nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2013‒05‒22
seventeen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Worker or Shirker – Who Evades More Taxes? A Real Effort Experiment By Christoph Bühren; Torben C. Kundt
  2. Prospect Theory and consumer behavior: Goals and Tradeoffs By Florent Buisson
  3. The decentralization of punishments in experiments with public goods By Zuzana Berná; Jiøí Špalek
  4. What Determines Trust? Human Capital vs. Social Institutions : Evidence from Manila and Moscow By John V.C. Nye; Grigory Androuschak; Desirée Desierto; Garett Jones; Maria Yudkevich
  5. Philanthropy in a Changing World: An Evolving Attitude to Giving? By Vladimir Hyanek; Marie Hladka
  6. Sustaining Group Reputation. By Erik O. Kimbrough; Jared Rubin
  7. Decision–Making and Implementation in Teams By Jordi Blanes i Vidal; Marc Möller
  8. Revisiting the Antisocial Punishment across Societies Experiment By Pablo Lucas; Issam Malki
  9. Punishment Mechanisms and their Effect on Cooperation - A Simulation Study By M. D. Farjam; M. Faillo; W.F.G. Haselager; I.G. Sprinkhuizen-Kuyper
  10. Do Reputation Concerns Make Behavioral Biases Disappear? The Conjunction Fallacy on Facebook and Mechanical Turk By Giovanna Devetag; Francesca Ceccacci; Paola De Salvo
  11. Firing Threats and Tenure: Incentive effects and impression management By Brice Corgnet; Roberto Hernán-Gonzalez; Stephen Rassenti
  12. Battle of the (Same) Sexes: How We Take Advantage of Presumed Trust from Same-Gender Others and Rationalize to the Contrary By Van Sant, Alex B.; Kray, Laura J.
  13. Reconciling behavioural and neoclassical economics By Guilhem Lecouteux
  14. Norms Make Preferences Social By Erik O. Kimbrough; Alexander Vostroknutov
  15. Dominance Concepts for Fehr-Schmidt Preferences By Sanjit Dhami; Ali al-Nowaihi
  16. Do Charitable Subsidies Crowd Out Political Giving? The Missing Link Between Charitable and Political Contributions By Baris Yoruk
  17. Two Studies on the Interplay between Social Preferences and Individual Biological Features. By Santiago Sanchez-Pages (University of Barcelona, University of Edinburgh)

  1. By: Christoph Bühren (University of Kassel); Torben C. Kundt (University of the Federal Armed Forces)
    Abstract: WWith the help of a real effort experiment, we analyze if tax evasion depends on the amount of effort invested to generate income. In three treatments, subjects were either endowed with income or had to work moderately or hard to earn it. In line with prospect theory, subjects evaded more taxes when they worked hard for their income. We find little evidence for the prediction that tax evasion in the endowed treatment is higher than in the moderate work treatment.
    Date: 2013
  2. By: Florent Buisson (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: I show that a loss averse consumer who must share her budget between two goods prefer allocations for which consumption equals reference point for at least one good. The phenomenon intensity depends on the curvature of the utility curve. These results are consistent with several stylized facts which cannot be explained by the standard consumer theory.
    Keywords: Loss aversion; prospect theory
    Date: 2013–03
  3. By: Zuzana Berná; Jiøí Špalek (Department of Public Economics, Masaryk University)
    Abstract: This paper deals with the effects of introducing adequate punishment opportunities in experiments with public goods. Decentralized punishment means that the contributing subjects have a possibility to sanction free riders without the intervention of an external authority. The very first experiments demonstrated a significantly positive effect of a punishment opportunity on enhancing cooperation in situations of social dilemma. Following studies, however, pointed at limited effectiveness of this mechanism. The first part of the paper summarizes selected literature on the topic and presents its principal findings. The second part is dedicated to the presentation of the results of an experimental series on decentralized punishment realized in the Czech Republic. The last part introduces possible questions and topics which may be subject of future research within this area.
