nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2013‒04‒06
nineteen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Social Information and Charitable Giving: An artefactual field experiment with young children and adolescents By Guzmán, Andrea; Villegas-Palacio, Clara; Wollbrant, Conny
  2. Understanding the Nature of Cooperation Variability By Fosgaard, Toke; Hansen , Lars Gårn; Wengström, Erik
  3. Contribution Games and the End-Game Effect: When Things Get Real – An Experimental Analysis By Bar-El, Ronen; Tobol, Yossi
  4. Assessing Mental Models via Recording the Decision Deliberations of Pairs By Siegfried K. Berninghaus; Werner Güth; Charlotte Klempt; Kerstin Pull
  5. Self-Image and Strategic Ignorance in Moral Dilemmas By Grossman, Zachary; van der Weele, Joël
  6. The power of sunspots: an experimental analysis By Dietmar Fehr; Frank Heinemann; Aniol Llorente-Saguer
  7. Cooperation, Trust, and Economic Development: An Experimental Study in China By Junyi Shen; Xiangdong Qin
  8. How to Improve Economic Understanding? Testing Classroom Experiments in High Schools By Gerald Eisenkopf; Pascal Sulser
  9. Only Mine or All Ours: An Artefactual Field Experiment on Procedural Altruism By Utteeyo Dasgupta; Subha Mani
  10. Uncertainty, risk, and incentives: theory and evidence By Zhiguo He; Si Li; Bin Wei; Jianfeng Yu
  11. Analyst Forecast Revisions and Overconfidence By Jean-Sébastien Michel; J. Ari Pandes
  12. Creating Attachment through Advertising: Loss Aversion and Pre–Purchase Information By Heiko Karle
  13. The Effect of Non-Cognitive Traits on Health Behaviours in Adolescence By Mendolia, Silvia; Walker, Ian
  14. Variants of the Monoamine Oxidase A Gene (MAOA) Predict Free-riding Behavior in Women in a Strategic Public Goods Experiment By Vanessa Mertins; Andrea B. Schote; Jobst Meyer
  15. Strive to be first or avoid being last: An experiment on relative performance incentives. By E. Glenn Dutcher; Loukas Balafoutas; Florian Lindner; Dmitry Ryvkin; Matthias Sutter
  16. Task Assignment under Agent Loss Aversion By Kohei Daido; Kimiyuki Morita; Takeshi Murooka; Hiromasa Ogawa
  17. Personality Traits and Economic Preparation for Retirement By Michael D. Hurd; Angela Lee Duckworth; Susann Rohwedder; David R. Weir
  18. Sharing One's Fortune? An Experimental Study on Earned Income and Giving By Tonin, Mirco; Vlassopoulos, Michael
  19. No myopic loss aversion in adolescents? – An experimental note By Daniela Glätzle-Rützler; Matthias Sutter; Achim Zeileis

  1. By: Guzmán, Andrea (Universidad Nacional de Colombia-Sede Medellin); Villegas-Palacio, Clara (Universidad Nacional de Colombia-Sede Medellin); Wollbrant, Conny (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: A growing literature in economics examines the development of preferences among children and adolescents. This paper combines a repeated dictator game with treatments that either provides participants with information about the average behavior of others or not. Collecting data on 384 children aged 5-17, we find that sensitivity to social information is present already in early life and that information about others’ donations can reduce, but primarily increases donations.<p>
    Keywords: Children; Charitable giving; Social information; Preference development
    JEL: C93 D02 D03 D64
    Date: 2013–03–27
  2. By: Fosgaard, Toke (Department of Food and Resource Economics, University of Copenhagen); Hansen , Lars Gårn (Department of Food and Resource Economics, University of Copenhagen); Wengström, Erik (Department of Economics, Lund University)
    Abstract: We investigate framing effects in a large-scale public good experiment. We measure indicators of explanations previously proposed in the literature, which when combined with the large sample, enable us to estimate a structural model of framing effects. The model captures potential causal effects and the behavioral heterogeneity of cooperation variability. We find that framing only has a small effect on the average level of cooperation but a substantial effect on behavioral heterogeneity and we show that this can be explained almost exclusively by a corresponding change in the heterogeneity of beliefs about other subjects’ behavior. Preferences are on the other hand stable between frames.
    Keywords: Framing; Public Goods; Internet Experiment; Simulation
    JEL: C13 C71 C93 H41
    Date: 2013–03–19
  3. By: Bar-El, Ronen (Open University of Israel); Tobol, Yossi (Jerusalem College of Technology (JTC))
    Abstract: We conduct a contribution game for a real public good and show that when the contributors value the real public good highly, they increase their contributions in each round. Thus, contrary to previous literature, free riding decreases over rounds and the end-game effect is reversed.
