopf (University of Kassel) |
| Abstract: | We investigate the motives of pro-social behavior in collective decisions in an economic experiment. It compares individual behavior in private and collective decisions in a unified experimental setup. Subjects are given an individual endowment and have to decide how much of it to donate to charity. The experiment is combined with two long questionnaires that provide us with background information on subjects and enables us to learn more about the motives driving their behavior. Contrary to theoretical predictions, the distribution of amounts donated individually is remarkably similar to the distribution of amounts proposed for collective donation. In regressions, we find individual donations to be driven by consequentialist motives, social norms and moral convictions. In collective decisions, neither the motiverelated variables nor any of the control variables are found significant. Comparing subjects’ affective state before and after the experiment, we find that individual donations create a feeling of warm glow while collective donations do not. On the other hand, the change in affective state in the collective decision is higher the higher the amount proposed for the collective donation. This pattern is consistent with expressive motives. |
| Keywords: | voting motives, voluntary contributions, redistribution, charity, economic experiment, warm-glow, Immanuel Kant, affect |
| JEL: | C90 D72 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201319&r=cbe |
| By: | André Lapied (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS); Thomas Rongiconi (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS) |
| Abstract: | The "General-Self-Control-Preference" model introduced by Noor and Takeoka (2010) allows to take into account non linear costs of Self-Control. In this paper we extend this theory to situations in which a decision-maker faces ambiguity. We focus on the fact that lack of information is a potential source of temptation. Indeed lack of information doesn't allow the decision-maker to put a probability measure on uncertain events. Our basic hypothesis is that, in ambiguous situation, individuals are not confident enough about their beliefs and could therefore be tempted to use other beliefs to evaluate the alternatives in the second period. We study a two period model where ex ante dominated choice may tempt the decision-maker in the second period. Individuals have preferences over sets of alternatives that represent second period choices. We provide a Choice-Theoretic model where the ex-ante belief is a probability measure whereas ex post belief is a Choquet-capacity, in order to take into account individual attitudes towards ambiguity in the second period. |
| Keywords: | Temptation, Self-control, Ambiguity, Choquet-Expected-Utility, Comonotonic-Temptation-Independence. |
| JEL: | D81 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1316&r=cbe |
| By: | Hitoshi Matsushima (The University of Tokyo); Tomomi Tanaka (Economic Development & Global Education, LLC); Tomohisa Toyama (Kogakuin University) |
| Abstract: | We examine repeated prisoners’ dilemma with imperfect private monitoring and random termination where the termination probability is low. We run laboratory experiments and show subjects retaliate more severely when monitoring is more accurate. This experimental result contradicts the prediction of standard game theory. Instead of assuming full rationality and pure self-interest, we introduce naivete and social preferences, i.e., reciprocal concerns, and develop a model that is consistent with, and uniquely predicts, the observed behavior in the experiments. Our behavioral model suggests there is a trade-off between naivete and reciprocity. When people are concerned about reciprocity, they tend to make fewer random choices. |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf309&r=cbe |
| By: | Adam Zylbersztejn (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | Several experimental studies show that ex post communication promotes generosity in situations where individual incentives contradict with common interest, like the provision of public goods. The root underlying the effect of this institution, especially in a repeated interaction, is nonetheless still obscure. This study provides a novel empirical testbed for two mechanisms by which ex post communication may affect behavior in repeated interactions : one is related to strategic signaling, the other involves emotions induces by others' opinions. The main findings are as follows. First, the presence of ex post communication (conducted through the attribution of costless disapproval points) fosters pro-social behavior and reduces free-riding. Second, I find systematic evidence that subjects tend to use ex post communication as a signaling device, whilst no evidence in favor of the emotion-based hypothesis. A possible interpretation of this phenomenon is that ex post messages are used to announce future sanctions for free-riding. |
| Keywords: | Public goods game; voluntary contribution mechanism; ex post communication |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00800587&r=cbe |
| By: | Surajeet Chakravarty (Department of Economics, University of Exeter); Miguel A. Fonseca (Department of Economics, University of Exeter) |
| Abstract: | We study using laboratory experiments the impact on cooperation of allowing individuals to invest in group-specific, excludable public goods. We find that allowing different social groups to voluntarily contribute to such goods increases total contributions. However, a significant proportion of that contribution goes towards the group-specific club good, rather than the public good, even when the latter has higher financial returns to cooperation. We find significant evidence of in-group biases, which are manifested by positive in-group reciprocity. That is, club goods allow subjects to display their preferences for interaction with their in-group members, as well as in positive in-group reciprocity. |
| Keywords: | club goods, social identity, experiment |
| JEL: | C92 D02 D03 H41 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:exe:wpaper:1302&r=cbe |
| By: | Nataliya Barasinska; Dorothea Schäfer |
