nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2013‒06‒09
twenty-one papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Accepting Zero in the Ultimatum Game: Selfish Nash Response? By Gianandrea Staffiero; Filippos Exadaktylos; Antonio M. Espín
  2. Social preferences under uncertainty By Alexia Gaudeul
  3. Tangible temptation in the social dilemma: Cash, cooperation, and self-control By Kristian Ove R. Myrseth; Gerhard Riener; Conny Wollbrant
  4. Incomplete Information Models of Guilt Aversion in the Trust Game By Giuseppe Attanasi; Pierpaolo Battigalli; Elena Manzoni
  5. Competitiveness in dynamic group contests: Evidence from combined field and lab data By Yann Girard; Florian Hett
  6. Social Identity and Punishment By Jeffrey V. Butler; Pierluigi Conzo; Martin A. Leroch
  7. On the Impulse in Impulse Learning By Jieyao Ding; Andreas Nicklisch
  8. Does Social Judgement Diminish Rule Breaking? By Timothy C. Salmon; Danila Serra
  9. Cui Bono, Benefit Corporation? An Experiment Inspired by Social Enterprise Legislation in Germany and the US By Sven Fischer; Sebastian Goerg; Hanjo Hamann
  10. Behavioral Law and Economics: Empirical Methods By Christoph Engel
  11. Strike, coordination, and dismissal in uniform wage settings By Karina Gose; Abdolkarim Sadrieh
  12. Endogenous vs. Exogenous Transmission of Information: An Experiment By Aurora García-Gallego; Penélope Hernández-Rojas; Amalia Rodrigo-González
  13. You can't always get what you want - East and West Germans' attitudes and preferences regarding the welfare state By Pfarr, Christian; Schmid, Andreas; Ulrich, Volker
  14. Competitive Altruism and Endogenous Reference Group Selection in Private Provision of Environmental Public Goods By Heinz Welsch; Jan Kühling
  15. Do Preferences for Job Attributes Provide Evidence of 'Hierarchy of Needs' By Cem BaÅŸlevent; Hasan KirmanoÄŸlu
  16. Gender Differences in Cooperation: Experimental Evidence on High School Students By Molina, José Alberto; Gimenez-Nadal, Jose Ignacio; Cuesta, José A.; Garcia-Lazaro, Carlos; Moreno, Yamir; Sanchez, Angel
  17. For Love or Money? Motivating Workers By Saima Naeem; Asad Zaman
  18. Understanding fixation effects in creativity: A design-theory approach By Marine Agogue; Mathieu Cassotti
  19. Reading to Young Children: A Head-Start in Life? By Kalb, Guyonne; van Ours, Jan C.
  20. Optimism bias in project appraisal: deception or selection? By Eliasson, Jonas; Fosgerau, Mogens
  21. How consumers’ socio-economic background influences satisfaction: Insights for better utility regulation By Clifton, Judith; Díaz-Fuentes, Daniel; Fernández-Gutiérrez, Marcos

  1. By: Gianandrea Staffiero (Universitat Pompeu Fabra); Filippos Exadaktylos (BELIS, Murat Sertel Center for Advanced Economic Studies,Istanbul Bilgi University); Antonio M. Espín
    Abstract: The rejection of unfair proposals in ultimatum games is often quoted as evidence of other-regarding preferences. In this paper we focus on those responders who accept any proposals, setting the minimum acceptable offer (MAO) at zero. While this behavior could result from the randomization between the two payoff-maximizing strategies (i.e. setting MAO at zero or at the smallest positive amount), it also implies that the opponent’s payoff is maximized and the “pie†remains intact. We match subjects’ behavior as ultimatum responders with their choices in the dictator game, in two large-scale experiments. We find that those who set MAO at zero are the most generous dictators. Moreover, they differ substantially from responders whose MAO is the smallest positive offer, who are the greediest dictators. Thus, an interpretation of zero MAOs in terms of selfish, payoff-maximizing behavior could be misleading. Our evidence indicates that the restraint from punishing others can be driven by altruism and by the desire to maximize social welfare.