    Keywords: economic experiment, cooperation, public goods, decentralized punishment, partner and stranger matching
    JEL: C92 D70 H41
    Date: 2012–12
  4. By: John V.C. Nye (Department of Economics, George Mason University and Laboratory for Institutional Analysis of Economic Reforms, Higher School of Economics, Moscow); Grigory Androuschak (Laboratory for Institutional Analysis of Economic Reforms, Higher School of Economics, Moscow); Desirée Desierto (School of Economics, University of the Philippines Diliman); Garett Jones (Department of Economics, George Mason University); Maria Yudkevich (Laboratory for Institutional Analysis of Economic Reforms, Higher School of Economics, Moscow)
    Abstract: It is now well established that highly developed countries tend to score well on measures of social capital and have higher levels of generalized trust. In turn, the willingness to trust has been shown to be correlated with various social and environmental factors (e.g. institutions, culture) on one hand, and accumulated human capital on the other. To what extent is an individual’s trust driven by contemporaneous institutions and environmental conditions and to what extent is it determined by the individual’s human capital? We collect data from students in Moscow and Manila and use the variation in their height and gender to instrument for measures of their human capital to identify the causal effect of the latter on trust. We find that human capital positively affects the propensity to trust, and its contribution appears larger than the combined effect of other omitted variables including, plausibly, social and environmental factors.
    Date: 2012–11
  5. By: Vladimir Hyanek (Department of Public Economics, Masaryk University); Marie Hladka
    Abstract: Even though philanthropy tends to be considered a sociological theme rather than an economic one, it poses a number of questions that challenge economists as well. We chose to address the following: How can economists contribute to the theories related to philanthropy? Can we consider voluntary giving a demonstration of generosity rather than a market-based solution? We examine some terms that are used in public economics theory and use them to explore the issues of philanthropy. The terms we reviewed are: the Samaritan’s Dilemma, the Prisoner’s Dilemma, and the Free-Rider Problem, which we consider to be interesting and inspiring (Stone 2008). We answer the second question by means of sociological theory. The economists who investigate philanthropy are repeatedly faced with the obvious fact that it does not involve any buying and/or selling; it is not a marketplace operation. We have to find and identify the social values of donors and volunteers rather than their economic values, because economists are not fully able to explain empathy, altruism, and helpful behaviour using traditional economic principles (Rutherford 2008). The theoretical frame should be supported by relevant empirical data. There is, however, a lack of both theoretical and empirical work in this area in the Czech Republic. Before starting a large-scale survey, we decided to conduct smaller pre-research probes into people’s attitudes towards altruism, philanthropy, and giving. Even though our sample was not fully representative, the responses that we collected generated interesting findings about people’s views and attitudes. The first wave of data was collected between February and April 2009; the second wave between February and April 2010.
    Keywords: philanthropy, charity, altruism, public economics, motivation, not-for-profit
    JEL: L31 L38
    Date: 2012–12
  6. By: Erik O. Kimbrough (Simon Fraser University); Jared Rubin (Chapman University)
    Abstract: When individuals trade with strangers, there is a temptation to renege on contracts. In the absence of repeated interaction or exogenous enforcement mechanisms, this problem can impede valuable exchange. Historically, individuals have solved this problem by forming institutions that sustain trade using group, rather than individual, reputation. Groups can employ two mechanisms to uphold reputation that are generally unavailable to isolated individuals: information sharing and in-group punishment. In this paper, we design a laboratory experiment to distinguish the roles of these two mechanisms in sustaining group reputation and increasing gains from trade. We find that information sharing encourages path dependence via group reputation; good (bad) behavior by individuals results in greater (fewer) gains from exchange for the group in the future. However, the mere threat of in-group punishment is enough to discourage bad behavior, even if punishment is rarely employed. When combined, information sharing and in-group punishment work as complements; the presence of in-group punishment encourages cooperation early on, and information sharing reinforces this behavior over time.
