nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2013‒09‒13
eleven papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Giving according to preferences: Decision-making in the group dictator game reconsidered By Axel Franzen; Sonja Pointner
  2. Coordination in Teams : A Real Effort-task Experiment with Informal Punishment By Radu Vranceanu; Fouad El Ouardighi; Delphine Dubart
  3. Privacy Concerns, Voluntary Disclosure of Information, and Unraveling: An Experiment By Volker Benndorf; Dorothea Kübler; Hans-Theo Normann;
  4. Cognitive control and socially desirable behavior: The role of interpersonal impact By Marko Pitesa; Stefan Thau; Madan M. Pillutla
  5. Cooperation and Signaling with Uncertain Social Preferences By John Duffy; Felix Munoz-Garcia
  6. The Evolution of 'Theory of Mind': Theory and Experiments By Erik O. Kimbrough; Nikolaus Robalino; Arthur J. Robson
  7. The role of altruism in non-market valuation. An application to the Białowieża Forest. By Anna Bartczak
  8. Voluntary Pooled Public Knowledge Goods and Coalition Formation By Tom DEDEURWAERDERE; Paolo MELINDI GHIDI
  9. Time Varying Risk Aversion By Luigi Guiso; Paola Sapienza; Luigi Zingales
  10. Physical Activity and Thinking: An Investigation of their Relationship By Todd McElroy; David L. Dickinson; Nathan Stroh; Christopher A. Dickinson
  11. Prospect theory and tax evasion: a reconsideration of the Yitzhaki Puzzle By Amadeo Piolatto; Matthew Rablen

  1. By: Axel Franzen; Sonja Pointner
    Abstract: We study the decision process in a group dictator game in which three subjects can distribute an initial endowment between themselves and a group of recipients. The experiment consists of two stages; first, individuals play a standard dictator game. Second, individuals are randomly matched into groups of three and communicate via instant messaging regarding the decision in the group dictator game. In contrast to former studies our results show that group decisions do not differ from individual decisions in the dictator game. Furthermore, the analysis of the chat history reveals that players make proposals according to their preferences as revealed in the single dictator game and that these proposals in groups drive the final allocation.
    Keywords: dictator game, group dictator game, fairness games, small group research
    JEL: B3 C79 C91 C92 D03 D7
    Date: 2013–09–05
  2. By: Radu Vranceanu (Economics Department - ESSEC Business School); Fouad El Ouardighi (Operation management Department - ESSEC Business School); Delphine Dubart (ESSEC Business School - ESSEC Business School)
    Abstract: This paper reports the results from a real-effort team production experiment, where best performers can impose either tacit or explicit sanctions on their less-performing partners. The behavior of the best performer in the team differs from one condition to another. When explicit sanctions are not allowed, good performers reduce their effort in response to the advantageous difference in scores; when they can impose sanctions, their change in effort is no longer related to the difference in scores. To some extent, a mechanism of explicit sanctions allows good performers to focus on their own performance. Not sanctioning an opponent who under-performs, what we refer to as forgiveness, prompts the latter to improve his performance, but applying the sanction has a stronger effect.
    Keywords: Team work; performance; experimental economics; punishment
    Date: 2013
  3. By: Volker Benndorf; Dorothea Kübler; Hans-Theo Normann;
    Abstract: We study the voluntary revelation of private, personal information in a labor-market experiment with a lemons structure where workers can reveal their productivity at a cost. While rational revelation improves a worker's payoff, it imposes a negative externality on others and may trigger further unraveling. Our data suggest that subjects reveal their productivity less frequently than predicted in equilibrium. A loaded frame emphasizing personal information about workers' health leads to even less revelation. We show that three canonical behavioral models all predict too little rather than too much revelation: level-k reasoning, quantal-response equilibrium,and to a lesser extent inequality aversion.