    Keywords: ultimatum game, dictator game, altruism, social welfare, costly punishment, selfishness, social preferences
    JEL: C93 C91 D03 C70
    Date: 2012–01
  2. By: Alexia Gaudeul (Strategic Interaction Group, Max Planck Institute for Economics, Jena)
    Abstract: Willingness to take risk depends on whether the risk affects others as well as oneself and on how the risk affects one's position vis-`a-vis others. Taking a bet can improve one's position relative to others or threaten it. We present an experiment that explores individual attitudes to lotteries that involve both oneself and another subject. Individuals consistently and strongly dislike obtaining safe but unfair social outcomes rather than playing fair but risky social lotteries. This effect is apparent whether the unfair safe social outcome benefits them or the other. Subjects are also more risk averse when facing social lotteries than when facing lotteries that involve only themselves. There is a small but consistent and significant tendency to avoid social lotteries that impose a risk on the other. An attempt to reconcile those findings with standard models of social preferences shows that a high weight given to considerations of ex-ante inequality goes some way towards explaining the decisions of our subjects. It remains difficult however to account for the magnitude of their aversion to safe but unequal social outcomes.
    Keywords: Social preferences, Risk attitudes, Inequality aversion, Altruism, Procedural fairness, Utility measurement
    JEL: C91 D63 D81
    Date: 2013–06–06
  3. By: Kristian Ove R. Myrseth (ESMT European School of Management and Technology); Gerhard Riener (DICE, University of Düsseldorf); Conny Wollbrant (University of Gothenburg)
    Abstract: The social dilemma may contain, within the individual, a self-control conflict between urges to act selfishly and better judgment to cooperate. Examining the argument from the perspective of temptation, we pair the public good game with treatments that vary the degree to which money is abstract (merely numbers on-screen) or tangible (tokens or cash). We also include psychometric measures of self-control and impulsivity. Consistent with our hypothesis, we find in the treatments that render money more tangible a stronger positive association between cooperation and self-control—and a stronger negative association between cooperation and impulsivity. Our results shed light on the conditions under which self-control matters for cooperation.
    Keywords: Self-control, pro-social behavior, public good experiment, temptation
    JEL: D01 D03 D64 D70
    Date: 2013–05–24
  4. By: Giuseppe Attanasi; Pierpaolo Battigalli; Elena Manzoni
    Abstract: In the theory of psychological games it is assumed that players' preferences on material consequences depend on endogenous beliefs. Most of the applications of this theoretical framework assume that the psychological utility functions representing such preferences are common knowledge. But this is often unrealistic. In particular, it cannot be true in experimental games where players are subjects drawn at random from a population. Therefore an incomplete-information methodology is called for. We take a first step in this direction, focusing on models of guilt aversion in the Trust Game. We consider two alternative modeling assumptions: (i) guilt aversion depends on the role played in the game, because only the trustee can feel guilt for letting the co-player down, (ii) guilt aversion is independent of the role played in the game. We show how the set of Bayesian equilibria changes as the upper bound on guilt sensitivity varies, and we compare this with the complete-information case. Our analysis illustrates the incomplete-information approach to psychological games and can help organize experimental results in the Trust Game.
    Keywords: Psychological games, Trust Game, guilt, incomplete information
    JEL: C72 C91 D03
    Date: 2013–06
  5. By: Yann Girard (GSEFM, Goethe University Frankfurt, Germany); Florian Hett (GSEFM, University of Mainz, Germany)
    Abstract: We analyse data from a field setting in which students participate in a dynamic group contest with feedback. We combine this information with a laboratory measure of competitiveness. We ?nd that competitive groups perform worse overall. In addition, we find that participants react to intermediate performance: A better rank in a given period increases the number of points in the subsequent period, even after controlling for group and time fixed effects. The effect is significantly stronger for competitive groups. We show that this difference in the sensitivity to dynamic incentives can explain the overall negative effect of competitiveness on performance.
