nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2013‒08‒16
ten papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Peer Pressure and Productivity: The Role of Observing and Being Observed By Georganas, Sotiris; Tonin, Mirco; Vlassopoulos, Michael
  2. Voluntary Contributions to Property Rights By David M. Bruner; John R. Boyce
  3. Learning to Argue with Intermediate Macro Theory: A Semester-Long Team Writing Project By Marketa W. Halova; Georg H. Strasser
  4. A Reformulation of Libertarian Paternalism By Guilhem Lecouteux
  5. The formation of job referral networks: Experimental evidence from ubran Ethiopia: By Caria, Antonia Stefano; Hassen, Ibrahim Worku
  6. Cooperation and Personality By Proto, Eugenio
  7. The logic of adaptive sequential experimentation in policy design: By Xing, Haipeng; Zhang, Xiaobo
  8. Reciprocity as an individual difference By Kurt A. Ackermann; Jürgen Fleiß; Ryan O. Murphy
  9. Do institutions affect social preferences? Evidence from divided Korea By Byung-Yeon Kim; Syngjoo Choi; Jungmin Lee; Sokbae 'Simon' Lee; Kyunghui Choi
  10. Social Networks and Peer Effects at Work By Beugnot, Julie; Fortin, Bernard; Lacroix, Guy; Villeval, Marie Claire

  1. By: Georganas, Sotiris (Royal Holloway, University of London); Tonin, Mirco (University of Southampton); Vlassopoulos, Michael (University of Southampton)
    Abstract: Peer effects arise in situations where workers observe each other's work activity. In this paper we disentangle the effect of observing a peer from that of being observed by a peer, by setting up a real effort experiment in which we manipulate the observability of performance. In particular, we randomize subjects into three groups: in the first one subjects are observed by another subject, but do not observe anybody; in the second one subjects observe somebody else's performance, but are not observed by anybody; in the last group subjects work in isolation, neither observing, nor being observed. We consider both a piece rate compensation scheme, where pay depends solely on own performance, and a team compensation scheme, where pay also depends on the performance of other team members. Overall, we find some evidence that subjects who are observed increase productivity at least initially when compensation is team based, while we find that subjects observing react to what they see in a non-linear but monotonic way when compensation is based only on own performance.
    Keywords: peer effects, piece rate, team incentives, real-effort experiment
    JEL: D03 J24 M52 M59
    Date: 2013–07
  2. By: David M. Bruner; John R. Boyce
    Abstract: This paper reports the results of an experimental test of the Nash equilibrium prediction of voluntary provision of property rights in a contest under anarchy. Specically, the experiment investigates whether pre-commitment induces positive provision of property rights. As pre- dicted, zero contributions to property rights are observed without pre- commitment. Positive voluntary contributions are observed with pre- commitment, but are less than predicted. Nonetheless, as predicted, stronger property rights with pre-commitment results in less con ict and more production. The experiment also tests predictions for group- size eects. While average contributions to property rights are un- aected by group-size, mean con ict increases and mean production decreases with larger groups. Key Words: Property Rights; Con ict; Public Goods; Experiments
    JEL: C72 C91 F35 O12 O43 P48
    Date: 2013
  3. By: Marketa W. Halova (Department of Economics, Washington State University); Georg H. Strasser (Department of Economics, Boston College)
    Abstract: We describe experiences from integrating a semester-long economic analysis project into an intermediate macroeconomic theory course. Students work in teams of "economic advisors" to write a series of nested reports for a decision-maker, analyzing the current economic situation, evaluating and proposing policies while responding to events during the semester in real-time. The project simulates real-world policy con- sulting with an emphasis on applying economic theory and models. We describe the project setup and how to tailor its theme to current events, explain methods for keep- ing it manageable in larger classes, and document student learning outcomes by survey results and report summaries. Besides improving the learning experience, this project equips economics students to contribute their own views to policy debates and buttress them with tight macroeconomic reasoning.
    Keywords: Teaching intermediate macroeconomic theory, nancial crisis, cooperative learning, team-based writing project
    JEL: A20 A22 E00 G01
    Date: 2013–08–11
  4. By: Guilhem Lecouteux (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: Conventional normative economics is built on the assumption that people act as if seeking to satisfy coherent and a priori preferences. This model has however been challenged by many empirical works highlighting the existence of systematic deviations from the behaviour predicted by the neoclassical theory. The development of behavioural economics therefore questions the validity of the results developed by normative economists. Reconciling behavioural and normative economics needs in particular a clarification of the normative content of economic prescriptions, since it appears that the assumption of rational preferences enabled economists to overstep this question, the different interpretations of the current normative criterion of preference-satisfaction leading in fine to the same prescriptions. In this paper, we want to highlight that libertarian paternalism is probably the most natural solution to the reconciliation problem for neoclassical economists, since its current formulation relies on the existence of a rational homo oeconomicus trapped within each individual. We can however find within the current formulation of libertarian paternalism the same difficulties than the ones of Pareto's theory of the homo oeconomicus. We therefore suggest a reformulation of libertarian paternalism based on a normative criterion of individual autonomy rather than preference-satisfaction, and defend its relevance in the specific context of common-pool resources, by showing that the normative prescriptions generated by our principle of individual autonomy present strong similarities with the institutional design principles of Ostrom (1990) enabling a sustainable management of common-pool resources.
