nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2013‒06‒16
twenty papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Long-Term Relationships, Group lending and Peer Sanctioning in Microfinance: New Experimental Evidence By Simon Cornée; David Masclet
  2. On the Interpretation of Giving, Taking, and Destruction in Dictator Games and Joy-of-Destruction Games. By Le Zhang; Andreas Ortmann
  3. Structural versus Behavioral Remedies in the Deregulation of Electricity Markets: An Experimental Investigation Guided by Theory and Policy Concerns. By Silvester van Koten; Andreas Ortmann
  4. Tangible Temptation in the Social Dilemma: Cash, cooperation, and self-control By Myrseth, Kristian Ove R.; Riener, Gerhard; Wollbrant, Conny
  5. Institutional Quality, Culture, and Norms of Cooperation: Evidence from a Behavioral Field Experiment By Alessandra Cassar; Giovanna d'Adda; Pauline Grosjean
  6. How do Non-Monetary Performance Incentives for Physicians Affect the Quality of Medical Care? – A Laboratory Experiment By Nadja Kairies; Miriam Krieger
  7. Emotional state and Market Behavior By Breaban, A.; Noussair, C.N.
  8. Good News, Bad News, and Social Image: The Market for Charitable Giving By Luigi Butera; Jeffrey Horn
  9. Taking Punishment into your Own Hands: An Experiment By Julia Müller; Peter Duersch
  10. Strategic Self-Ignorance By Thunström, Linda; Nordström, Jonas; Shogren, Jason F.; Ehmke, Mariah; van 't Veld, Klaas
  11. Can video games affect children's cognitive and non-cognitive skills? By Agne Suziedelyte
  12. A reproduction and replication of Engel’s meta-study of dictator game experiments. By Le Zhang; Andreas Ortmann
  13. In Dubio Pro Reo. Behavioral explanations of pro-defendant bias in procedures By Antonio Nicita; Matteo Rizzolli
  15. Neighbors, Knowledge, and Nuggets: Two Natural Field Experiments on the Role of Incentives on Energy Conservation By Paul Dolan; Robert Metcalfe
  16. Waste Prevention and Social Preferences: The Role of Intrinsic and Extrinsic Motivations By Grazia Cecere; Susanna Mancinelli; Massimiliano Mazzanti
  17. Social Class and Un(ethical) Behavior: A Framework, with Evidence from a Large Population Sample By Trautmann, Stefan T.; van de Kuilen, Gijs; Zeckhauser, Richard J.
  18. The Role of Task Meaning on Output in Groups: Experimental Evidence By Agnes Baeker; Mario Mechtel
  19. How to Hire Helpers? Evidence From a Field Experiment By Julian Conrads; Bernd Irlenbusch; Tommaso Reggiani; Rainer Michael Rilke; Dirk Sliwka
  20. How Effective are Pay-for-Performance Incentives for Physicians? – A Laboratory Experiment By Jeannette Brosig-Koch; Heike Hennig-Schmidt; Nadja Kairies; Daniel Wiesen

  1. By: Simon Cornée (CREM CNRS UMR 6211, University of Rennes 1 and CERMi); David Masclet (CREM CNRS UMR 6211, University of Rennes 1 and CIRANO (Montreal))
    Abstract: Microfinance is generally associated with high repayment rates. However, it is not clear whether the success of microfinance results only from the use of group lending or is also due to other mechanisms such as peer sanctioning or dynamic incentives induced by long-term relationships that are typically included in microfinance contracts. In this paper, we contribute to the existing literature by investigating the respective effects of each of these components of microfinance. This is done by running a laboratory experiment that allows us to isolate long-term relationships from the two other components (i.e. group lending and peer monitoring). Our experiment indicates that peer-lending dimension of microcredit in absence of peer-sanctioning mechanism is not sufficient to mitigate ex ante and ex post moral hazards. In sharp contrast, we find that individualized long-term credit relationships perform significantly better than group-lending mechanisms with or without peer sanctioning.
