nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2013‒11‒22
eight papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Alternating or Compensating? An Experiment on the Repeated Sequential Best Shot Game By Lisa Bruttel; Werner Güth
  2. Fostering and Measuring Skills: Interventions That Improve Character and Cognition By James Heckman; Tim Kautz
  3. On the economics of others By Stark, Oded
  4. Manipulating reliance on intuition reduces risk and ambiguity aversion By Butler, Jeffrey V.; Guiso, Luigi; Jappelli, Tullio
  5. QWERTY and the search for optimality By Neil M Kay
  6. Support for Public Provision with Top-Up and Opt-Out: A Controlled Laboratory Experiment By Neil Buckley; Katherine Cuff; Jeremiah Hurley; Stuart Mestelman; Stephanie Thomas; David Cameron
  7. Isolating Warm Glow in Charitable Auction Giving By Kyriaki Remoundou; Andreas C. Drichoutis; Phoebe Koundouri
  8. Parental investment and the intergenerational transmission of economic preferences and attitudes By Maria Zumbuhl; Thomas Dohmen; Gerard Pfann

  1. By: Lisa Bruttel (Department of Economics, University of Konstanz, Germany); Werner Güth (Max Planck Institute of Economics, Jena, Germany)
    Abstract: In the two-person sequential best shot game, first player 1 contributes to a public good and then player 2 is informed about this choice before contributing. The payoff from the public good is the same for both players and depends only on the maximal contribution. Efficient voluntary cooperation in the repeated best shot game therefore requires that only one player should contribute in a given round. To provide better chances for such cooperation, we enrich the sequential best shot base game by a third stage allowing the party with the lower contribution to transfer some of its periodic gain to the other party. Participants easily establish cooperation in the finitely repeated game. When cooperation evolves, it mostly takes the form of 'labor division,' with one participant constantly contributing and the other constantly compensating. However, in a treatment in which compensation is not possible, (more or less symmetric) alternating occurs frequently and turns out to be almost as efficient as labor division.
    Keywords: best shot game, coordination, transfer, experiment
    JEL: C71 C73 C91
    Date: 2013–10–31
  2. By: James Heckman (University of Chicago); Tim Kautz (University of Chicago)
    Abstract: This paper reviews the recent literature on measuring and boosting cognitive and noncognitive skills. The literature establishes that achievement tests do not adequately capture character skills--personality traits, goals, motivations, and preferences--that are valued in the labor market, in school, and in many other domains. Their predictive power rivals that of cognitive skills. Reliable measures of character have been developed. All measures of character and cognition are measures of performance on some task. In order to reliably estimate skills from tasks, it is necessary to standardize for incentives, effort, and other skills when measuring any particular skill. Character is a skill, not a trait. At any age, character skills are stable across different tasks, but skills can change over the life cycle. Character is shaped by families, schools, and social environments. Skill development is a dynamic process, in which the early years lay the foundation for successful investment in later years. High-quality early childhood and elementary school programs improve character skills in a lasting and cost-effective way. Many of them beneficially affect later-life outcomes without improving cognition. There are fewer long-term evaluations of adolescent interventions, but workplace-based programs that teach character skills are promising. The common feature of successful interventions across all stages of the life cycle through adulthood is that they promote attachment and provide a secure base for exploration and learning for the child. Successful interventions emulate the mentoring environments offered by successful families.
