nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2013‒12‒29
eighteen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Changing Eating Habits - A Field Experiment in Primary Schools By Michèle, Belot; Jonathan, James; Patrick, Nolen
  2. Social Comparisons in Wage Delegation: Experimental Evidence By Charness, Gary; Cobo-Reyes, Ramón; Lacomba, Juan A.; Lagos, Francisco; Pérez, José María
  3. Characterizing Behavioral Decisions with Choice Datas By Dalton, Patricio S.; Ghosal, Sayantan
  4. Second Thoughts on Free Riding By Ulrik H. Nielsen; Jean-Robert Tyran; Erik Wengström
  5. Intentional Apple-choice Behaviors: When Amartya Sen Meets John Searle By Dorian Jullien
  6. Locus of Control and Savings By Deborah A. Cobb-Clark; Sonja C. Kassenboehmer; Mathias G. Sinning
  7. Top Contributors as Punishers By Daniela Grieco; Marco Faillo; Luca Zarri
  8. Reputation and Social (Dis)approval in Feedback Mechanisms: An Experimental study By Marianne Lumeau; David Masclet; Thierry Pénard
  9. How private is private information? The ability to spot deception in an economic game By Michèle Belot (University of Edinburgh) Jeroen van de Ven (Amsterdam Center for Law and Economics, University of Amsterdam, and Tinbergen Institute)
  10. Evidential equilibria: Heuristics and biases in static games By Sanjit Dhami; Ali al-Nowaihi
  11. Risk aversion relates to cognitive ability: Fact or Fiction? By Ola Andersson; Håkan J. Holm; Jean-Robert Tyran; Erik Wengström
  12. Conscientious consumers? Preferences, personality and expenditure in the UK By Benjamin Volland
  13. Better sexy than flexy? A lab experiment assessing the impact of perceived attractiveness and personality traits on hiring decisions By S. BAERT; L. DECUYPERE
  14. Complexity and Bounded Rationality in Individual Decision Problemsing. By Diasakos, Theodoros M
  15. Addressing self-disconnection among prepayment energy consumers: A behavioural approach By Marta Rocha; Michelle Baddeley; Michael G. Pollitt
  16. Promises and Expectations By Florian Ederer; Alexander Stremitzer
  17. Adaptive vs. Eductive Learning: Theory and Evidence By John Duffy; Te Bao
  18. Deciding for Others Reduces Loss Aversion By Ola Andersson; Håkan J. Holm; Jean-Robert Tyran; Erik Wengström

  1. By: Michèle, Belot; Jonathan, James; Patrick, Nolen
    Abstract: We conduct a field experiment in 31 primary schools in England to test whether incentives to eat fruit and vegetables help children develop healthier habits. The intervention consists of rewarding children with stickers and little gifts for a period of four weeks for choosing a portion of fruit and vegetables at lunch. We compare the effects of two incentive schemes (competition and piece rate) on choices and consumption over the course of the intervention as well as once the incentives are removed and six months later. We find that the intervention had positive effects, but the effects vary substantially according to age and gender. However, we find little evidence of sustained long term effects, except for the children from poorer socio‐economic backgrounds.
    Keywords: Incentives, Health, Habits, Child nutrition, Field experiment,
    Date: 2013
  2. By: Charness, Gary (University of California, Santa Barbara); Cobo-Reyes, Ramón (University of Essex); Lacomba, Juan A. (Universidad de Granada); Lagos, Francisco (Universidad de Granada); Pérez, José María (Universidad de Granada)
    Abstract: This article examines whether social comparisons have behavioral effects on workers' performance when a firm can choose workers' wages or let them choose their own. Firms can delegate the wage decision to neither, one or both workers in the firm. We vary the information workers receive, finding that social comparisons concerning both wages and decision rights affect workers' performance. Moreover, the relative effect of discrimination in relation to decision rights is larger than in relation to wage. We find these treatment effects with both stated effort and a real-effort task, suggesting that both approaches may yield similar results.
    Keywords: delegation, gift-exchange, experiment
    JEL: C91
    Date: 2013–12
  3. By: Dalton, Patricio S.; Ghosal, Sayantan
    Abstract: A number of different models with behavioral economics have a reduced form representation where potentially boundedly rational decision-makers do not necessarily internalize all the consequences of their actions on payoff relevant features (which we label as psychological states) of the choice environment. This paper studies the restrictions that such behavioral models impose on choice data and the implications they have for welfare analysis. First, we propose a welfare benchmark that is justified using standard axioms of rational choice and can be applied to a number of existing seminal behavioral economics models. Second, we show that Sen's axioms and fully characterize choice data consistent with behavioral decision-makers. Third, we show how choice data to infer information about the normative signi.cance of psychological states and establish the possibility of identifying welfare dominated choices.