    Keywords: Experimental Economics, Credit Market, Microfinance, Peer Lending
    JEL: C72 C91 G20 G21
    Date: 2013–05
  2. By: Le Zhang (University of New South Wales); Andreas Ortmann (University of New South Wales)
    Abstract: The literature on dictator [D] games seems to demonstrate that some people are quite altruistic (nice), whereas the literature on joy-of-destruction [JoD] games shows that some people may be quite nasty. We study to what extent these behaviors are context dependent: If people are nice or nasty, are they consistently so? Or are niceness and nastiness dependent on circumstances? What are some of these circumstances? And what role does efficiency play in this context? We study these issues in a counter-balanced within-subject design of one-shot D and JoD games across three treatments (between-subjects). We find that people’s niceness, and nastiness, are indeed choice set, and context, dependent. When take-options and add-options (mirror images of give-options in standard D games and destruction options in standard JoD games) were added, we find considerable heterogeneity in types but relatively little behavior that can be considered clearly inconsistent, i.e., both nice and nasty. Consistent with previous evidence, we also find that subjects pay considerable attention to efficiency considerations. Mach-IV scores and other demographic characteristics have larger – but not large – effects on niceness (giving decision) than nastiness (destruction decision) where they, in our setting, essentially make no difference. Importantly, the order of decision elicitation implicit in our counter-balanced within-subject design, and, intriguingly, the definition of the relevant reference point (especially for giving decisions), matter for the interpretation of the results.
    Keywords: Dictator game, Joy-of-Destruction game, Money burning, Altruism, Nastiness, Efficiency considerations, Mach-IV test
    JEL: A13 C79 D03 D64
    Date: 2012–12
  3. By: Silvester van Koten (European University Institute); Andreas Ortmann (The University of New South Wales)
    Abstract: We try to better understand the comparative advantages of structural and behavioral remedies of deregulation in electricity markets, an eminent policy issue for which the experimental evidence is scant and problematic. Specifically, we investigate theoretically and experimentally the effects on competition of introducing a forward market which the European Commission classifies as a behavioral remedy. We compare this scenario with its best alternative, the structural remedy of adding one more competitor by divestiture. Our study contributes to the literature by introducing more realistic cost configurations, by teasing apart competition effect and asset effect, and by investigating competitor numbers that reflect the market concentration in the European electricity industries. Our experimental data suggest that introducing a forward market has a positive effect on the aggregate supply in markets with two or three major competitors, configurations typical for the newly accessed and the old European Union member states, respectively. Introducing a forward market also increases efficiency.
    Keywords: experimental economics
    Date: 2012–09
  4. By: Myrseth, Kristian Ove R. (ESMT European School of Management and Technology); Riener, Gerhard (DICE, University of Düsseldorf); Wollbrant, Conny (Department of Economics, School of Business, Economics and Law, Göteborg University)
    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: 2013–06–07
  5. By: Alessandra Cassar (University of San Francisco); Giovanna d'Adda (University opf Birmingham); Pauline Grosjean (School of Economics, the University of New South Wales)
    Abstract: We design an experiment to examine the causal effect of legal institutional quality on informal norms of cooperation, and study the interaction of institutions and culture in sustaining economic exchange. 346 subjects in Italy and Kosovo play a market game under different and randomly allocated institutional treatments, which generate different incentives to behave honestly, preceded and followed by a non-contractible and non-enforceable trust game. Significant increases in individual trust and trustworthiness follow exposure to ‘better’ institutions. A reduction by one percentage point in the probability of facing a dishonest partner in the market game, which is induced by the quality of legal institutions, increases trust by 7 to 11%, and trustworthiness by 13 to 19%. This suggests that moral norms of cooperative behavior can follow improvements in formal institutional quality. Cultural origin, initial trust and trustworthiness influence opportunistic behavior in markets, but only in the absence of strong formal institutions.
    Keywords: legal institutions, culture, trust, trustworthiness, markets, experimental methods
    JEL: K40 O17 Z10
    Date: 2013–10
  6. By: Nadja Kairies; Miriam Krieger
    Abstract: In recent years, several countries have introduced non-monetary performance incentives for health care providers to improve the quality of medical care. Evidence on the effect of non-monetary feedback incentives, predominantly in the form of public quality reporting, on the quality of medical care is, however, ambiguous. This is often because empirical research to date has not succeeded in distinguishing between the effects of monetary and non-monetary incentives, which are usually implemented simultaneously. We use a controlled laboratory experiment to isolate the impact of nonmonetary performance incentives: subjects take on the role of physicians and make treatment decisions for patients, receiving feedback on the quality of their treatment. The subjects’ decisions result in payments to real patients. By giving either private or public feedback we are able to disentangle the motivational eff ects of self-esteem and social reputation. Our results reveal that public feedback incentives have a significant and positive effect on the quality of care that is provided. Private feedback, on the other hand, has no impact on treatment quality. These results hold for medical students and for other students.