    Keywords: Character, achievement tests, skill development, interventions
    JEL: D01 I20 J24
    Date: 2013–11
  3. By: Stark, Oded
    Abstract: We relate to others in two important ways: we care about others, and we care about how we fare in comparison to others. In some contexts, these two forms of relatedness interact. Caring about others can conveniently be labeled altruism. Caring about how we fare in comparison with others who fare better than ourselves can conveniently be labeled relative deprivation. I provide examples of domains in which the incorporation of altruism and relative deprivation can point to novel perspectives and suggest rethinking, and possibly revising, longheld views. And I show that there are domains in which consideration of relative deprivation can substitute for the prevalence of altruism, and vice versa. I conclude that this is a fascinating sphere for research on economics and social behavior. --
    Keywords: Altruism,Relative deprivatio,Economic and social behavior
    JEL: D01 D03 D13 D31 D63 D64 F22 F24 J61 O15
    Date: 2013
  4. By: Butler, Jeffrey V.; Guiso, Luigi; Jappelli, Tullio
    Abstract: Prior research suggests that those who rely on intuition rather than effortful reasoning when making decisions are less averse to risk and ambiguity. The evidence is largely correlational, however, leaving open the question of the direction of causality. In this paper, we present experimental evidence of causation running from reliance on intuition to risk and ambiguity preferences. We directly manipulate participants' predilection to rely on intuition and find that enhancing reliance on intuition lowers the probability of being ambiguity averse by 30 percentage points and increases risk tolerance by about 30 percent in the experimental sub-population where we would a priori expect the manipulation to be successful (males). --
    Keywords: Risk Aversion,Ambiguity Aversion,Decision Theory,Dual Systems,Intuitive Thinking
    JEL: D81 D83
    Date: 2013
  5. By: Neil M Kay (Department of Economics, University of Strathclyde)
    Abstract: This paper shows how one of the developers of QWERTY continued to use the trade secret that underlay its development to seek further efficiency improvements after its introduction. It provides further evidence that this was the principle used to design QWERTY in the first place and adds further weight to arguments that QWERTY itself was a consequence of creative design and an integral part of a highly efficient system rather than an accident of history. This further serves to raise questions over QWERTY’s forced servitude as “paradigm case†of inferior standard in the path dependence literature. The paper also shows how complementarities in forms of intellectual property rights protection played integral roles in the development of QWERTY and the search for improvements on it, and also helped effectively conceal the source of the efficiency advantages that QWERTY helped deliver.
    Keywords: QWERTY, invention, path dependence, path creation, patents, trade secrets
    Date: 2013–10
  6. By: Neil Buckley; Katherine Cuff; Jeremiah Hurley; Stuart Mestelman; Stephanie Thomas; David Cameron
    Abstract: We empirically test the predictions of political economy models regarding public support for a publicly provided private good financed with proportional income taxes when individuals can purchase the good privately and either continue to consume public provision ('top-up') or forego public provision ('opt-out'). Our laboratory results confirm the predicted majority-preferred tax rate in the mixed financing with top-up treatment, but find significantly higher rates than predicted in the mixed financing with opt-out treatment. Using non-parametric regression analysis, we also explore the relationship between individuals' top-up and opt-out decisions and both their income levels and the implemented tax rates.
    Keywords: publicly provided private good, mixed financing, voting experiment
    JEL: H42 H44 C91 D78
    Date: 2013–11
  7. By: Kyriaki Remoundou; Andreas C. Drichoutis; Phoebe Koundouri
    Abstract: We use a novel experimental design to isolate warm glow and measure its extent in an auction that contributes the revenues by highest bidders to a charity. A sample of consumers bid to upgrade an agricultural product from a river basin that is not in good ecological status. Charitable donations are crowed-out, one to one, by a reduction in the experimenters’ contribution to the charity allowing warm glow to be isolated. Results suggest that subjects do not bid higher in the charitable auction compared to the standard auction (control) treatment therefore providing no evidence of warm glow motivations behind giving.
    Date: 2013–09
  8. By: Maria Zumbuhl (Maastricht University); Thomas Dohmen (University of Bonn); Gerard Pfann (Maastricht University)
    Abstract: We study empirically whether there is scope for parents to shape the economic preferences and attitudes of their children through purposeful investments. We exploit information on the risk and trust attitudes of parents and their children, as well as rich information about parental efforts in the upbringing of their children from the German Socio-Economic Panel Study. Our results show that parents who invest more in the upbringing of their children are more similar to them with respect to risk and trust attitudes and thus transmit their own attitudes more strongly. The results are robust to including variables on the relationship between children and parents, family size, and the parents’ socioeconomic background.
    Keywords: parental investments, risk preferences, trust, intergenerational transmission, cultural economics, family economics, social interactions
    JEL: D80 J12 J13 J62 Z13
    Date: 2013–11

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