    Keywords: public goods experiment, end-game effect, free-riding
    JEL: C72 C92 H41
    Date: 2013–03
  4. By: Siegfried K. Berninghaus (Karlsruhe Institute of Technology, Institute for Economic Theory and Statistics); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Charlotte Klempt (Institute for Applied Economic Research); Kerstin Pull (Eberhard Karls Universität Tübingen)
    Abstract: Two participants have to decide jointly, with the discussions preceding their choice being video/audiotaped. For two tasks, one with and one without strategic interaction, we refer to obvious reasoning styles as mental models. The videotaped discussions are analyzed according to which mental models are mentioned by one or both participants in the same pair and how decisive such arguments were. The mental models for the risky choice task are "analytic approach", "commitment mode", and "avoid chance", and for the outside-option game "equality seeking", "backward induction", and "forward induction". We classify each pair according to their mental constellation in both tasks and assess mental models in addition to collecting choice data. Altogether, this allows for better explanations, especially of heterogeneity in reasoning and deciding.
    Keywords: behavioral principles, videotaped experiments, outside option games
    JEL: C72 C90 D03 G11
    Date: 2013–03–21
  5. By: Grossman, Zachary; van der Weele, Joël
    Abstract: Avoiding information about adverse welfare consequences of self-interested decisions, orstrategic ignorance, is an important source of corruption, anti-social behavior and even atrocities. We model an agent who cares about self-image and has the opportunity to learn the social benefits of a personally costly action.  The trade-off between self-image concerns and material payoffs can lead the agent to use ignorance as an excuse, even if it is deliberately chosen. Two experiments, modeled after Dana, Weber, and Kuang (2007), show that a) many people will reveal relevant information about others' payoffs after making an ethical decision, but not before, and b)  some people are willing to pay for ignorance. These results corroborate the idea that Bayesian self-signaling drives people to avoid inconvenient facts in moral decisions.
    Keywords: Economics, Economics, General, prosocial behavior, dictator games, strategic ignorance, self-signaling
    Date: 2013–03–15
  6. By: Dietmar Fehr; Frank Heinemann; Aniol Llorente-Saguer
    Abstract: The authors show how the influence of extrinsic random signals depends on the noise structure of these signals. They present an experiment on a coordination game in which extrinsic random signals may generate sunspot equilibria. They measure how these signals affect behavior. Sunspot equilibria emerge naturally if there are salient public signals. Highly correlated private signals may also cause sunspot-driven behavior, even though this is no equilibrium. The higher the correlation of signals and the more easily these can be aggregated, the more powerful these signals are in moving actions way from the risk-dominant equilibrium.
    Keywords: Human behavior
    Date: 2013
  7. By: Junyi Shen (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Xiangdong Qin (School of Economics, Shanghai Jiao Tong University, China)
    Abstract: Many previous empirical studies have suggested that cooperation and trust affect economic growth. However, the precise relationship between trust and cooperation (i.e., whether trust leads to cooperation or cooperation leads to trust) remains unclear and it is not known how the level of economic development affects the level of cooperation and trust. Using a combination of public goods experiment, gambling game experiment, and trust game experiment, we investigate the links among cooperation, trust, and economic development in four regions of China. Our results suggest that first, there is a U-shaped or V-shaped relationship between cooperation and economic development; second, on the one hand, cooperation leads to trust, and on the other hand, more cooperative behavior may be created by rewarding trusting behavior; and third, men are more cooperative and trusting than women. Furthermore, we find that the widely used 'GSS trust' question from the General Social Survey (GSS) does not predict either cooperation or trust, whereas the questions 'GSS fair' and 'GSS help' have weak predictive power for trusting behavior but not for cooperative behavior.
    Keywords: Cooperation, Trust, Economic development, Experiment, China
    JEL: C91 H41 I32
    Date: 2013–04
  8. By: Gerald Eisenkopf (Department of Economics, University of Konstanz, Germany); Pascal Sulser (Department of Economics, University of Konstanz, Germany)
    Abstract: We present results from a field experiment at Swiss high schools in which we compare the effectiveness of a classroom experiment against conventional economics teaching. We randomly assigned classes into different teaching environments or a control group. Our results suggest that both teaching methods improve economic understanding considerably in contrast to classes without prior training. We do not observe a significant overall effect of the classroom experiment, but more able students benefit from the experiment while others lose out. Furthermore there is no robust impact of economic training on social preferences, measured as both individual behavior in incentivized decisions or political opinions.