    Keywords: Laboratory experiment; quality reporting; feedback; treatment quality; performance incentives
    JEL: I11 C91 L15 I18
    Date: 2013–05
  7. By: Breaban, A.; Noussair, C.N. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: We consider the relationship between the emotional state of traders and market prices. We create asset markets with the structure first studied by Smith, Suchanek and Williams (1988), which is known to generate price bubbles and crashes. We analyze participants' facial expressions with facereading software before and while the market is operating. We find that greater positive emotion in facial expressions before the market opens predicts higher prices and larger bubbles. Greater fear predicts lower prices and smaller bubbles. Those traders who remain the most neutral during periods of market volatility achieve the highest earnings. Loss aversion in decision making is correlated with fear, not with other emotions.
    Keywords: bubble;emotions;facereading;fear;crash.
    JEL: C92
    Date: 2013
  8. By: Luigi Butera (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Jeffrey Horn (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)
    Abstract: This paper experimentally investigates how donors respond to news about the efficiency of their charities, that is, to real prices of giving greater than 1, and how the response depends on that information being public or not. We find that as long as charity efficiency remains private information, individuals reward better-than-expected charities (good news) by increasing their donations. On the other hand, bad news are largely ignored by donors when giving happens under full anonymity. However, when charity efficiency is revealed to others, some donors decrease their contribution in response to good news, and they increase it when news are bad. This emergent behavior accounts for 34% of subjects that do respond to new information. We show that the latter behavior is driven by image-motivated donors, who treat the size of their gift and the efficiency of their recipients as substitutes in terms of social image payoffs. Length: 36
    Keywords: charity, experiment
    Date: 2013–05
  9. By: Julia Müller (Erasmus University Rotterdam); Peter Duersch (University of Heidelberg)
    Abstract: In a punishment experiment, we separate the demand for punishment in general from the demand to conduct punishment personally. Subjects experience an unfair split of their earnings from a real effort task and have to decide on the punishment of the person who determines the distribution. First, it is established whether the allocator's payoff is reduced and, afterwards, subjects take part in a second price auction for the right to (physically) carry out the act of payoff reduction themselves. Subjects bid positive amounts and are happier if they get to punish personally.
    Keywords: personal punishment, real effort task, experiment, auction
    JEL: C92 D03
    Date: 2013–05–27
  10. By: Thunström, Linda (Department of Economics and Finance, University of Wyoming); Nordström, Jonas (Department of Economics, Lund University); Shogren, Jason F. (Department of Economics and Finance, University of Wyoming); Ehmke, Mariah (Department of Agricultural and Applied Economics, University of Wyoming); van 't Veld, Klaas (Department of Economics and Finance, University of Wyoming)
    Abstract: We examine strategic self-ignorance—the use of ignorance as an excuse to over-indulge in pleasurable activities that may be harmful to one’s future self. Our model shows that guilt aversion provides a behavioral rationale for present-biased agents to avoid information about negative future impacts of such activities. We then confront our model with data from an experiment using prepared, restaurant-style meals—a good that is transparent in immediate pleasure (taste) but non-transparent in future harm (calories). Our results support the notion that strategic self-ignorance matters: nearly three of five subjects (58 percent) chose to ignore free information on calorie content, leading at-risk subjects to consume significantly more calories. We also find evidence consistent with our model on the determinants of strategic self-ignorance.
    Keywords: Experiment; Information; Ignorance
    JEL: D03 D81 D83
    Date: 2013–05–28
  11. By: Agne Suziedelyte (The University of New South Wales)
    Abstract: The aim of this paper is to investigate whether there is a causal relationship between video game playing and children's cognitive and non-cognitive skills. According to the literature, video games have a potential to improve children's cognitive abilities. Video games may also positively aect such non-cognitive skills as the ability to sustain attention and pro-social behavior. On the other hand, there are concerns that video games can teach children to behave aggressively. The Child Development Supplement to the Panel Study of Income Dynamics is used for the analysis. The key advantages of this data set are its panel nature, which allows addressing the endogeneity of video game playing, and the time diary component, which provides a reliable measure of children's video game time. I nd that video game playing has a positive statistically signicant eect on some of the cognitive skills. More specically, an increase in video game time is found to improve children's ability to solve problems. There is no statistically signicant effect of video game playing on children's reading skills, once other variables are held fixed. The findings of this study support the hypothesis that video game playing may improve certain non-cognitive skills. Moreover, there is no evidence that video game playing increases aggressiveness in children.
