nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2013‒09‒25
nine papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Deciding for Others Reduces Loss Aversion By Andersson, Ola; Holm, Håkan J.; Tyran, Jean-Robert; Wengström, Erik
  2. Why Blame? By Mehmet Gurdal; Joshua B. Miller; Aldo Rustichini
  3. The Effect of Outside Leaders on the Performance of the Organization: An Experiment By Marcela Ibanez; Elke Schaffland
  4. Second Thoughts on Free Riding By Nielsen, Ulrik H.; Tyran, Jean-Robert; Wengström, Erik
  5. A Tailor-Made Test of Intransitive Choice By Aurélien Baillon; Han Bleichrodt; Alessandra Cillo
  6. When x Becomes x': Sameness and the Internal Consistency of Choice By Marek Hudík
  7. Loved Ones Matter: Family Effects and Stock Market Participation By Hellström, Jörgen; Zetterdahl, Emma; Hanes, Niklas
  8. Choice via Grouping Procedures By Matsuki, Jun; Tadenuma, Koichi
  9. The spatiality of trust – Antecedents of trust and the role of face-to-face contacts By Nilsson, Magnus; Mattes, Jannika

  1. By: Andersson, Ola (Research Institute of Industrial Economics (IFN)); Holm, Håkan J. (Lund University); Tyran, Jean-Robert (University of Vienna); Wengström, Erik (Lund University)
    Abstract: We study risk taking on behalf of others, both with and without potential losses. A large-scale incentivized experiment is conducted with subjects randomly drawn from the Danish population. On average, decision makers take the same risks for other people as for themselves when losses are excluded. In contrast, when losses are possible, decisions on behalf of others are more risky. Using structural estimation, we show that this increase in risk stems from a decrease in loss aversion when others are affected by their choices.
    Keywords: Risk taking; Loss aversion; Experiment
    JEL: C91 D03 D81 G02
    Date: 2013–09–17
  2. By: Mehmet Gurdal; Joshua B. Miller; Aldo Rustichini
    Abstract: We provide experimental evidence that subjects blame others based on events they are not responsible for. In our experiment an agent chooses between a lottery and a safe asset; payment from the chosen option goes to a principal who then decides how much to allocate between the agent and a third party. We observe widespread blame: regardless of their choice, agents are blamed by principals for the outcome of the lottery, an event they are not responsible for. We provide an explanation of this apparently irrational behavior with a delegated-expertise principal-agent model, the subjects’ salient perturbation of the environment. JEL Classification Numbers: C92; D63; C79. Keywords: Experiments; Rationality; Fairness
    Date: 2013
  3. By: Marcela Ibanez (Georg-August University Göttingen); Elke Schaffland (Georg-August University Göttingen)
    Abstract: In order to deal with crises, organizations often bring expert leaders from outside. However, relying in an outside leader can result in decreased performance of the organization. In this paper, we use an experiment to investigate the role of identity and skills of the outside leader on the performance of the organization. Our results indicate that outside leaders are less committed than inside leaders and that group members cooperate less with an outsider than an inside leader.
    Keywords: Social Identity; Leadership; Public Good Game; Lab Experiment
    Date: 2013–09–16
  4. By: Nielsen, Ulrik H. (Department of Economics, University of Copenhagen); Tyran, Jean-Robert (Department of Economics, University of Vienna); Wengström, Erik (Department of Economics, Lund University)
    Abstract: We use the strategy method to classify subjects into cooperator types in a large-scale online Public Goods Game and find that free riders spend more time on making their decisions than conditional cooperators and other cooperator types. This result is robust to reversing the framing of the game and is not driven by free riders lacking cognitive ability, confusion, or natural swiftness in responding. Our results suggest that conditional cooperation serves as a norm and that free riders need time to resolve a moral dilemma.