    Keywords: Education of Economics, Classroom Experiments, Field Experiments, Indoctrination
    JEL: A21 C93 I21
    Date: 2013–02–15
  9. By: Utteeyo Dasgupta (Franklin and Marshall College); Subha Mani (Fordham University)
    Abstract: In an artefactual field experiment, we introduce a novel allocation game to investigate the role of procedural altruism in household decision-making and study choices of married spouses. Subjects can distribute their earnings from the experiment either on food items (joint consumption good), or on gender specific personal clothing (private consumption good). Subjects’ consumption choices are observed under two treatments – earnings with effort, and earnings without effort. At the aggregate we find that subjects exhibit a strong preference for own private consumption good when assigned to the effort treatment. However, further scrutiny suggests that women’s choice for the joint consumption good in the household remains largely independent of the treatment. In contrast, men exhibit a strong preference for private consumption good in the effort treatment.
    Keywords: Procedural utility, Household decision making, Gender, Experiment
    JEL: C93 D1 Z1
  10. By: Zhiguo He; Si Li; Bin Wei; Jianfeng Yu
    Abstract: Uncertainty has qualitatively different implications than risk in studying executive incentives. We study the interplay between profitability uncertainty and moral hazard, where profitability is multiplicative with managerial effort. Investors who face greater uncertainty desire faster learning, and consequently offer higher managerial incentives to induce higher effort from the manager. In contrast to the standard negative risk-incentive trade-off, this "learning-by-doing" effect generates a positive relation between profitability uncertainty and incentives. We document empirical support for this prediction.
    Date: 2013
  11. By: Jean-Sébastien Michel; J. Ari Pandes
    Abstract: We find evidence that supports the notion that analysts who provide extreme forecast revisions are overconfident, especially in assessing the earnings prospects of high information uncertainty firms. We further examine whether analyst overconfidence is associated with stock market performance, and find that a portfolio of extreme forecast revisions underperforms a portfolio of modest forecast revisions in high information uncertainty firms, but not in low information uncertainty firms. Finally, we find that experienced analysts are more overconfident than inexperienced analysts, particularly for high information uncertainty firms, suggesting that analysts do not reduce their overconfidence bias by learning from experience.
    Keywords: Analyst forecast revisions, overconfidence, information uncertainty, forecast accuracy, stock returns
    JEL: G12 G14 G24
    Date: 2013
  12. By: Heiko Karle (ETH Zurich, Switzerland)
    Abstract: Complementing the existing literature on anchoring effects and loss aversion, we analyze how firms can influence loss–averse consumers’ willingness to pay by product information in the form of informative advertising rather than by prices. We find that consumers’ willingness to pay is greatest when only partial information about the product—i.e. only a fraction of product attributes—is disclosed, and that partial information disclosure is the optimal mode of advertising for a monopolistic firm. This causes the consumers’ realized product valuation to diverge from their intrinsic product valuation, which leads to a reduction of consumer surplus. Consequently, transparency policies can help to protect consumers.
    Keywords: Advertising; Loss Aversion; Information Disclosure.
    JEL: D83 L41 M37
    Date: 2013–03
  13. By: Mendolia, Silvia (University of Wollongong); Walker, Ian (Lancaster University)
    Abstract: This paper investigates the relationship between personality traits in adolescence and health behaviours using a large and recent cohort study. In particular, we investigate the impact of locus of control, self-esteem and conscientiousness at age 15-16, on the incidence of health behaviours such as: alcohol consumption; cannabis and other drug use; unprotected and early sexual activity; and sports and physical activity. We use matching methods to control for a very rich set of adolescent and family characteristics and we find that personality traits do affect health behaviours. In particular, individuals with external locus of control, or with low self-esteem, or with low levels of conscientiousness are more likely to engage in health-risky behaviours.
    Keywords: personality, locus of control, self-esteem, health behaviours
    JEL: I18 I28
    Date: 2013–03
  14. By: Vanessa Mertins (Institute for Labour Law and Industrial Relations in the EU, University of Trier); Andrea B. Schote; Jobst Meyer
    Abstract: Laboratory experiments have documented substantial heterogeneity in social preferences, but little is known about the origins of such behavior. Previous research on public goods experiments suggests that individual-level demographic and psychological variables correlate with player types. However, the key question about biological sources of variation in these preferences remains open. The aim of this study is to uncover genetic variations that influence differences in cooperative behavior. For this reason, we identify types of players within a strategic public goods experiment. We explicitly test for an association between individual variance in strategy choice and the functional promoter-region repeat of the monoamine oxidase A gene (MAOA). Our experimental findings suggest a link between MAOA and the occurrence of free-riding in females. Females with MAOA-L are less likely to behave like weak free-riders than MAOA-H carriers, whereas among males, our results did not support a significant relation between genotype and player type. Furthermore, MAOA-L female carriers contribute more than MAOA-H subjects to the public good if they know that others contribute nothing, and they showed slightly lower scores on the Machiavellianism scale. This is the first piece of evidence that genotype might predict player type within a public goods setting. It contributes to our understanding of biological drivers of economic decision-making and points to the need for further exploration.
