nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2013‒05‒05
ten papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. The intrinsic value of decision rights By Björn Bartling; Ernst Fehr; Holger Herz
  2. Consensus and Contribution: Shared Status Hierarchies Promote Group Success By Kilduff, Gavin J.; Anderson, Cameron; Willer, Robb
  3. Characterizing Financial and Statistical Literacy By Amalia Di Girolamo; Glenn W. Harrison; Morten I. Lau; J. Todd Swarthout
  4. Learning in a Black Box By Heinrich H. Nax; Maxwell N. Burton-Chellew; Stuart A. West; H. Peyton Young
  5. Conscience Accounting: Emotional Dynamics and Social Behavior By Uri Gneezy; Alex Imas; Kristóf Madarász
  6. Trust and preferences: evidence from survey data By Giuseppe Albanese; Guido de Blasio; Paolo Sestito
  7. Up close it feels dangerous: 'anxiety' in the face of risk By Thomas M. Eisenbach; Martin C. Schmalz
  8. Is Giving Equivalent to Not Taking in Dictator Games? By Korenok Oleg; Edward L. Millner; Laura Razzolini
  9. Employee recognition and performance: A field experiment By Bradler, Christiane; Dur, Robert; Neckermann, Susanne; Non, Arjan
  10. Scoring Rules for Subjective Probability Distributions By Glenn W. Harrison; Jimmy Martínez-Correa; J. Todd Swarthout; Eric R. Ulm

  1. By: Björn Bartling; Ernst Fehr; Holger Herz
    Abstract: Philosophers, psychologists, and economists have long argued that certain decision rights carry not only instrumental value but may also be valuable for their own sake. The ideas of autonomy, freedom, and liberty derive their intuitive appeal – at least partly – from an assumed positive intrinsic value of decision rights. Proving the existence of this value and measuring its size, however, is intricate. Here, we develop an experimental method capable of achieving these goals. The data reveal that – across different parameterizations – the large majority of our subjects intrinsically value decision rights beyond their instrumental benefit. The existence of an intrinsic value of decision rights helps understand the allocation of decision rights in practice, and it has implications for their optimal allocation in organizations, economic institutions, and society at large.
    Keywords: Decision rights, intrinsic value, authority
    JEL: C91 D03 D23
    Date: 2013–04
  2. By: Kilduff, Gavin J.; Anderson, Cameron; Willer, Robb
    Abstract: Recent research on status and group productivity has highlighted that status hierarchies encourage contributions to group efforts by rewarding contributors with enhanced status. However, that and other work has typically assumed that status hierarchies are widely agreed-upon among group members. Here we challenge this assumption, proposing that groups vary in their level of hierarchical consensus and that when groups fail to achieve high agreement, the status rewards motivating contributions are attenuated, undermining group performance. Results of two studies of task groups support our claims. We observed that status disagreements were quite common, particularly those in which two group members both viewed themselves as higher in status than the other, and that more dominant individuals were most likely to engage in these types of disagreements. Further, we found that such status disagreements led to diminished group performance and that this effect was driven by reduced contributions from the group members involved. These findings suggest that status consensus can vary substantially across groups, and that groups that are able to successfully coalesce around agreed-upon status hierarchies benefit from increased contributions and performance.
    Keywords: Business Administration, Management and Operations, Human Resources Management and Services, Shared Status Hierarchies, Group Dynamics
    Date: 2013–05–01
  3. By: Amalia Di Girolamo; Glenn W. Harrison; Morten I. Lau; J. Todd Swarthout
    Abstract: We characterize the literacy of an individual in a domain by their elicited subjective belief distribution over the possible responses to a question posed in that domain. We consider literacy across several financial, economic and statistical domains. We find considerable demographic heterogeneity in the degree of literacy. We also characterize the degree of consistency within a sample about their knowledge, even when that knowledge is imperfect. We show how uncertainty aversion might be a normatively attractive behavior for individuals who have imperfect literacy. Finally, we discuss extensions of our approach to characterize financial capability, the consequences of non-literacy, social literacy, and the information content of hypothetical survey measures of literacy.
    Date: 2013–04
  4. By: Heinrich H. Nax (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales [EHESS] - Ecole des Ponts ParisTech - Ecole normale supérieure de Paris - ENS Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Maxwell N. Burton-Chellew (Department of Zoology - University of Oxford (UK)); Stuart A. West (Department of Zoology - University of Oxford (UK)); H. Peyton Young (Department of Economics - University of Oxford (UK))
    Abstract: Many interactive environments can be represented as games, but they are so large and complex that individual players are in the dark about what others are doing and how their own payo s are a ected. This paper analyzes learning behavior in such 'black box' environments, where players' only source of information is their own history of actions taken and payoff s received. Speci fically we study repeated public goods games, where players must decide how much to contribute at each stage, but they do not know how much others have contributed or how others' contributions a effect their own payoff s. We identify two key features of the players' learning dynamics. First, if a player's realized payoff increases he is less inclined to change his strategy, whereas if his realized payo ff decreases he is more inclined to change his strategy. Second, if increasing his own contribution results in higher payoff s he will tend to increase his contribution still further, whereas the reverse holds if an increase in contribution leads to lower payo ffs. These two e ffects are clearly present when players have no information about the game; moreover they are still present even when players have full information. Convergence to Nash equilibrium occurs at about the same rate in both situations.