    Keywords: information revelation, privacy, lemons market, level-k reasoning, quantal response equilibrium, inequality aversion
    JEL: C72 C90 C91
    Date: 2013–09
  4. By: Marko Pitesa (GEM - Grenoble Ecole de Management - Grenoble École de Management (GEM)); Stefan Thau (INSEAD - INSEAD); Madan M. Pillutla (LBS - London Business School - London Business School)
    Abstract: Individuals' willingness to act in socially desirable ways, such as sharing resources with others and abiding by norms of ethical conduct, is a necessary condition of social life. The current research reconciles two seemingly contradicting sets of findings on the role of cognitive control in socially desirable behaviors. One set of findings suggests that people are tempted by self-serving impulses and have to rely on cognitive control overriding such impulses to act in socially desirable ways. Another set of findings suggests people are guided by other-regarding impulses and cognitive control is not necessary to motivate socially desirable behaviors. We provide a theoretical and empirical integration of these findings by identifying a key situational variable--the salience of interpersonal impact--that determines whether the dominant impulse is to behave in a self-serving or a socially desirable manner. We suggest that the dominant impulse is to behave in a socially desirable manner when the interpersonal impact of an action is salient, and that the dominant impulse is to behave in a self-serving manner when the interpersonal impact of an action is not salient. Consistent with this prediction, Studies 1-3 found that impairing participants' cognitive control led to less socially desirable behavior when interpersonal impact was not salient, but more socially desirable behavior when interpersonal impact was salient. Study 4 extended these findings by demonstrating that behaving in a socially desirable manner causes cognitive control impairment when interpersonal impact is not salient. But, when interpersonal impact is salient, behaving in a self-serving manner impairs cognitive control. We discuss the implications of our findings for understanding and managing socially desirable behaviors.
    Keywords: socially desirable behavior; cognitive control; impulses; cheating; resource distributions
    Date: 2013–08–22
  5. By: John Duffy; Felix Munoz-Garcia
    Abstract: This paper investigates behavior in finitely repeated simultaneous and sequential-move prisoner's dilemma games when there is one-sided incomplete information and signaling about players' concerns for fairness, specifically, their preferences regarding "inequity aversion." In this environment, we show that only a pooling equilibrium can be sustained, in which a player type who is unconcerned about fairness initially cooperates in order to disguise himself as a player type who is concerned about fairness. This disguising strategy induces the uninformed player to cooperate in all periods of the repeated game, including the final period, at which point the player type who is unconcerned about fairness takes the opportunity to defect, i.e., he "backstabs" the uninformed player. Despite such last-minute defection, our results show that the introduction of incomplete information can actually result in a Pareto improvement under certain conditions. We connect the predictions of this "backstabbing" equilibrium with the frequently observed decline in cooperative behavior in the final period of finitely-repeated experimental games.
    Keywords: Prisoner\'s Dilemma, Social Preferences, Inequity Aversion, Incomplete Information, Siganling, Information Transmission
    JEL: C72 C73 D82
    Date: 2012–03
  6. By: Erik O. Kimbrough (Dept. of Economics, Simon Fraser University); Nikolaus Robalino (Dept. of Economics, Simon Fraser University); Arthur J. Robson (Dept. of Economics, Simon Fraser University)
    Abstract: This paper provides an evolutionary foundation for our capacity to attribute preferences to others. This ability is intrinsic to game theory, and is a key component of "Theory of Mind", perhaps the capstone of social cognition. We argue here that this component of theory of mind allows organisms to efficiently modify their behavior in strategic environments with a persistent element of novelty. Such environments are represented here by multistage games of perfect information with randomly chosen outcomes. "Theory of Mind" then yields a sharp, unambiguous advantage over less sophisticated, behavioral approaches to strategic interaction. In related experiments, we show the subscale for social skills in standard tests for autism is a highly significant determinant of the speed of learning in such games.
    Keywords: Evolution, Theory of mind
    JEL: D01 C7
    Date: 2013–09
  7. By: Anna Bartczak (Faculty of Economic Sciences, University of Warsaw; Warsaw Ecological Economics Center)
    Abstract: The purpose of this study is to investigate the impact of an individual trait of altruism on social preferences and hence willingness to pay (WTP) for changes in forest management strategies in the Białowieża Forest in Poland. We used data from a discrete choice experiment (CE), where attributes described changes in the quality of the forest and recreation and were framed to capture the respondents’ non-use and use motivations. Patterns in the individual differences in altruistic behavior were elicited using a self-reported questionnaire developed by Rushton et al. (1981) concerning the frequency of an engagement in different altruistic behaviors. The application of the choice experiment technique allowed for the disentangling of the effect of a trait of altruism with regard to different attributes and their levels. The parameterization we employed in the survey was a WTP-space model (Train and Weeks 2005). Results show that the level of altruism has a significant effect on the valuation of restrictions in the forest visitor numbers; however, the altruism influence on the existence and bequest value from improving nature preservation depends on the current status of the forest.