    Keywords: cognitive and non-cognitive skills; human capital; video game playing; time use; children
    JEL: D13 J13 J24
    Date: 2012–09
  12. By: Le Zhang (University of New South Wales); Andreas Ortmann (University of New South Wales)
    Abstract: In this paper, we reproduce Engel’s (2011) meta-study of dictator game experiments using his data, and then replicate it using our own data. We find that Engel’s (2011) meta-study of dictator game experiments is quite robust. We show that meta-analyses of dictator game experiments depend to an extent on the definition of independent variables and consistent coding of studies. This insight pertains in particular to the take-option, which has produced important questions (Bardsley 2008; List 2007; Guala and Mittone 2010) about the epistemological inferences one can draw from dictator game experiments.
    Keywords: dictator game experiments, meta-analysis, meta-regression, reproduction, replication
    JEL: C24 C91 D03
    Date: 2012–11
  13. By: Antonio Nicita (Department of Economics and Law, La Sapienza University of Rome.); Matteo Rizzolli (Free University of Bozen)
    Abstract: The standard model of optimal deterrence predicts that the probability of wrongful conviction of the innocent is, at the margin, as detrimental to deterrence as the probability of wrongful acquittal of guilty individuals. We extend the model in several directions: using expected utility as well as non-expected utility to consider the role of risk aversion, non-linear probability weighting and loss aversion. We also consider how relevant emotions such as guilt, shame and indignation play out. Several of these factors support the intuition that wrongful convictions of the innocent do have a larger detrimental impact on deterrence and thus the policy implications are reconciled with the widely shared maxim in dubio pro reo. We then draw some theoretical implications such as a novel justification for the different standards of proof in criminal vs civil law as well as other policy implications.
    Keywords: wrongful convictions, Type I errors, wrongful acquittals, Type II errors, evidence, optimal under-deterrence, behavioral economics, risk aversion, loss aversion, prospect theory, prelec function
    JEL: K14 K41 K42
    Date: 2013–06
  14. By: Bradley J. Ruffle (BGU); Yossef Tobol (School of Industrial Management Jerusalem College of Technology Jerusalem Israel and IZA, Bonn)
    Abstract: We show that temporally distancing the decision task from the payment of the reward increases honest behavior. Each of 427 Israeli soldiers fulfilling their mandatory military service rolled a six-sided die in private and reported the outcome to the unit's cadet coordinator. For every point reported, the soldier received an additional half-hour early release from the army base on Thursday afternoon. Soldiers who participated on Sunday (the first work day of the week) are significantly more honest than those who participated later in the week. We derive practical implications for eliciting honesty.
    Keywords: experimental economics, honesty, temporal distance, soldiers.
    JEL: C93 D63
    Date: 2013
  15. By: Paul Dolan; Robert Metcalfe
    Abstract: There is increasing research on the exogenous impact of descriptive social norms on economic behavior. The research to date has a number of limitations: 1) it has not de-coupled the impact of the norm and the knowledge required to understand how to change behavior based upon it; 2) it has exclusively used offline but not online (i.e. emails) methods; and 3) it has not understood the impact of financial incentives in conjunction with norms. We address these three limitations using two natural field experiments. We find, firstly, that norms change energy behavior over a 15 month treatment period irrespective of whether information is provided or not. We find that social norms reduce consumption by around 6% (0.2 standard deviations). Norms have has their largest impact on the day that information on the social norm is received, and then decreases over time. Secondly, we do not find that social norms work online (even with experienced consumers who are used to online billing) - social norms de- livered online may have very little beneficial effects on reducing energy use. Thirdly, we find that large financial rewards work very well online in reducing consumption, with a 0.35 change in energy consumption over a four month period. Perhaps most interestingly, we find that the large effect of financial incentives is completely removed when information on social norms is added online.
    Keywords: social norms, financial incentives, natural field experiments, energy consumption
    JEL: D01 D03 D83 Q41
    Date: 2013–06
  16. By: Grazia Cecere (Institut Mines Télécom, Télécom Ecole de Management, Université Paris Sud France. France); Susanna Mancinelli (University of Ferrara Italy); Massimiliano Mazzanti (University of Ferrara, SEEDS & CERIS CNR, Italy)
    Abstract: Though reduction is at the top of the waste management hierarchy, EU policies have historically introduced waste management incentives mainly concerning waste recovery and recycling, in addition to actions aimed at reducing disposal in landfills. Only very recently have EU policies started defining targets for waste reduction. Against this backdrop, we aim to examine whether individual behavior towards waste reduction is more strongly driven by extrinsic motivations such as social norms, or intrinsic motivations such as purely altruistic preferences. We exploit a large new survey that covers thousands of individuals for the EU27, to test the role of motivations when people are faced with collective management of the public good. We find that diverse motivations are behind the reduction of food waste: extrinsic motivations nevertheless increase the likelihood of producing more waste. Green consumption / recycling-oriented attitudes and individualistic thinking about waste management relate to ‘waste producers’. This shows that in order to go beyond a recycling-oriented society towards reduction of the source of waste externality – its generation – the nature of social preferences matters. Behavior patterns leading to waste reduction are less socially oriented, less exposed to peer pressure and more reliant upon purely ‘altruistic’ social attitudes. Policy makers should learn from the relevant insights on social behavior we here address if our societies aim to fully integrate the idea of waste reduction alongside recycling in the future.