    Keywords: Experimental Economics, Group Reputation, Information, Group Punishment, Gains from Trade, Trust Game, Juries
    JEL: C9 D02 D7 Q2
    Date: 2013
  7. By: Jordi Blanes i Vidal; Marc Möller
    Abstract: We use a mechanism-design approach to study a team whose members choose a joint project and exert individual efforts to execute it. Members have private information about the qualities of alternative projects. Information sharing is obstructed by a trade-off between adaptation and motivation. We determine the conditions under which first-best project and effort choices are implementable and show that these conditions can become relaxed as the team grows in size. This contrasts with the common argument (based on free-riding) that efficiency is harder to achieve in larger teams. We also characterize the second-best mechanism and find that decision-making may be biased either in favor or against the team's initially preferred alternative.
    Keywords: teams, adaptation, motivation, decision–making, incentives
    JEL: D02 D23 L29
    Date: 2013–05
  8. By: Pablo Lucas (Geary Institute, University College Dublin, Ireland and Maastricht School of Management, The Netherlands); Issam Malki (Sheffield Hallam University, Department of Economics, England)
    Abstract: This paper presents an alternative interpretation of an experimental public goods game dataset, particularly on the understanding of the observed antisocial behaviour phenomenon between subjects around the world. The anonymous nature of contributions and punishments are taken into account to reinterpret the experimental results by analysing dynamic behaviour in terms of mean contributions across societies and their association with antisocial punishment. Thus, by also taking into account the heterogeneity between the experimented cities, the analysis contrasts with the interpretation of one trend across cities, as the findings indicate two opposite trends in differentgroups of cities.
    Keywords: Behavioural economics, experimental public goods, game dataset
    JEL: D03
    Date: 2013–05–15
  9. By: M. D. Farjam; M. Faillo; W.F.G. Haselager; I.G. Sprinkhuizen-Kuyper
    Abstract: In social dilemmas punishment costs resources, not just from the one who is punished but often also from the punisher and society. Reciprocity on the other side is known to lead to cooperation without the costs of punishment. The question at hand is whether punishment besides its costs brings advantages and how its negative side-effects can be reduced to a minimum in an environment populated by reciprocal agents. Various punishment mechanisms have been studied in the economic literature such as unrestricted punishment, legitimate punishment, cooperative punishment, and the hired gun mechanism. All these mechanisms are implemented in a simulation where agents can share resources and may decide to punish other agents when they do not share. Through evolutionary learning agents adapt their sharing/punishing policy. Despite the costs of punishment, legitimate punishment compared to no-punishment increased performance when the availability of resources was low. When the availability was high, performance was better in no-punishment conditions with indirect reciprocity. Furthermore the hired gun mechanism worked only as good as other punishment mechanisms when the availability of resources was high. Legitimate punishment leads to a higher performance than unrestricted punishment. Summarized, this paper shows that a well-chosen punishment mechanism can play a facilitating role for cooperation even if the cooperating system already adopted reciprocity.