    Keywords: Behavioral Choices, Revealed and Normative Preferences, Individual Welfare, Axiomatic Characterization,
    Date: 2013
  4. By: Ulrik H. Nielsen (Department of Economics, Copenhagen University); Jean-Robert Tyran (Centre for Economic Policy Research (CEPR), University of Vienna, Department of Economics, Copenhagen University); Erik Wengström (Department of Economics, Copenhagen 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: 2013–09–04
  5. By: Dorian Jullien (University of Nice Sophia Antipolis; GREDEG CNRS)
    Abstract: This paper suggests that Amartya Sen's conception of rationality could benefit from insights borrowed to John Searle's philosophy of mind. More precisely, I argue that the work of Searle on intentionality provides a relevant conceptual apparatus to strengthen Sen's conceptualization of context-dependent preferences in a way that suggests further analytical contributions to the latter’s line of research. The arguments developed in the paper are relevant for three interrelated issues on economic rationality that are currently discussed in economic methodology: (1) methodological dualism and intentionalitic explanations in economics, (2) the relationships between economics and philosophy, and (3) the recent rise of behavioral economics within the mainstream of economic theory.
    Keywords: rationality, intentionality, preferences, context-dependency, Amartya Sen, John Searle
    JEL: B00 B40 B41 B49
    Date: 2013–12
  6. By: Deborah A. Cobb-Clark; Sonja C. Kassenboehmer; Mathias G. Sinning
    Abstract: This paper analyzes the relationship between individuals’ locus of control and their savings behavior, i.e. wealth accumulation, savings rates, and portfolio choices. Locus of control is a psychological concept that captures individuals’ beliefs about the controllability of life events and is a key component of self-control. We find that households with an internal reference person save more both in terms of levels and as a percentage of their permanent incomes. Although the locus-of-control gap in savings rates is largest among rich households, the gap in wealth accumulation is particularly large for poor households. Finally, households with an internal reference person and average net worth hold significantly less financial wealth, but significantly more pension wealth, than otherwise similar households with an external reference person.
    Keywords: Non-cognitive skills; locus of control; wealth accumulation; asset portfolios; savings
    JEL: G02 G11 I31 R21
    Date: 2013–12
  7. By: Daniela Grieco (Department of Economics (University of Verona)); Marco Faillo (Department of Economics, University of Trento); Luca Zarri (Department of Economics (University of Verona))
    Abstract: We experimentally investigate cooperation within a finitely repeated public goods game framework where peer punishment is possible but, unlike previous work, in each round access to sanctioning power is exclusively awarded to the group’s top contributor. We compare this mechanism with a treatment where the right to punish is assigned to one randomly selected subject (O’Gorman et al., 2009), as well as with classic discretionary punishment (Fehr and Gächter, 2000) and with ‘legitimate punishment’ (Faillo et al., 2013). We show that the “Top Contributors as Punishers” mechanism is extremely effective in both raising cooperation and welfare, compared to the randomly selected punisher treatment and to discretionary punishment. This interestingly occurs despite the fact that the (first and second-order) free riding problem may lead subjects to perceive the new institution as an excessively demanding one: in fact, the lure of the top contributor role induces many subjects to significantly contribute and many top contributors to incur relevant costs to sanction others.
    Keywords: Public Goods Games; Cooperation; Legitimacy; Solitary Punishment; Behavioral Mechanism Design.
    JEL: C73 C91 D02 D63
    Date: 2013–12
  8. By: Marianne Lumeau (University of Paris 13, CEPN and Labex ICCA, France); David Masclet (CREM UMR CNRS 6211, Université de Rennes 1, France); Thierry Pénard (Université de Rennes 1, CREM UMR CNRS 6211, France)
    Abstract: Several studies have highlighted the role of feedback mechanisms in the success of electronic marketplaces. In this current experiment, we attempt to isolate experimentally the role of reputation and social (dis)approval associated to ratings using a trust game experiment with the opportunity to rate one’s partner (Keser, 2003; Masclet and Penard, 2012). For this purpose we compare two experimental feedback systems that differ in the information that is publically available to participants. In a first feedback system, individuals’ rating profiles are public whereas in the second feedback system this information is private. Our findings indicate that both private and public ratings improve cooperation. However, we observe that private feedbacks are less efficient in enhancing trust and trustworthiness than public systems. This is mainly due to fact that fewer ratings are assigned in the private feedback system than in the public system. Altogether these findings suggest that, even if social (dis)approval matters, publicly observed feedback remains crucial to induce honest behaviors and improve efficiency on markets characterized by imperfect information.