    Keywords: Dynamic contest, competitiveness, field experiments, lab experiments, rank feedback
    JEL: C91 C93 D03 D74 I21
    Date: 2013–04–01
  6. By: Jeffrey V. Butler (EIEF); Pierluigi Conzo (University of Turin); Martin A. Leroch (University of Mainz)
    Abstract: Third party punishment is crucial for sustaining cooperative behavior. Still, little is known about its determinants. In this paper we use laboratory experiments to investigate a long-conjectured interaction between group identification and bystanders' punishment preferences using a novel measure of these preferences. We induce minimal groups and give a bystander the opportunity to punish the perpetrator of an unfair act against a defenseless victim. We elicit the bystander's valuation for punishment in four cases - when the perpetrator, the victim, both or neither are members of the bystander's group. We generate testable predictions about the rank order of punishment valuations from a simple framework incorporating group-contingent preferences for justice which are largely confirmed. Finally, we conduct control sessions where groups are not induced. Comparing punishment across treatment and control suggests that third-party punishers tend to treat others as in-group members unless otherwise divided.
    Date: 2013
  7. By: Jieyao Ding (Max Planck Institute for Research on Collective Goods, Bonn); Andreas Nicklisch (University of Hamburg, School of Business, Economics and Social Science)
    Abstract: This paper experimentally investigates the nature of impulses in impulse learning. Particularly, we analyze whether positive feedback (i.e., yielding a superior payo in a game) or negative feedback (i.e., yielding an inferior payo in a game) leads to a systematic change in the individual choices. The results reveal that subjects predominantly learn from negative feedback.
    Keywords: learning, Aspiration level, Impulse, Reinforcement, Stimulus
    JEL: C91 D83 D03
    Date: 2013–02
  8. By: Timothy C. Salmon; Danila Serra
    Abstract: We experimentally investigate the extent to which social obervability of one's actions and the possibility of social non-monetary judgment affect the decision to engage in rule breaking behavior.  We consider three rule bfeaking scenarios - theft, bribery and embezzlement - in the absence of any formal enforcement mechanism.  By involving a student sample characterized by cultural heterogeneity due to immigraiton of ancestors to the US, we are able to investigate whether the effectiveness of informal social enforcement mechanisms is conditional on the cultural background of the decision-maker.  A total of 52 countries are represented in our sample, ranging from Low Rule of Law countries such as Liberia and Nigeria to High Rule of Law countries such as Sweden and Norway.  Our data provide evidence that people with different cultural backgrounds do respond differently to increased social observability of their actions.  In particular, while subjects that dientify culturally with a High Rule of law country respond to social obervability and judgment by lowering their propensities to engage in rule breaking, subjects that identify with Low Rule of law countries do not.  Our findings suggest that development policies that rely purely on social judgment to enforce behavior may not work with Low Rule of Law populations
    Keywords: Theft, corruption, social enforement, culture, experiemnts
    JEL: C90 D73 K42 Z10
    Date: 2013–03–15
  9. By: Sven Fischer (Max Planck Institute for Research on Collective Goods, Bonn); Sebastian Goerg (Max Planck Institute for Research on Collective Goods, Bonn); Hanjo Hamann (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: How do barely incentivized norms impact incentive-rich environments? We take social enterprise legislation as a case in point. It establishes rules on behalf of constituencies that have no institutionalized means of enforcing them. By relying primarily on managers' other-regarding concerns whilst leaving corporate incentive structures unaltered, how effective can such legislation be? This question is vital for the ongoing debate about social enterprise forms, as recently introduced in several US states and in British Columbia, Canada. We ran a laboratory experiment with a framing likened to German corporate law which traditionally includes social standards. Our results show that a stakeholder provision, as found in both Germany and the US, cannot overcome material incentives. However, even absent incentives the stakeholder norm does not foster other regarding behavior but slightly inhibits it instead. Our experiment thus illustrates the paramount importance of taking into account both incentives and framing effects when designing institutions. We tentatively discuss potential policy implications for social enterprise legislation and the stakeholder debate.