    Keywords: Public Goods Games, Punishment, Cooperation, Reciprocity, Evolution of Cooperation
    Date: 2013
  10. By: Giovanna Devetag; Francesca Ceccacci; Paola De Salvo
    Abstract: This paper reports the results of experiments designed to test whether individuals interacting on Facebook are more likely to succumb to the conjunction fallacy when they post their answers publicly and are exposed to the answers of others. Using the experimental design in Kahneman and Tversky (1983), we find that the proportion of individuals violating the conjunction rule on Facebook is substantially lower than that reported by previous experiments conducted in the lab, regardless of whether responses are public or private. When responses are posted in a public form, however, the partic- ipation rate is substantially higher. The violation rate on Facebook is also significantly lower than the rate of violation from the same experiment run on Mechanical Turk, a popular online labor market, with monetary incentives. Adding a bonus for the correct answer reduces the violation rate on Mechanical Turk when answers are private, but not when they are public, suggesting that peer effects may indeed counteract the effect of monetary incentives. Our experiment casts doubts about the robustness of behavioral biases for the understanding of real life decisions in environments in which interaction is not anonymous and people are reputation conscious, and suggests the power of social networks to mitigate their effects
    Keywords: Facebook, conjunction fallacy, biases, peer effects, field experiments, incentives, reputation
    JEL: A14 C93 D03 D83
    Date: 2013
  11. By: Brice Corgnet (Chapman University); Roberto Hernán-Gonzalez (Universidad de Granada); Stephen Rassenti (Economic Science Institute, Chapman University)
    Abstract: We study the effect of firing threats and tenure in a virtual workplace that reproduces features of existing organizations. We show that organizations in which bosses can fire up to one third of their workforce produce twice more than organizations for which firing is not possible. Firing threats sharply decrease on-the-job leisure activities. Nevertheless, organizations endowed with firing threats significantly underperformed those using individual incentives. Our analysis also indicates that, in the presence of firing threats, employees engage in impression management activities in order to be seen as hard-working individuals. These results are consistent with the predictions of our theoretical model in which workers aim at signaling a high level of intrinsic motivation to increase their chance of obtaining tenure. Finally, we show that production levels dropped substantially under tenure while on-the-job leisure surged.
    Keywords: Firing threats, tenure, incentives, impression management
    JEL: C92 D23 D82
    Date: 2013
  12. By: Van Sant, Alex B.; Kray, Laura J.
    Abstract: In the current research, we consider how gender composition may impact the likelihood of deception in contexts with asymmetric information where one party has the opportunity to strategically deceive another party for the opportunity to gain economically. We predict that the combined processes of social categorization and social projection should make people more likely to presume trust from same-gender others than different-gender others. Because anonymous interactions promote the tendency to construe situations instrumentally, we hypothesize that people will take advantage of presumed trust from same-gender others by being more likely to deceive them than different-gender others under conditions of anonymity. Finally,we argue that when rationalizing their deceptive behavior, liars should be more likely to attribute mistrust to same-gender others than different-gender others. We turn to the Cheap Talk Game paradigm (Gneezy, 2005) for our research setting and find support for our hypotheses across three different vignettes and a laboratory study using a behavioral measure of deception.
    Keywords: Human Resources Management and Services, Business Administration, Management and Operations, trust, gender, social projection, deception, ethical decision making
    Date: 2013–05–13
  13. By: Guilhem Lecouteux (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: The representation of the individual in economics as a rational homo oeconomicus had been seriously questioned by the development of behavioural economics. Some authors nevertheless argue that economists do not need to produce complex models of human behaviour, since such investigation does not fall within the scope of economic analysis. We show that the mere definition of the scope of economic analysis is quite ambiguous, between on the one hand a conception of economics as a science of individual choice and on the other hand as a science of social institutions: this duality finds its origins during the marginalist revolution with Jevons, Menger and Walras, whose theories seem to be in conflict concerning the scope of economic analysis and the definition of the "economic man". Economists then produced two distinct models of this economic man, one as the simplification of a real individual, and the other as a representative agent. The figure of the homo oeconomicus developed later by Pareto homogenized these two traditions, leading to the indeterminacy of the scope of economic analysis and in fine to the development of behavioural economics. Since behavioural and neoclassical economics are the continuation of these two distinct traditions, we stress that they should be considered as complementary rather than substitute approaches to economic analysis.
    Keywords: homo oeconomicus, marginalist revolution, behavioural economics, economic man, rational choice theory.