    Keywords: welfare economics, libertarian paternalism, homo oeconomicus, nudge, autonomy, common-pool resources
    Date: 2013–08–07
  5. By: Caria, Antonia Stefano; Hassen, Ibrahim Worku
    Abstract: In this study we focus on exclusion from job contact networks, which constitutes a major disadvantage for labor market participants in settings where referral hiring is common and information about jobs hard to obtain. In a mid-size town in northern Ethiopia, where these mechanisms are at work, we observe that many individuals do not access local job contact networks. Models of strategic network formation and behavioral decision theory suggest that given the right incentives, job contact networks should be more inclusive. On these grounds we hypothesize that workers would link to peripheral peers when this maximizes their chances of referral and when self-regarding concerns are absent due to social preferences.
    Keywords: social network, Labor market, field experiment,
    Date: 2013
  6. By: Proto, Eugenio (University of Warwick)
    Abstract: Cooperating and trusting behavior may be explained by preferences over social outcomes (people care about others, are unselfish and help- ful), or attitudes to work and social responsibilities (plans have to be carried out, norms have to be followed). If the first hypothesis is true, Agreeable- ness, reporting stated empathy for others, should matter most; if the second, higher score in traits expressing attitude to work, intrinsic motivation (Con- scientiousness) should be correlated with cooperating behavior and trust. We find experimental support for the second hypothesis when subjects provide real mental effort in two treatments with identical task, differing by whether others' payment is affected.
    Keywords: Personality Traits, Cooperation, Effort Provision
    Date: 2013
  7. By: Xing, Haipeng; Zhang, Xiaobo
    Abstract: In this paper, we argue that economists can learn a great deal from the design principles implemented in medical research. We develop a theoretical model to show the logic of adaptive sequential experiment design in the presence of uncertainty over negative effects and discuss how to choose samples in a population to minimize the experiment cost. We also point out the applications of our proposed framework in the economic domain, such as economic reforms and new product design.
    Keywords: Economic development, Economy, Experiments, randomized experiment, Social Sciences, methodologies,
    Date: 2013
  8. By: Kurt A. Ackermann (Chair of Decision Theory and Behavioral Game Theory, ETH Zurich); Jürgen Fleiß (Institute of Statistics and Operations Research, Karl-Franzens-University Graz); Ryan O. Murphy (Chair of Decision Theory and Behavioral Game Theory, ETH Zurich)
    Abstract: There is accumulating evidence that decision makers are sensitive to the distribution of resources among themselves and others, beyond what is expected from the predictions of narrow self-interest. These social preferences are typically conceptualized as being static and existing independently of information about the other people influenced by a DM’s allocation choices. In this paper we consider the reactivity of a decision makers’s social preferences in response to information about the intentions or past behavior of the person to be affected by the decision maker’s allocation choices (i.e., how do social preferences change in relation to the other’s type). This paper offers a conceptual framework for characterizing the link between distributive preferences and reciprocity, and reports on experiments in which these two constructs are disentangled and the relation between the two is characterized.
    Date: 2013–08–06
  9. By: Byung-Yeon Kim; Syngjoo Choi (Institute for Fiscal Studies and University College London); Jungmin Lee (Institute for Fiscal Studies and University of Arkansas); Sokbae 'Simon' Lee (Institute for Fiscal Studies and Seoul National University); Kyunghui Choi
    Abstract: The Cold War division of Korea, regarded as a natural experiment in institutional change, provides a unique opportunity to examine whether institutions affect social preferences. We recruited North Korean refugees and South Korean students to conduct laboratory experiments eliciting social preferences, together with standard surveys measuring subjective attitudes toward political and economic institutions. Our experiments employ widely used dictator and trust games, with four possible group matches between North and South Koreans by informing them of the group identity of their anonymous partners. Experimental behaviour and support for institutions differ substantially between and within groups. North Korean refugees prefer more egalitatian distribution in the dictator games than South Korean students, even after controlling for individual characteristics that could be correlated with social preferences; however, the two groups show little difference in the trust game, once we control for more egalitarian behaviour of North Koreans. North Korean refugees show less support for market economy and democracy than South Korean subjects. Attitudes toward insitutions are more strongly associated with the experimental behaviours among South Korean subjects than among North Korean subjects. An online appendix to accompany this publication is available here
    Keywords: social preferences, experiment, institutions, market economy, democracy
    JEL: C92 C93 D03 P20
    Date: 2013–08
  10. By: Beugnot, Julie (Université Laval); Fortin, Bernard (Université Laval); Lacroix, Guy (Université Laval); Villeval, Marie Claire (CNRS, GATE)
    Abstract: This paper extends the standard work effort model by allowing workers to interact through networks. We investigate experimentally whether peer performances and peer contextual effects influence individual performances. Two types of network are considered. Participants in Recursive networks are paired with participants who played previously in isolation. In Simultaneous networks, participants interact in real-time along an undirected line. Mean peer effects are identified in both cases. Individual performances increase with peer performances in the recursive network. In the simultaneous network, endogenous peer effects vary according to gender: they are large for men but not statistically different from zero for women.
    Keywords: peer effects, social networks, work effort, piece rate, experiment
    JEL: C91 J16 J24 J31 M52
    Date: 2013–07

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