    Keywords: Reputation, (dis)approval, Experiment, Trust Game
    Date: 2013–12
  9. By: Michèle Belot (University of Edinburgh) Jeroen van de Ven (Amsterdam Center for Law and Economics, University of Amsterdam, and Tinbergen Institute)
    Abstract: We provide experimental evidence on the ability to detect deceit in a buyer-seller game with asymmetric information. Sellers have private information about the buyer’s valuation of a good and sometimes have incentives to mislead buyers. We examine if buyers can spot deception in face-to-face encounters. We vary (1) whether or not the buyer can interrogate the seller, and (2) the contextual richness of the situation. We find that the buyers’ prediction accuracy is above chance levels, and that interrogation and contextual richness are important factors determining the accuracy. These results show that there are circumstances in which part of the information asymmetry is eliminated by people’s ability to spot deception.
    Keywords: Deception, lie detection, asymmetric information, face-to-face interaction, experiment.
    JEL: C91 D82 K4
    Date: 2013–12–19
  10. By: Sanjit Dhami; Ali al-Nowaihi
    Abstract: Standard equilibrium concepts in game theory find it difficult to explain the empirical evidence in a large number of static games such as prisoners’ dilemma, voting, public goods, oligopoly, etc. Under uncertainty about what others will do in one-shot games of complete and incomplete information, evidence suggests that people often use evidential reasoning (ER), i.e., they assign diagnostic significance to their own actions in forming beliefs about the actions of other like- minded players. This is best viewed as a heuristic or bias relative to the standard approach. We provide a formal theoretical framework that incorporates ER into static games by proposing evidential games and the relevant solution concept- evidential equilibrium (EE). We derive the relation between a Nash equilibrium and an EE. We also apply EE to several common games including the prisoners’ dilemma and oligopoly games.
    Keywords: Evidential reasoning; causal reasoning; evidential games; social projec- tion functions; ingroups and outgroups; evidential equilibria and consistent eviden- tial equilibria; Nash equilibria; the prisoners.dilemma and oligopoly games; common knowledge and epistemic foundations.
    Date: 2013–11
  11. By: Ola Andersson (Research Institute of Industrial Economics (IFN)); Håkan J. Holm (Lund University - Department of Economics); Jean-Robert Tyran (Centre for Economic Policy Research (CEPR), University of Vienna, Department of Economics, Copenhagen University); Erik Wengström (Department of Economics, Copenhagen University)
    Abstract: Recent experimental studies suggest that risk aversion is negatively related to cognitive ability. In this paper we report evidence that this relation might be spurious. We recruit a large subject pool drawn from the general Danish population for our experiment. By presenting subjects with choice tasks that vary the bias induced by random choices, we are able to generate both negative and positive correlations between risk aversion and cognitive ability. Structural estimation allowing for heterogeneity of noise yields no significant relation between risk aversion and cognitive ability. Our results suggest that cognitive ability is related to random decision making rather than to risk preferences.
    Keywords: risk preference, cognitive ability, experiment, noise
    JEL: C81 C91 D12 D81
    Date: 2013–09–04
  12. By: Benjamin Volland
    Abstract: While the importance of personality for understanding differences in labor market outcomes has come to be increasingly appreciated by economic scholars, little research has so far focused on the question whether these measures also explain some of the individual heterogeneity in demand behavior. Using data from the British Household Panel Survey, this study provides evidence for the relationship between the Big Five personality traits and expenditures for food away from home and other leisure activities. Additionally, we assess the relationship between dimensions of personality and individual preferences in predicting expenditure on these categories. Results indicate that aspects of personality predict a non-negligible part of expenditure behavior, and that these effects are independent of the individual’s preference stock. Our results provide empirical support for approaches that include personality as a constraint into economic models of human behavior.