    Keywords: experiment, stakeholder value, social enterprise, benefit corporation, corporate law
    JEL: D01 A12 M52 D03 L21 M14
    Date: 2013–02
  10. By: Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: Originally, behavioral law and economics was an exercise in exploring the implications of key findings from behavioral economics (and psychology) for the analysis and reform of legal institutions. Yet as the new discipline matures, it increasingly replaces foreign evidence by fresh evidence, directly targeted to the legal research question. This chapter surveys the key methods: field evidence, survey data, vignette and lab experiment, discusses their pros and cons, illustrates them with key publications, and concludes with methodological paths for fu-ture development. It quantifies statements with descriptive statistics about the 77 behavioral papers that have been published in the Journal of Empirical Legal Studies since its foundation until the end of 2012.
    Keywords: behavioral law and economics, law and psychology, criminology, field data, survey data, vignette, lab experiment
    JEL: K00 D02 C91 D03 C01 C83
    Date: 2013–01
  11. By: Karina Gose (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Abdolkarim Sadrieh (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: In our laboratory experiment, the employer in a gift exchange game with 12 workers can incur a loss, if the employees fail to provide enough effort. When the employer can offer individually differentiated wages, we observe high wage and effort choices. When restricted to uniform wages, however, trust and reciprocity drop dramatically due to widespread free-riding by employees on the workforce's reputation. Introducing two collective action mechanisms, strike and effort coordination, does not mitigate the free-riding problem. Introducing employment risk, however, reduces free-riding substantially and reinstalls employees´ reciprocity at the price of a small, but sustained unemployment.
    Keywords: fair wage-effort hypothesis, efficiency wages, wage compression, labor unions, contract design
    JEL: C92 D23 J33 M52
    Date: 2013–03
  12. By: Aurora García-Gallego (LEE & Department of Economics, Universitat Jaume I, Castellón, Spain); Penélope Hernández-Rojas (ERI-CES & Department of Economic Analysis, University of Valencia, Spain); Amalia Rodrigo-González (Department of Business Finance, University of Valencia, Spain)
    Abstract: Based on Gossner, Hernández and Neyman’s (2006) 3-player game (hereafter GHN) we analyze communication efficiency in the lab. In that game, player 1 represents random nature an i.i.d. procedure, player 2 is a fully informed player (wiser), and player 3 is the less informed player (agent). The game is repeated and players 2 and 3 get 1 if both actions match nature’s actions and 0 otherwise. We propose an experiment following this game. We implement two treatments: one without chat (NC) and one with chat (C). In the treatment with chat, players may first send messages to each other through an online chat application, and then play the game. After the chat time, only the wiser player has perfect information on the realized (random) sequence played by nature. The players then play the finitely repeated binary game. In treatment NC, subjects just play the game. In the experiment we observed endogenous communication treatment NC as well as exogenous in treatment C, both of which result in higher payoffs. Furthermore, when explicit communication is possible we observe a chat effect which can be interpreted as a higher level of efficiency in communication. Strategies used by subjects are in line with GHN strategies.
    Keywords: communication, transmission of information, efficiency, experiments
    JEL: D8 C91 C73
    Date: 2013
  13. By: Pfarr, Christian; Schmid, Andreas; Ulrich, Volker
    Abstract: More than twenty years after the fall of the iron curtain, do citizens from former Communist countries still exhibit attitudes and preferences with regard to the welfare state and income redistribution that differ from those in the West? This paper seeks to answer this question for Germany after reunification using not only survey data on attitudes but also evidence on preferences from a discrete choice experiment, both based on a representative sample. In a first step, we revisit the empirical evidence, compare our results to those of Alesina and Fuchs-Schündeln (2007) and test whether convergence of attitudes has yet been achieved. In a second step, we apply an advanced method to investigate preferences for redistribution in terms of willingness to pay. This framework is more in line with standard public choice theory as individuals are forced to overcome trade-offs and are exposed to take their inherent budget constraint into account when voicing their opinion on redistribution. The results are quite mixed. While East Germans seem to desire a higher amount of redistribution than West Germans, they are not willing to contribute more through taxation. This finding has important implications for social policy in reunified Germany.
