nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒03‒15
twelve papers chosen by
Marco Novarese
Universita' del Piemonte Orientale Amedeo Avogadro

  1. What do we expect of others? By Brañas-Garza, Pablo; Rodriguez-Lara, Ismael
  2. The Meaning of Deceive in Experimental Economic Science By Bart J. Wilson
  3. Conditional Punishment By Kamei, Kenju
  4. Who's Afraid of the Big Bad Wolf? Risk Aversion and Gender Discrimination in Assessment By Jason Hartford and Nic Spearman
  5. Circumstantial risk: Impact of future tax evasion and labor supply opportunities on risk exposure By Doerrenberg, Philipp; Duncan, Denvil; Zeppenfeld, Christopher
  6. Discovered Preferences for Risky and Non-Risky Goods By Sarah Jacobson; Jason Delaney; Thorsten Moenig
  7. Why do I keep going in circles? On the impossibility of constructing rational preferences By Brendan Markey-Towler
  8. Parents' Education and their Adult Offspring's Other-Regarding Behavour By Ulrik H. Nielsen
  9. Got green milk? A field experimental trial of consumer demand for a climate label By Matsdotter, Elina; Elofsson, Katarina; Arntyr, Johan
  10. Are Smarter People Better Samaritans? Effect of Cognitive Abilities on Pro-Social Behaviors By Luis Aranda; Martin Daniel Siyaranamual
  11. Person-Organization Fit and Incentives: A Causal Test By Andersson, Ola; Huysentruyt, Marieke; Miettinen, Topi; Stephan, Ute
  12. A short-but-efficient test for overconfidence and prospect theory. Experimental validation By Peon, David; Calvo, Anxo; Antelo, Manel

  1. By: Brañas-Garza, Pablo; Rodriguez-Lara, Ismael
    Abstract: We report experimental data on expectations about generosity in a dictator game in which dictators first divide the pie and then make a guess about the donation of other dictators. In our experiment, recipients have to guess the donation that they are going to receive from their own dictator as well as the donation of other dictator, whose choice does not affect their own payoffs. Our findings indicate that property rights are important to explain guesses, as dictators predict a smaller donation from other dictators than recipients do. We also observe that the involvement in the game is crucial as recipients expect other dictators to be more generous than their own dictator. When we compare guesses with actual donations, we see that dictators' guesses are positively correlated with their own transfer and that recipients overestimate the kindness of other dictators, as they expect them to be more kind than what they actually are.
    Keywords: generosity, expectations, dictator game, fairness, property rights, involvement.
    JEL: C9 D63 D64
    Date: 2014–02–26
  2. By: Bart J. Wilson (Chapman University, Economic Science Institute)
    Keywords: experimental economics, deception, professional ethics of economists
    JEL: C90
    Date: 2014
  3. By: Kamei, Kenju
    Abstract: We elicit human conditional punishment types by conducting experiments. We find that their punishment decisions to an individual are on average significantly positively proportional to other members’ punishment decisions to that individual.
    Keywords: cooperation, punishment, experiments
    JEL: C91 C92 D70 H41
    Date: 2014–02–28
  4. By: Jason Hartford and Nic Spearman
    Abstract: This study exploits a natural experiment to evaluate the gender bias effect associated with negative marking due to gender-differentiated risk aversion. This approach avoids framing effects that characterize experimental evaluation of negative marking assessments. Evidence of a gender bias against female students is found. Quantile regressions indicate that female students in higher quantiles are substantially more adversely affected by negative marking. This distribution effect has been overlooked by prior studies, but has important policy implications for higher learning institutions where access to bursary and scholarship funding, as well as access to further study opportunities, is reserved for top performing candidates.