    Keywords: altruism, Choice Experiment, forest naturalness, number of visitors, use and non-use value, WTP-space model
    JEL: Q23 Q51 Q56 Q57
    Date: 2013
    Abstract: In this paper we develop a theoretical model of the mechanisms behind the voluntary provision of public knowledge goods in coalitions in presence of social preferences. The model builds on the large empirical literature on voluntary production of pooled public knowledge goods, such as source code in communities of software developers or data voluntarily provided to open access data repositories. This literature shows that the provision of public goods is strongly dependent on the presence of social preferences such as group identity and social approval of individual pro-social attitudes. To integrate these effects in standard public good theory this paper builds a private-collective model of public good provision, where contribution to public knowledge goods generates both public and exclusive private benefits for the members of the coalition only. The analysis shows that, when the private benefit is important, the effect of the social preferences on the coalition formation is ambiguous. In particular, in the latter case, in presence of strong individual reputational effects, the public knowledge goods will be more difficult to produce. The comparison of the predictions of the theoretical model with the stylized facts of large scale surveys of Free/Libre/Open-Source (FLOSS) software developers confirms the results of the model.
    Keywords: coalition formation, private-collective model, social group identity, pro-social reputation, public knowledge goods, social dilemma
    JEL: H42 D71
    Date: 2013–09–03
  9. By: Luigi Guiso (EIEF and CEPR); Paola Sapienza (Northwestern University, NBER and CEPR); Luigi Zingales (University of Chicago, NBER and CEPR)
    Abstract: We use a repeated survey of a large sample of clients of an Italian bank to measure possible changes in investors’ risk aversion following the 2008 financial crisis. We find that both a qualitative and a quantitative measure of risk aversion increase substantially after the crisis. These changes are correlated with changes in portfolio choices, but do not seem to be correlated with “standard” factors that affect risk aversion, such as wealth, consumption habit, and background risk. This opens the possibility that psychological factors might be driving it. To test whether a scary experience (as the financial crisis) can trigger large increases in risk aversion, we conduct a lab experiment. We find that indeed students who watched a scary video have a certainty equivalent that is 27% lower than the ones who did not. Following a sharp drop in stock prices,a fear model predicts that individuals should sell stocks, while the habit model has the opposite implications; people should actively buy stocks to bring the risky assets to the new optimal level. We show that after the drop in stock prices in 2008 individuals rebalanced their portfolio in a way consistent to a fear model.
    Date: 2013
  10. By: Todd McElroy; David L. Dickinson; Nathan Stroh; Christopher A. Dickinson
    Abstract: Physical activity level is becoming more recognized as a primary factor in overall human health and obesity. Humans possess a number of traits that influence their physical activity level. We examined whether having a high or low desire to engage in challenging mental activity predicted differences in daily physical activity levels. We recruited 30 high “need for cognition” (NFC) individuals and 30 low-NFC individuals and measured their physical activity level in 30-second epochs over a 1-week period. Low-NFC individuals were more physically active overall but this difference was most pronounced during the 5-day work week and lessened during the weekend. Awareness of this physical activity deficit and its negative consequences may encourage high-NFC individuals to be proactive and adopt lifestyle changes to increase their physical activity levels. Key Words: Daily activity, Cognition, Obesity, Risk
    Date: 2013
  11. By: Amadeo Piolatto; Matthew Rablen
    Abstract: The standard expected utility model of tax evasion predicts that evasion is decreasing in the marginal tax rate (the Yitzhaki Puzzle). The existing literature disagrees on whether prospect theory overturns the puzzle. We disentangle four distinct elements of prospect theory and find loss aversion and probability weighting to be redundant in endogenous specification of the reference level. These classes include, as special cases, the most common specifications in the literature. New specifications of the reference level are needed, we conclude.
    Keywords: prospect theory, tax evasion, Yitzhaki puzzle, stigma, diminishing sensitivity, reference dependence, endogenous audit probability, endogenous reference level
    JEL: H26 D81 K42
    Date: 2013–08

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