    Keywords: Personality, Five Factor Model, Expenditures, Leisure, UK
    JEL: D12
    Date: 2013–12–18
    Abstract: In this letter we present a laboratory experiment to assess the relative and independent effect of perceived attractiveness and personality traits on hiring decisions. Our results indicate that attractiveness and conscientiousness, followed by emotional stability, are important drivers of recruiters’ decisions.
    Date: 2013–12
  14. By: Diasakos, Theodoros M
    Abstract: I develop a model of endogenous bounded rationality due to search costs, arising implicitly from the problems complexity. The decision maker is not required to know the entire structure of the problem when making choices but can think ahead, through costly search, to reveal more of it. However, the costs of search are not assumed exogenously; they are inferred from revealed preferences through her choices. Thus, bounded rationality and its extent emerge endogenously: as problems become simpler or as the benefits of deeper search become larger relative to its costs, the choices more closely resemble those of a rational agent. For a fixed decision problem, the costs of search will vary across agents. For a given decision maker, they will vary across problems. The model explains, therefore, why the disparity, between observed choices and those prescribed under rationality, varies across agents and problems. It also suggests, under reasonable assumptions, an identifying prediction: a relation between the benefits of deeper search and the depth of the search. As long as calibration of the search costs is possible, this can be tested on any agent-problem pair. My approach provides a common framework for depicting the underlying limitations that force departures from rationality in different and unrelated decision-making situations. Specifically, I show that it is consistent with violations of timing independence in temporal framing problems, dynamic inconsistency and diversification bias in sequential versus simultaneous choice problems, and with plausible but contrasting risk attitudes across small- and large-stakes gambles.
    Date: 2013
  15. By: Marta Rocha; Michelle Baddeley; Michael G. Pollitt
    Abstract: This paper uses insights from the study of self-control in decision-making to remedy the problem of self-disconnection among energy prepayment consumers. Self-disconnection happens when consumers exhaust all available credit in their meter and are left without supply of energy. This has serious consequences for the wellbeing of consumers and may increase firms’ costs. We design a mechanism composed of a commitment contract and a reminder in order to minimize the number of self-disconnections. We empirically assess this mechanism by examining (1) the determinants of self-disconnection and (2) the choice of different commitment contracts. We show that self-control plays a role in self-disconnection and we are able to identify, in our sample, those consumers who benefit from a commitment contract. Moreover, we find a demand for commitment and an opportunity to save among those consumers who need a commitment contract.
    Keywords: Commitment contract; Self-control; Prepayment meter; Self-disconnection; Reminder
    JEL: D03 D12 D91
    Date: 2013–05–12
  16. By: Florian Ederer (School of Management, Yale University); Alexander Stremitzer (UCLA School of Law)
    Abstract: We investigate why people keep their promises in the absence of external enforcement mechanisms and reputational effects. In a controlled economic laboratory experiment we show that exogenous variation of second-order expectations (promisors' expectations about promisees' expectations that the promise will be kept) leads to a significant change in promisor behavior. We document for the first time that a promisor's aversion to disappoint the promisee's expectation leads her to keep her promise. We propose a simple theory of lexicographic promise keeping that is supported by our results and nests the findings of previous contributions as special cases.
    Keywords: A13, C91, D03, C72, D64, K12
    Date: 2013–12
  17. By: John Duffy; Te Bao
    Abstract: Adaptive learning and eductive learning are two widely used ways of modeling learning behavior in macroeconomics. Both approaches yield restrictions on model parameters under which agents are able to learn a rational expectation equilibrium (REE) but these restrictions do not always overlap with one another. In this paper we report on an experiment where we exploit such differences in stability conditions under adaptive and eductive learning to investigate which learning approach provides a better description of the learning behavior of human subjects. Our results suggest that adaptive learning is a better predictor of whether a system converges to REE, while the path by which the system converges appears to be a mixture of both adaptive and eductive learning model predictions.
    Keywords: Rational Expectations, Adaptive Learning, Eductive Learning, Experimental Economics.
    JEL: C91 C92 D83 D84
    Date: 2013–12
  18. By: Ola Andersson (Research Institute of Industrial Economics (IFN)); Håkan J. Holm (Lund University - Department of Economics); Jean-Robert Tyran (Centre for Economic Policy Research (CEPR), University of Vienna, Department of Economics, Copenhagen University); Erik Wengström (Department of Economics, Copenhagen 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: 2013–09–04

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