    Keywords: Risk aversion, Gender Discrimination
    JEL: J16 D81 I24 A20 C21
    Date: 2014
  5. By: Doerrenberg, Philipp; Duncan, Denvil; Zeppenfeld, Christopher
    Abstract: This paper examines whether risk-taking in a lottery depends on the opportunity to respond to the lottery outcome through additional labor effort and/or tax evasion. Previous empirical attempts to answer this question face identification issues due to self selection into jobs that facilitate tax evasion and labor effort exibility. We address these identification issues using a laboratory experiment (N = 180). Subjects have the opportunity to invest earned income in a lottery and, depending on randomly assigned treatment states, have the opportunity to respond to the lottery outcome through evasion and/or extra labor effort. We find strong evidence that ex-post access to labor opportunities reduces ex-ante risk willingness while access to tax evasion has no effect on risk behavior. We discuss possible explanations for this result based on the existing literature. --
    Keywords: Tax Evasion,Labor Supply,Risk Behavior,Lab Experiment
    JEL: G11 H21 H24 H26 J22
    Date: 2014
  6. By: Sarah Jacobson (Williams College); Jason Delaney (School of Business Administration, Georgia Gwinnett College); Thorsten Moenig (Department of Mathematics, University of St. Thomas)
    Abstract: We develop an axiomatic theory that integrates the discovered preference hypothesis into neoclassical microeconomic choice theory. A theory in which preferences must be discovered through experience can explain patterns observed in choice data, including preference reversals, evolution of or instability in risky choice, and errors that decline with repetition as seen in contingent valuation data. With reasonable assumptions, we show that preferences for common, high-ranked, and non-stochastic choice items are learned quickly and thus should appear stable. However, initially low-ranked choice items may remain persistently mis-ranked. Preferences for choice items with stochastic outcomes are difficult to learn, so choice under uncertainty is subject to error. At finite time, a choice item is more likely to be mis-ranked if it has stochastic outcomes, if it is initially low-ranked, or if it appears rarely in choice sets. The existence of a default option may or may not render correct ranking more difficult. Undiscovered preferences can lead to real welfare loss as agents make choices not congruent with their true preferences. This theory is amenable to tests using laboratory experiments. Preference discovery has implications for policy, and the process of discovery may contaminate choice data in a variety of contexts.
    Keywords: discovered preferences, preference stability, learning, risk preferences
    JEL: D81 D83 D01 D03
    Date: 2014–03
  7. By: Brendan Markey-Towler (School of Economics, The University of Queensland)
    Abstract: In standard models of rational choice it is typically taken for granted that preferences are given and defined over the alternatives alone, and the possibility of making a rational choice is simply a matter of assumption. In this paper I generalise this aspect of the economic model so that preferences over alternatives are constructed from given preferences defined over various characteristics of the alternatives under consideration. I characterise the decision problem before investigating what conditions a procedure for aggregating preferences over attributes into preferences over alternatives must satisfy in order for the latter to be rational. I then consider what the implications of these conditions for the procedural rationality of the aggregation process.
    Date: 2014–03–03
  8. By: Ulrik H. Nielsen (Department of Economics, Copenhagen University)
    Abstract: Does socioeconomic background when measured by parental educational attainment explain the heterogeneity in adults' other-regarding preferences? I test this by using data from two online experiments -- a Dictator Game and a Trust Game that were conducted with a broad sample of the Danish adult population. I match the experimental data with high-quality data from the Danish population registers about my subjects and their parents. Whereas previous studies have found socioeconomic status, including parental educational attainment, to be predictive for children's generosity, I find no such evidence among adults. This result is robust across age groups and genders. I provide two explanations for this. First, sociodemographic characteristics in general appear to be poor predictors of adults' other-regarding behavior. Second, by using Danish survey data, I find that Danish parents' educational attainment appears to be uncorrelated with how important they find it to teach their children to "think of others". More speculative explanations are also provided.
    Keywords: Dictator Game, Trust Game, Generosity, Other-Regarding Preferences, Parental Education, Socioeconomic Status.