    Keywords: Income redistribution; preferences; willingness to pay;
    JEL: C93 D63 H23 P26
    Date: 2013–05
  14. By: Heinz Welsch (University of Oldenburg, Department of Economics); Jan Kühling (University of Oldenburg, Department of Economics)
    Abstract: We develop and test a model of social comparison in which individuals gain status through pro-social behavior (competitive altruism) and in which they endogenously choose the reference group and associated reference standard involved in signaling status (reference group selection). In our framework of private provision of environmental public goods, the optimal reference standard involves a balance between the magnitude of the status signal (implying a low reference standard) and the higher value of the signal in a greener social environment. By using a unique set of survey data we find evidence of (a) respondents behaving in a competitively altruistic fashion and (b) reference persons’ intensity of pro-environmental behavior depending on relevant attitudes of the respondents, consistent with predictions from our framework of reference group selection.
    Keywords: competitive altruism; reference groups; endogenous reference standard; pro-environmental behavior; private public good provision
    JEL: D64 H31 H41 Q00
    Date: 2012–10
  15. By: Cem BaÅŸlevent (Department of Economics, Istanbul Bilgi University); Hasan KirmanoÄŸlu (Department of Economics, Istanbul Bilgi University)
    Abstract: We examine whether employees’ preferences for various job attributes are associated with their individual characteristics in ways that are in line with ‘hierarchy of needs’ theories. Using data from the fifth round of the European Social Survey, we observe the influence of socio-demographic and dispositional characteristics as well as socialization experiences on opinions regarding the importance of five different desirable job attributes. An item-by-item examination of the attributes (including ‘security’ and ‘offering a high income’) reveals that dispositional factors (measured using the battery of items in Schwartz’s theory of basic personal values) influence job attitudes in expected ways, but employees also tend to place more importance on attributes that concern them more directly. For example, while female employees care more about being able to combine work and family responsibilities, younger workers value training opportunities more highly than older ones. Regarding socialization experiences, we find that job security is more important for those who have been unemployed in the past. We interpret our findings to mean that hierarchy of needs theories are valid in the context of job attitudes in the sense that the ranking of preferred job attributes is quite predictable once individual characteristics are accounted for.
    Keywords: preferred job attributes, hierarchy of needs, basic personal values, European Social Survey
    JEL: C25 J28
    Date: 2012–01
  16. By: Molina, José Alberto (University of Zaragoza); Gimenez-Nadal, Jose Ignacio (University of Zaragoza); Cuesta, José A. (University of Zaragoza); Garcia-Lazaro, Carlos (University of Zaragoza); Moreno, Yamir (University of Zaragoza); Sanchez, Angel (University of Zaragoza)
    Abstract: Charles Darwin (1874) stated that "women are less selfish but men are more competitive". Very recent papers (Eckel & Grossman, 1998, 2001 or Andreoni and Vesterlund 2001, among others) have shown the relevance of gender in altruism in both ultimatum and dictator games. In this paper we analyze the role of gender in repeated Prisoners' Dilemma played by Spanish high-school students in both a square lattice and a heterogeneous network. We find that female students have a higher probability of cooperation than male students.
    Keywords: high school students, cooperation, gender differences, prisoners' dilemma
    JEL: C72 C73 C93 D03 J16
    Date: 2013–05
  17. By: Saima Naeem (Pakistan Institute of Development Economics, Islamabad); Asad Zaman (Pakistan Institute of Development Economics, Islamabad)
    Abstract: We conducted a field experiment and tested how employers can use socioemotional resources, such as appreciation and recognition, in order to signal intentions and create positive reciprocal relationships with employees. Results showed that these resources led to a significant gain in productivity. The study was extended to account for relative wage concerns both with and without appreciation treatment. Efficiency gains with appreciation appeared to be robust even after including information regarding relatively disadvantageous wage discrimination. However, workers’ without socioemotional resources exhibited strong resentment toward relatively lower wages by showing a significant systematic decrease in their labour supply. Our results suggest that workers not only compare their wages, as pointed out in previous literature, but also compare the socioemotional resources provided by their employer. This provides important evidence against one-dimensional comparisons of relative wages relevant to worker productivity.