    Date: 2013–05–02
  14. By: Erik O. Kimbrough (Simon Fraser Unviersity); Alexander Vostroknutov (SMaastricht University)
    Abstract: We develop a unifying explanation for prosocial behavior. We argue that people care not about others’ payoffs per se, but whether their own behavior accords with social norms. Individuals who are sensitive to norms will adhere to them so long as they observe others doing the same. A model formalizing this generates both prosociality (without relying on explicit distributional preferences) and well-known context effects (for which distributional preferences cannot account). A simple experiment allows us to measure individual-level normsensitivity and to show that norm-sensitivity explains heterogeneity in prosociality in public goods, dictator, ultimatum, and trust games.
    Keywords: experimental economics, norms, social preferences, reciprocity
    JEL: C91 C92 D03
    Date: 2013–05
  15. By: Sanjit Dhami; Ali al-Nowaihi
    Abstract: Many diverse problems in economics can only be reasonably explained by assuming that people have social preferences, i.e., in addition to their own payoffs they are altruistic towards those who are poorer and envious towards those who are richer. How do people with social preferences choose among alternative income distributions? The aim of our paper is to answer this question in the context of the Fehr-Schmidt (1999) preferences. The classical notions of first and second order stochastic dominance are not useful in this case. However, a fairly natural set of conditions that are a modification of the concepts of first and second order stochastic dominance and generalized Lorenz dominance turn out to successfully answer the question posed. We also introduce weak FS dominance, which is particularly suited to the linear form of Fehr-Schmidt preferences.
    Keywords: Fehr-Schmidt Preferences; ?First Order Fehr-Schmidt Dominance; Second Order Fehr-Schmidt Dominance; Weak Fehr-Schmidt Dominance; Strong Fehr-Schmidt Dominance; Fehr-Schmidt-Lorenz Dominance.
    JEL: D03 D63 D64
    Date: 2013–05
  16. By: Baris Yoruk
    Abstract: In the United States, charitable contributions can be deducted from taxable income making the price of giving inversely related to the marginal tax rate. However, several other types of contributions such as donations to political organizations are not tax deductible. This paper investigates the spillover effects of charitable subsidies on political giving using five independent surveys of charitable and political giving in the United States conducted from 1990 to 2001. The results show that charitable and political giving are complements. Compared with non-donors, charitable donors are more likely to donate and give more to political organizations. Increasing the price of charitable giving decreases not only charitable giving but also the probability of giving and the amount of donations to political organizations. The implied elasticity of the amount of political contributions with respect to the tax price of charitable giving is as much as -0.88. This effect is robust under different specifications and with different sets of instrumental variables. These results highlight the positive externalities created by charitable subsidies and have important implications for economic models of political and charitable giving.
    Date: 2013
  17. By: Santiago Sanchez-Pages (University of Barcelona, University of Edinburgh)
    Abstract: Biological features and social preferences have been studied separately as factors influencing human strategic behaviour. We run two studies in order to explore the interplay between these two sets of factors. In the first study, we investigate to what extent social preferences may have some biological underpinnings. We use simple one-shot distribution experiments to attribute subjects one out of four types of social preferences: Self-interested (SI), Competitive (C), Inequality averse (IA) and Efficiency-seeking (ES). We then investigate whether these four groups display differences in their levels of facial Fluctuating Asymmetry (FA) and in proxies for exposure to testosterone during phoetal development and puberty. We observe that development-related biological features and social preferences are relatively independent. In the second study, we compare the relative weight of these two set of factors by studying how they affect subjects’ behaviour in the Ultimatum Game (UG). We find differences in offers made and rejection rates across the four social preference groups. The effect of social preferences is stronger than the effect of biological features even though the latter is significant. We also report a novel link between facial masculinity (a proxy for exposure to testosterone during puberty) and rejection rates in the UG. Our results suggest that biological features influence behaviour both directly and through their relation with the type of social preferences that individuals hold.
    Keywords: Testosterone; Ultimatum Game; Fluctuating Asymmetry; Facial masculinity;2D:4D; Social preferences.
    Date: 2013–03–29

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