    Keywords: Response Time; Free Riding; Public Goods; Experiment
    JEL: C70 C90 D03
    Date: 2013–09–11
  5. By: Aurélien Baillon; Han Bleichrodt; Alessandra Cillo
    Abstract: We performed a new test of transitivity based on individual measurements of the main intransitive choice models in decision under uncertainty. Our test is tailor-made and, therefore, more likely to detect violations of transitivity than previous tests. In spite of this, we observed only few intransitivities and we could not reject the hypothesis that these were due to random error. A possible explanation for the poor predictive performance of the intransitive choice models is that they only allow for interactions between acts, but exclude within-act interactions by retaining the assumption that preferences are separable overstates of nature. Prospect theory, which relaxes separability but retains transitivity, predicted choices significantly better than the nontransitive choice models. We conclude that descriptively realistic models need to allow for within-act interactions, but may retain transitivity. Subject classifications: Utility/preference: Estimation. Decision analysis: Risk. Area of review: Decision Analysis.
    Date: 2013
  6. By: Marek Hudík
    Abstract: The fact that any two choices are necessarily asynchronous raises the question of whether some alternative x at moment t remains the same alternative x at moment t + 1. It is argued that this question cannot be answered without taking into account the decision-maker’s perception of the choice problem. Consequently, an objective description of a choice problem is impossible for each description involves an interpretation. A definition of sameness is provided and an extension of the standard choice model is suggested. The problem of the possibility of different perceptions of the decision-maker and the observer is emphasized
    Keywords: sameness, categorization, internal consistency, choice theory, indifference, framing, subjectivism
    JEL: B40 D01 D03
    Date: 2013–06
  7. By: Hellström, Jörgen (Umeå School of Business and Economics); Zetterdahl, Emma (Department of Economics, Umeå School of Business and Economics); Hanes, Niklas (Department of Economics, Umeå School of Business and Economics)
    Abstract: In this paper new and detailed empirical evidence on the impact of family on individuals’ stock market participation decision is provided. Since influence is likely to vary systematically over different types of individuals the heterogeneous effect of social interaction, in a setting including both community as well as within-family effects, is further examined. The main results indicate that individuals’ likelihood for subsequent participation increases (decreases) following positive (negative) parental and partner stock market experiences. The effect of social interaction is further found to be of relatively greater importance for individuals with relatively lower levels of financial literacy and for individuals with an on average higher level of interpersonal trust. In terms of gender, both male and female participation is positively affected by family influence, while community effects mainly pertain to males.
    Keywords: Family effects; Investor behavior; Peer effect; Social interaction; Social influence; Stock market participation
    JEL: D83 G11
    Date: 2013–09–19
  8. By: Matsuki, Jun; Tadenuma, Koichi
    Abstract: In this paper, we consider a natural procedure of decision-making, called a “Grouping Choice Method”, which leads to a kind of bounded rational choices. In this procedure a decision-maker (DM) first divides the set of available alternatives into some groups and in each group she chooses the best element (winner) for her preference relation. Then, among the winners in the first round, she selects the best one as her final choice. We characterize Grouping Choice Methods in three different ways. First, we show that a choice function is a Grouping Choice Method if and only if it is a Rational Shortlist Method (Manzini and Mariotti, 2007) in which the first rationale is transitive. Second, Grouping Choice Methods are axiomatically characterized by means of a new axiom called Elimination, in addition to two well-known axioms, Expansion and Weak WARP (Manzini and Mariotti, 2007). Third, Grouping Choice Methods are also characterized by a weak version of Path Independence.
    Keywords: grouping of alternatives, preference, bounded rationality
    JEL: D01
    Date: 2013–09
  9. By: Nilsson, Magnus (CIRCLE, Lund University); Mattes, Jannika (Institute for Social Sciences, CETRO, University of Oldenburg, Germany and CIRCLE, Lund University, Sweden)
    Abstract: In this paper we analyze how the spatiality of interactions influences trust creation in multi-site corporate innovation projects. By drawing on insights from the discussion on initial and gradual trust and connecting them to contributions from the field of economic geography, we examine different antecedents of trust and their dependence on face-to-face interaction. We thereby illustrate the complexity of initial and gradual trust creation and the interplay between personality traits, group-based similarities, situational and institutional factors, reputational inference, and personal interaction as trust antecedents. We can show that the speed and level of resilient trust creation is decisively influenced by the frequency and duration of face-to-face exchange between key project actors. The empirical insights are based on two qualitative case studies on specific innovation projects in multinational companies. Our findings stress the need to incorporate space as a facilitating factor in the analysis of trust development.
    Keywords: Trust; spatiality; proximity; face-to-face; project work
    JEL: M10 M19
    Date: 2013–04–17

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