    Keywords: Appreciation, Recognition, Symbolic Gift Exchange, Wage Comparisons
    JEL: C93 M5 J31 J32 J53
    Date: 2013
  18. By: Marine Agogue (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris, LaPsyDÉ - Laboratoire de Psychologie du Développement et de l'Éducation de l'enfant - Université Paris V - Paris Descartes); Mathieu Cassotti (LaPsyDÉ - Laboratoire de Psychologie du Développement et de l'Éducation de l'enfant - Université Paris V - Paris Descartes)
    Abstract: Despite the existence of many studies about the different aspects of fixation in creativity and design reasoning, the underlying mechanisms of fixation, i.e., the processes that interfere during creative reasoning and lead one to become fixated on a small number of unvaried solutions, remain unclear. In this paper, we propose a theoretical framework to model fixation based on C-K design theory, which states that fixation is characterised as a set of restrictive heuristics activated in creative reasoning. We applied our framework in a set of experiments. We demonstrated how this framework makes sense of the varieties of fixation in design processes. We conclude by proposing three capabilities to understand fixation and overcome it: restrictive heuristics development, inhibitory control and expansion.
    Date: 2013
  19. By: Kalb, Guyonne (Melbourne Institute of Applied Economic and Social Research); van Ours, Jan C. (Tilburg University)
    Abstract: This paper investigates the importance of parents reading to their young children. Using Australian data we find that parental reading to children at age 4 to 5 has positive and significant effects on reading skills and cognitive skills of these children at least up to age 10 or 11. Our findings are robust to a wide range of sensitivity analyses.
    Keywords: reading to children, reading skills, other cognitive skills
    JEL: C26 I21 J24
    Date: 2013–05
  20. By: Eliasson, Jonas (KTH Royal Institute of Technology); Fosgerau, Mogens (DTU Transport)
    Abstract: A number of highly cited papers by Flyvbjerg and associates have shown that ex-ante infrastructure appraisals tend to be overly optimistic. Ex post evaluations indicate a bias where investment cost is higher and demand lower on average than predicted ex ante. These authors argue that the bias must be attributed to intentional misrepresentation by project developers. This paper shows that the bias may arise simply as a selection bias, without there being any bias at all in predictions ex ante, and that such a bias is bound to arise whenever ex ante predictions are related to the decisions whether to implement projects. Using a database of projects we present examples indicating that the selection bias may be substantial. The examples also indicate that benefit-cost ratios remains a useful selection criterion even when cost and benefits are highly uncertain, gainsaying the argument that such uncertainties render cost-benefit analyses useless.
    Keywords: Cost overruns; Forecast accuracy; Cost-benefit analysis; Appraisal; Selection bias; Winner’s curse
    JEL: R40 R42
    Date: 2013–06–03
  21. By: Clifton, Judith; Díaz-Fuentes, Daniel; Fernández-Gutiérrez, Marcos
    Abstract: Augmenting consumer welfare was a key justification behind the reform of utilities from the 1980s. But, three decades later, evidence is mounting that consumer satisfaction with household utilities is quite uneven. Moreover, governments, regulators and international organizations are increasingly recognizing that consumers from specific socio-economic backgrounds may be less satisfied than those from other backgrounds. To attend to this, instances of demand-side regulation have been implemented, but there remains a lack of empirical research on the precise links between consumers’ socio-economic background and their satisfaction. This article contrasts consumers’ stated and revealed preferences for three major household utility services (electricity, gas and telecommunications, including internet) across twelve European countries. Contrasting stated and revealed preferences has been applied to policy on transportation, marketing and the environment: this article pioneers the application of this technique to the analysis of satisfaction with household utilities across multiple countries. We find strong evidence that consumers’ socio-economic category matters: consumers with lower levels of education, the elderly and those who are not employed exhibit particular expenditure patterns and lower satisfaction levels vis-à-vis some of or all the services under analysis. We conclude by highlighting how our findings may be of use to regulators in the ongoing quest to improve the quality of utility regulation.
    Keywords: Utilities, regulation, satisfaction, socio-economic background, consumers, stated and revealed preferences.
    JEL: D12 D18 L9 L97 L98
    Date: 2013–05–29

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