    Keywords: Intrinsic Motivations, Extrinsic Motivations, Social Norms, Recycling, Waste Reduction, Green Preferences
    JEL: Q53 R11 K42
    Date: 2013–05
  17. By: Trautmann, Stefan T. (Tilburg University); van de Kuilen, Gijs (Tilburg University); Zeckhauser, Richard J. (Harvard University)
    Abstract: Differences in ethical behavior between members of the upper and lower classes have been at the center of civic debates in recent years. This paper presents a framework for understanding how class affects ethical standards and behaviors. The framework is applied using data from a large Dutch population sample. The data include objective measures of class, survey responses relating to ethical behavior, and results from an experiment designed to probe ethical choices. Ethical behavior proves to be affected by (i) moral values, (ii) social orientation, and (iii) the costs and benefits of taking various actions. Strong class differences emerge in each of these areas, leading to differences in behavior. Moreover, strong differences among different conceptions of class (wealth, education, etc.) produce additional variation. We argue that the relationship between class and ethical behavior is far from a simple pattern; it is a complex mosaic.
    Date: 2013–03
  18. By: Agnes Baeker; Mario Mechtel (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: This paper analyzes experimentally how the interaction of task meaning and peer presence affects work effort. We build on the experimental designs of Falk and Ichino (2006) and Ariely et al. (2008). Confirming previous results from the literature, we find positive peer effects and negative effects of low task meaning. In addition, we find that peer effects are even stronger if task meaning is low. We conclude that a peer setting is able to overcome the negative effort effect of low task meaning.
    Keywords: task meaning, peer effects, experimental economics
    JEL: J20 J30 M50
    Date: 2013–06
  19. By: Julian Conrads (University of Cologne); Bernd Irlenbusch (University of Cologne); Tommaso Reggiani (University of Cologne); Rainer Michael Rilke (University of Cologne); Dirk Sliwka (University of Cologne)
    Abstract: How to hire voluntary helpers? We shed new light on this question by reporting a field experiment in which we invited 2,859 students to help at the 'ESA Europe 2012' conference. Invitation emails varied non-monetary and monetary incentives to convince subjects to offer help. Students could apply to help at the conference and, if so, also specify the working time they want to offer. Just asking subjects to volunteer or offering them a certificate turned out to be significantly more motivating than mentioning that the regular conference fee would be waived for helpers. Increasing monetary incentives by varying hourly wages of 1, 5, and 10 Euros shows positive effects on the number of applications and on the working time offered. However, when comparing these results with treatments without any monetary compensation, the number of applications could not be increased by offering money and may even be reduced.
    Keywords: Recruitment, Voluntary work, Monetary incentives, Field experiment
    JEL: C93 J33 M52
    Date: 2013–05–29
  20. By: Jeannette Brosig-Koch; Heike Hennig-Schmidt; Nadja Kairies; Daniel Wiesen
    Abstract: Recent reforms in health care have introduced a variety of pay-for-performance programs using financial incentives for physicians to improve the quality of care. Their effectiveness is, however, ambiguous as it is often difficult to disentangle the effect of financial incentives from the ones of various other simultaneous changes in the system. In this study we investigate the effects of introducing financial pay-for-performance incentives with the help of controlled laboratory experiments. In particular, we use fee-for-service and capitation as baseline payment schemes and test how additional pay-for-performance incentives affect the medical treatment of different patient types. Our results reveal that, on average, patients significantly benefit from introducing pay-forperformance, independently of whether it is combined with capitation or fee-for-service incentives. The magnitude of this effect is significantly infl uenced by the patient type, though. These results hold for medical and non-medical students. A cost-benefit analysis further demonstrates that, overall, the increase in patient benefits cannot overcompensate the additional costs associated with pay-for-performance. Moreover, our analysis of individual data reveals different types of responses to pay-for-performance incentives. We find some indication that pay-forperformance might crowd out the intrinsic motivation to care for patients. These insights help to understand the effects caused by introducing pay-for-performance schemes.
    Keywords: Physician incentive schemes; pay-for-performance; fee-for-service; capitation; laboratory experiment
    JEL: C91 I11
    Date: 2013–05

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