    JEL: C91 D63 D64
    Date: 2014–02
  9. By: Matsdotter, Elina (Department of Economics, Swedish University of Agricultural Sciences); Elofsson, Katarina (Department of Economics, Swedish University of Agricultural Sciences); Arntyr, Johan (Ramböll Sverige AB)
    Abstract: A majority of consumers claim to prefer climate-labelled food over non-labelled alternatives. However, there is limited empirical evidence that such labels actually influence consumer behaviour when shopping. The purpose of this study is to investigate whether qualitative information about a voluntary climate labelling scheme affects the demand for milk in the short run. In a randomized field experiment conducted in 17 retail stores in Sweden, the effects of a climate label on milk demand was measured. Results suggest that climate labelling increased demand for medium-fat climate labelled milk by approximately 7%. The response is significantly smaller than suggested by consumer surveys but larger than that observed in earlier studies of actual purchasing behaviour where quantitative information on climate impact was provided.
    Keywords: Climate labelling; milk; demand; voluntary policy instruments; randomized controlled trial
    JEL: D12 D83 Q18 Q54
    Date: 2014–02–13
  10. By: Luis Aranda (Advanced School of Economics, University Ca' Foscari of Venice); Martin Daniel Siyaranamual (Department of Economics, Padjadjaran University)
    Abstract: This study investigates how cognitive abilities correlate with civic engagement of older Europeans (aged 50+), using waves two and three of the SHARE dataset. An instrumental variable approach is employed in an at-tempt to disentangle possible endogeneity issues arising between cognitive abilities and civic engagement. Cognitive abilities are instrumented with the number of books in the respondent's place of residence during childhood. The results advocate for the existence of a causal relationship running from cognition in old age to community engagement. Though contradicting standard theoretical predictions, this empirical finding is in line with mainline experimental results showing how participants with higher cognitive abilities tend to be less risk averse, and thus more willing to opt for a payoff-dominant action in a stag hunt game context more often.
    Keywords: Cognitive ability; civic engagement; instrumental variables;risk-aversion; we-rationality
    JEL: D03 D64 D71
    Date: 2014–05
  11. By: Andersson, Ola (Research Institute of Industrial Economics (IFN)); Huysentruyt, Marieke (London School of Economics); Miettinen, Topi (Hanken School of Economics at HECER); Stephan, Ute (Aston Business School)
    Abstract: We investigate the effects of organizational culture and personal value orientations on performance under individual and team contest incentives. We develop a model of regard for others and in-group favoritism predicting interaction effects between organizational culture and personal values in the contest games. The predictions are tested in a computerized lab experiment with exogenous control of both organizational culture and incentives. In line with our theoretical model we find that prosocial (proself) orientated subjects exert more (less) effort in team contests in the primed prosocial organizational culture condition, relative to the neutrally primed baseline condition. Further, when the prosocial organizational culture is combined with individual contest incentives, prosocial subjects no longer outperform their proself counterparts. These findings provide a first, affirmative, causal test of person-organization fit theory. They also suggest the importance of a 'triple-fit' between personal preferences, organizational culture and incentive mechanisms for prosocially orientated individuals.
    Keywords: Tournaments; Organizational culture; Personal values; Person-organization fit; Teams; Economic incentives
    JEL: C91 D02 D23 J33 M52
    Date: 2014–02–27
  12. By: Peon, David; Calvo, Anxo; Antelo, Manel
    Abstract: Two relevant areas in the behaviorist literature are prospect theory and overconfidence. Many tests are available to elicit their different manifestations: utility curvature, probability weighting and loss aversion in PT; overestimation, overplacement and overprecision as measures of overconfidence. Those tests are suitable to deal with single manifestations but often unfeasible, in terms of time to be performed, to determine a complete psychological profile of a given respondent. This paper contributes to provide two short tests, based on classic works in the literature, to derive a complete profile on prospect theory and overconfidence. We conduct an experimental research with 126 students to validate the tests, revealing they are broadly efficient to replicate the regular results in the literature. The experimental analysis of all measures of overconfidence and prospect theory using the same sample of respondents allows us to provide new insights on the relationship between these two areas. Finally, enhancements for future research are suggested.
    Keywords: Experimental economics, overconfidence, prospect theory, behavioral finance, utility measurement, overestimation, overplacement, overprecision
    JEL: C91 D03 D81
    Date: 2014–03–05

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