| Abstract: | We investigate whether the willingness to take investment risk is a sex-linked trait and link the results to the country's gender equality regime. Our empirical analysis involves household data on financial asset holdings as well as on self-reported risk tolerance for Austria, Italy, the Netherlands and Spain. Of those countries, Italy is by far the country with the greatest degree of gender inequality according to the 2009 Global Gender Gap Report. Two stages of building a portfolio of financial assets are analyzed. For the first-stage decision of whether to invest in risky assets in the first place, gender is found to have no effect in Austria, the Netherlands and Spain but does have an impact in Italy. However, even for Italy, it seems to be irrelevant in the second-stage decision about the share of wealth invested in the risky assets. We infer from these findings that, for countries with a high degree of gender equality, it is inappropriate to base financial advice primarily on gender. |
| Keywords: | Gender, risk aversion, financial behavior |
| JEL: | G11 J16 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1278&r=cbe |
| By: | Pape, Andreas; Kurtz, Kenneth |
| Abstract: | We introduce a computer program which calculates an agent’s optimal behavior according to Case-based Decision Theory (Gilboa and Schmeidler, 1995) and use it to test CBDT against a benchmark set of problems from the psychological literature on human classification learning (Shepard et al., 1961). This allows us to evaluate the efficacy of CBDT as an account of human decision-making on this set of problems. We find: (1) The choice behavior of this program (and therefore Case-based Decision Theory) correctly predicts the empirically observed relative difficulty of problems and speed of learning in human data. (2) ‘Similarity’ (how CBDT decision makers extrapolate from memory) is decreasing in vector distance, consistent with evidence in psychology (Shepard, 1987). (3) The best-fitting parameters suggest humans aspire to an 80 − 85% success rate, and humans may increase their aspiration level during the experiment. (4) Average similarity is rejected in favor of additive similarity. |
| Keywords: | Case-based Decision Theory, Human Cognition, Learning, Agent-based Computational Economics, Psychology, Cognitive Science |
| JEL: | C63 C88 D83 |
| Date: | 2013–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:45206&r=cbe |
| By: | Hart E. Posen; Dirk Martignoni; Daniel A. Levinthal |
| Abstract: | Learning from experience is a central theme in the management literature. While in general experiential learning is viewed as efficacious, the literature increasingly points to the difficulties inherent in the learning process — many of which stem from a deficit of information about the merits of alternative solutions. It seems plausible that larger organizations, with their capacity to simultaneously pursue a variety of potential solutions to a given challenge, may overcome this deficit. Such a perspective suggests that the efficacy of an organization's learning process should be an increasing function of organizational size. While this logic is intuitively appealing, we find that it does not fully capture the nuances of the organizational learning process. We employ a computational model and find that larger organizations, as characterized by their scale in pursuing parallel initiatives: (a) explore less than smaller organizations, (b) are less likely to discover the very best alternative, and yet (c) on average identify better alternatives. Increasing the number of parallel initiatives guides the search process towards viable alternatives, but it does so at the cost of inhibiting search breadth. Thus, in our model, the characteristics of learning by larger organizations do not result from differences in inertia or incentives that may impede learning and innovation, but rather from the properties of the organizational learning process itself. |
| Keywords: | - |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:13-09&r=cbe |
| By: | Liang, Pinghan; Meng, Juanjuan |
| Abstract: | This paper conducts a laboratory experiment to investigate the role of social connections in behavioral indirect reciprocity. We provide the evidence of spillovers effects of social ties, e.g., the recipient’s indirect reciprocal act varies with the relations between the donor and a third party. Naturally occurring friendship is employed to study social connections. Thus, a beneficiary might either be a “friend” or a “stranger” of the donor. We demonstrate that knowing social connections significantly increases the recipient’s repayment only if the donor is kind enough in the first place. Overall, recipients’ indirect reciprocity almost doubles when introducing social networks among donors and beneficiaries. It is also shown that this spillovers effect is unlikely the result of recipients’ perception of donors’ expectations. Major theories of social preferences, e.g., fairness, intention-based, guilt-aversion, cannot offer satisfactory explanations of our findings. We propose an explanation based on in-group and out-group differences but with endogenous group status, in which social connections play a crucial role. |
| Keywords: | indirect reciprocity, social connections, spillovers, social preferences |
| JEL: | C91 D03 D85 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:45270&r=cbe |
| By: | Kuhn, Michael A. (University of California, San Diego); Kuhn, Peter J. (University of California, Santa Barbara); Villeval, Marie Claire (CNRS, GATE) |
| Abstract: | We experimentally manipulate two aspects of the cognitive environment, cognitive depletion and recent sugar intake, and estimate their effects on individuals' time preferences in a way that allows us to identify the structural parameters of a simple (α,β,δ) intertemporal utility function for each person. We find that individuals exposed to a prior cognitive load, individuals who consumed a sugared drink, and individuals who consumed a sugar-free drink all defer more income than a control group exposed to none of these conditions. Structural estimates show that all three effects are driven entirely by increases in the intertemporal price elasticity parameter (α). Together, our results suggest that at least for complex economic decisions like intertemporal financial choice, the ‘attention/focusing' effect of both prior cognitively demanding activity and prior assignment of a primary reward can improve decision-making. |
| Keywords: | time preferences, self-control, depletion, sucrose, experiment |
| JEL: | C91 D90 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7273&r=cbe |