    Keywords: Learning ; Information ; Public goods games
    Date: 2013–04
  5. By: Uri Gneezy; Alex Imas; Kristóf Madarász
    Abstract: We develop a dynamic model where people decide in the presence of moral constraints and test the predictions of the model through two experiments. Norm violations induce a temporal feeling of guilt that depreciates with time. Due to such fluctuations of guilt, people exhibit an endogenous temporal inconsistency in social preferences—a behavior we term conscience accounting. In our experiments people first have to make an ethical decision, and subsequently decide whether to donate to charity. We find that those who chose unethically were more likely to donate than those who did not. As predicted, donation rates were higher when the opportunity to donate came sooner after the unethical choice than later. Combined, our theoretical and empirical findings suggest a mechanism by which prosocial behavior is likely to occur within temporal brackets following an unethical choice.
    Keywords: Emotions, Temporal Brackets, Deception, Prosocial Behavior
    JEL: D03
    Date: 2012–02
  6. By: Giuseppe Albanese (Bank of Italy); Guido de Blasio (Bank of Italy); Paolo Sestito (Bank of Italy)
    Abstract: This paper considers the role of preferences in explaining trust. By using the Bank of ItalyÂ’s Survey on Household Income and Wealth (SHIW), the paper shows that time preferences and risk preferences are key covariates of self-reported trust. They both predict negatively a measure of generalized trust; however, risk aversion is positively correlated with an index of particularized trusting behaviour (which refers to family and friends). Moreover, the results are robust to using a different data source to gauge the role of social preferences and personality traits. The study highlights that neglecting preferences when analysing the role of trust in explaining socio-economic outcomes might pose serious challenges in terms of omitted variables.
    Keywords: trust, preferences, survey data
    JEL: D1 D8 Z1
    Date: 2013–04
  7. By: Thomas M. Eisenbach; Martin C. Schmalz
    Abstract: Motivated by individuals' emotional response to risk at different time horizons, we model an 'anxious' agent--one who is more risk averse with respect to imminent risks than distant risks. Such preferences describe well-documented features of 1) individual behavior, 2) equilibrium prices, and 3) institutions. In particular, we derive implications for financial markets, such as overtrading and price anomalies around announcement dates, as well as a downward-sloping term structure of risk premia, which are found empirically. Since such preferences can lead to dynamic inconsistencies with respect to risk trade-offs, we show that costly delegation of investment decisions is a strategy used to cope with 'anxiety.'
    Keywords: Risk management ; Risk-taking (Psychology) ; Human behavior ; Investments ; Rate of return
    Date: 2013
  8. By: Korenok Oleg (Department of Economics, VCU School of Business); Edward L. Millner (Department of Economics, VCU School of Business); Laura Razzolini (Department of Economics, VCU School of Business)
    Abstract: We answer the question: Is giving equivalent to not taking? We show that, if giving is equivalent to not taking, impure altruism could account for List's (2007) finding that the payoff to recipients in a dictator game decreases when the dictator has the option to take. We examine behavior in dictator games with different taking options but equivalent final payoffs. We find that the recipients tend to earn more as the amount the dictator must take to achieve a given final payoff increases. We conclude that not taking is not equivalent to giving and agree with List (2007) that the current social preference models fail to rationalize the observed data.
    Keywords: Dictator Game; Impure Altruism; Taking
    JEL: C91 D01 D64 H30 H41
    Date: 2013–04
  9. By: Bradler, Christiane; Dur, Robert; Neckermann, Susanne; Non, Arjan
    Abstract: This paper reports the results from a controlled field experiment designed to investigate the causal effect of public recognition on employee performance. We hired more than 300 employees to work on a three-hour data-entry task. In a random sample of work groups, workers unexpectedly received recognition after two hours of work. We find that recognition increases subsequent performance substantially, and particularly so when recognition is exclusively provided to the best performers. Remarkably, workers who did not receive recognition are mainly responsible for this performance increase. This result is consistent with workers having a preference for conformity. --
    Keywords: employee motivation,recognition,reciprocity,conformity,field experiment
    JEL: C93 M52
    Date: 2013
  10. By: Glenn W. Harrison; Jimmy Martínez-Correa; J. Todd Swarthout; Eric R. Ulm
    Abstract: The theoretical literature has a rich characterization of scoring rules for eliciting the subjective beliefs that an individual has for continuous events, but under the restrictive assumption of risk neutrality. It is well known that risk aversion can dramatically affect the incentives to correctly report the true subjective probability of a binary event, even under Subjective Expected Utility. To address this one can "calibrate" inferences about true subjective probabilities from elicited subjective probabilities over binary events, recognizing the incentives that risk averse agents have to distort reports. We characterize the comparable implications of the general case of a risk averse agent when facing a popular scoring rule over continuous events, and find that these concerns do not apply with anything like the same force. For empirically plausible levels of risk aversion, one can reliably elicit most important features of the latent subjective belief distribution without undertaking calibration for risk attitudes providing one is willing to assume Subjective Expected Utility.
    Date: 2013–04

This nep-cbe issue is ©2013 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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