    Keywords: gene, player type, public good, conditional cooperation, experimental economics
    JEL: H41 D87 C91 C72
    Date: 2013–02
  15. By: E. Glenn Dutcher; Loukas Balafoutas; Florian Lindner; Dmitry Ryvkin; Matthias Sutter
    Abstract: Managers often use tournaments which motivate workers to compete for the top, compete to avoid the bottom, or both. In this paper we compare the effectiveness and efficiency of the corresponding incentive schemes. To do so, we utilize optimal contracts in a principal-agent setting, using a Lazear-Rosen type model that predicts equal effort and efficiency levels for the three mechanisms with the appropriate distribution of prizes. We test the model's predictions in a laboratory experiment and find that a mechanism which incorporates both competition for the top and away from the bottom produces the highest effort from agents, especially in contests of a relatively larger size. Avoiding being last is shown to produce the lowest variance of effort, be more effective and, in larger contests, more efficient than competing for the top. Finally, we show that behavior in all mechanisms is consistent with basic directional and reinforcement learning.
    Keywords: tournament, reward, punishment, promotion, firing, contract, experiment, learning
    JEL: M52 J33 J24 D24 C90
    Date: 2013–03
  16. By: Kohei Daido (School of Economics, Kwansei Gakuin University); Kimiyuki Morita (Graduate School of Commerce and Management, Hitotsubashi University); Takeshi Murooka (Department of Economics, University of California-Berkeley); Hiromasa Ogawa (Graduate School of Economics, University of Tokyo)
    Abstract: We analyze a simple task-assignment model in which a principal assigns a task to one of two agents depending on the state. If the agents have standard concave utility, the principal assigns the task to an agent with the highest productivity in each state. In contrast, if the agents are loss averse, in order to alleviate their expected losses the principal may assign the task to a single agent in all states. Furthermore, the optimal contract may specify the same effort level across states. Our results imply that such simple contracts can be optimal even when employers can write contingent contracts at no cost.
    Keywords: task assignment, loss aversion, reference-dependent preferences
    JEL: D03 D86 M12 M52
    Date: 2013–03
  17. By: Michael D. Hurd (RAND); Angela Lee Duckworth (University of Pennsylvania); Susann Rohwedder (RAND); David R. Weir (Survey Research Center, University of Michigan)
    Abstract: This paper assesses the effects of personality traits on economic preparation for retirement, wealth accumulation, and consumption, among persons 66 to 69 years of age. Among the five chief personality traits of neuroticism, extroversion, agreeableness, conscientiousness, and openness, we focus most on conscientiousness. We find levels of adequate economic preparation for retirement ranging from 29 percent to 90 percent and that conscientiousness positively affects the proportion of persons adequately prepared for retirement, while neuroticism negatively affects it. Both consumption and wealth increase with conscientiousness but wealth increases faster, indicating that more conscientious persons save more out of retirement resources.
    Date: 2012–09
  18. By: Tonin, Mirco (University of Southampton); Vlassopoulos, Michael (University of Southampton)
    Abstract: In this paper we investigate the relationship between earnings and charitable giving. We set up a real effort experiment, in which subjects enter data in four one-hour occasions and are paid a piece rate. From the second occasion onwards, we randomly assign half of the subjects to a treatment with higher piece rates. At the end we ask subjects whether they want to donate a share of their earnings to a charity of their choice. We find that, despite large differences in earnings due to the different piece rates, subjects receiving the higher piece rate are actually less likely to give, and that givers in the two groups give the same share of their total earnings. Charities receive the same average donation from members of the two groups indicating that subjects in this experiment do not treat charitable giving as a normal good.
    Keywords: charity, earnings, luck, effort, windfall
    JEL: D64 J39
    Date: 2013–03
  19. By: Daniela Glätzle-Rützler; Matthias Sutter; Achim Zeileis
    Abstract: Myopic loss aversion (MLA) has been found to play a persistent role for investment behavior under risk. We study whether MLA is already present during adolescence. Quite surprisingly, we find no evidence of MLA in a sample of 755 adolescents. This finding is at odds with previous findings, and it might be explained by self-selection effects. In other dimensions, however, we are able to replicate stylized findings in our pool of adolescents, such that teams invest higher amounts than individuals and that women invest less than men.
    Keywords: myopic loss aversion, experiment, adolescents, team-decision making
    JEL: C91 D03
    Date: 2013–03

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