nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒04‒18
sixteen papers chosen by
Marco Novarese
Universita' del Piemonte Orientale Amedeo Avogadro

  1. The role of expectations in the provision of public goods under the influence of social identity By Lankau, Matthias; Bicskei, Marianna; Bizer, Kilian
  2. Motives for Sharing in Developing Countries: Experimental Evidence from Jakarta By Ado, Akifumi; Kurosaki, Takashi
  3. Fear of being left alone drives inefficient exit from partnerships. An experiment By Alexia Gaudeul; Paolo Crosetto; Gerhard Riener
  4. Rich man and Lazarus – Asymmetric Endowments in Public-Good Experiments By Claudia Keser; Andreas Markstädter; Martin Schmidt; Cornelius Schnitzler
  5. Overcoming Moral Hazard with Social Networks in the Worksplace: An Experimental Approach By Dhillon, Amrita; Peeters, Ronald; Muge Yukse, Ayse
  6. Social environment and forms of governance: Monetary and non-monetary punishment and the role of emotions By Bicskei, Marianna; Lankau, Matthias; Bizer, Kilian
  7. Negative reciprocity and its relation to anger-like emotions in homogeneous and heterogeneous groups By Bicskei, Marianna; Lankau, Matthias; Bizer, Kilian
  8. Behavioral determinants of home bias - theory and experiment By Dennis Dlugosch; Kristian Horn; Mei Wang
  9. Why Blame? By Gurdal, Mehmet; Miller, Joshua B.; Rustichini, Aldo
  10. Real tax effects and tax perception effects in decisions on asset allocation By Fochmann, Martin; Hemmerich, Kristina
  11. Insensitivity to Prices in a Dictator Game By Jim Engle-Warnick; Natalia Mishagina
  12. Cooperation and Personality By Proto, Eugenio
  13. Believing in Oneself: Can Psychological Training Overcome the Effects of Social Exclusion? By Ghoshal, Sayantan; Jana, Smarajit; Mani, Anandi; Mitra, Sandip; Roy, Sanchari
  14. Your Loss Is My Gain: A Recruitment Experiment With Framed Incentives By Jonathan de Quidt
  15. How peer-punishment affects cooperativeness in homogeneous and heterogeneous groups: A public goods experiment with social identity By Bicskei, Marianna; Lankau, Matthias; Bizer, Kilian
  16. Luck, Choice and Responsibility: An Experimental Study of Fairness Views By Möllerström, Johanna; Reme, Bjørn-Atle; Sørensen, Eric Ø.

  1. By: Lankau, Matthias; Bicskei, Marianna; Bizer, Kilian
    Abstract: Individuals who share a common identity show persistently elevated contributions to public goods. Yet, so far the factors that actually trigger this welfare enhancement are not precisely understood. We investigate two channels: (1) subjects' expectations on group members' cooperativeness and (2) the degree to which they reciprocate these expectations by own contributions' i.e. their conditional cooperation. To this purpose we induce identity in the lab and implement an in-group, out-group and partner matching protocol in a ten-period public good game. Our results yield that comparatively higher expectations on in-group than on outgroup members' cooperativeness are the main driver for welfare enhancements in identity homogeneous groups. The degree of conditional cooperation is, however, similar in all matching protocols. Merely individuals initially identified as free-riders seem to reciprocate a limited range of expectations by higher own contributions when matched with in-group than with out-group members. Nevertheless, our findings clearly underline the paramount importance of expectations in determining cooperation under social identity. --
    Date: 2014
  2. By: Ado, Akifumi; Kurosaki, Takashi
    Abstract: We implemented laboratory experiments in Jakarta, Indonesia, to identify motives for sharing, including baseline altruism, directed altruism, sanction aversion, and reciprocity. The study area is located on the periphery of the Metropolis of Jakarta, many of whose residents are migrants and are closely connected with informal institutions such as Arisan, a rotating savings and credit association in Indonesia. Using data from sample households, the experimental results show that transfers based on baseline altruism accounted for the largest amount.Because the difference in the transferred amounts arising from the revelation of dictators' identities was statistically insignificant, we combined the four motives into two: preference-related motives (baseline and directed altruism) and incentive-related motives (sanction aversion and reciprocity) for the examination of their association with real world behavior regarding sharing. The empirical results suggest the importance of incentive-related motives in explaining variations in the amount of income transfers received from and sent to others.
    Keywords: sharing, altruism, reciprocity, network, experimental economics
    JEL: O17 C92 D03 D64
    Date: 2014–03
  3. By: Alexia Gaudeul (DFG RTG 1411, Friedrich-Schiller-Universität Jena); Paolo Crosetto (UMR GAEL INRA, Universite Pierre Mendes France, Grenoble); Gerhard Riener (DICE, Heinrich-Heine-Universität Düsseldorf)
    Abstract: We explore in an experiment what leads to the breakdown of partnerships. Subjects are assigned a partner and participate in a repeated public good game with stochastic outcomes. They can choose each period between staying in the public project or working on their own. There is excessive exit as subjects overestimate the likelihood their partner will leave. High barriers to exit thus improve welfare. We observe that exit is driven by failure within the common project but also by pay-off comparisons across options and beliefs about being exploited. Those considerations increasingly matter as we lower exit costs across treatments.
    Keywords: breakup, collaboration, cooperation, exit, imperfect public monitoring, moral hazard, partnerships, punishment, public good, repeated game, social risk, teams
    JEL: C23 C92 H41
    Date: 2014–04–08
  4. By: Claudia Keser; Andreas Markstädter; Martin Schmidt; Cornelius Schnitzler
    Abstract: We compare voluntary contributions to a public good in a symmetric setting to those in a weakly and a strongly asymmetric setting, where the players have different, randomly allocated endowments. We observe that the group-contribution levels are not significantly different between the symmetric and the weakly asymmetric setting. In both situations, participants tend to contribute the same proportion of their respective endowment. In the strongly asymmetric situation, where one of the players has a higher endowment than the three other players together, we observe a significantly lower group contribution than in the other situations. The rich player in this situation does not contribute significantly more than the average contribution of the poor players and thus contributes a significantly lower proportion of the endowment. This player is not as greedy as the rich man in the parable but leaves not more than breadcrumbs to the poor players.
    Keywords: Experimental economics, public goods, asymmetries,
    Date: 2013–09–01
  5. By: Dhillon, Amrita (Kings College, London); Peeters, Ronald (Maastrict); Muge Yukse, Ayse (Maastrict)
    Abstract: The use of social networks in the workplace has been documented by many authors, although the reasons for their widespread prevalence are less well known. In this paper we present evidence based on a lab experiment that suggests quite strongly that social networks are used by employers to reduce worker moral hazard. We capture moral hazard with a dictator game between the referrer and worker. The worker chooses how much to return under dierent settings of social proximity. Social proximity is captured using Facebook friendship information gleaned anonymously from subjects once they have been recruited. Since employers themselves do not have access to social connections, they delegate the decision to referrers who can select among workers with dierent degrees of social proximity to themselves. We show that employers choose referrals over anonymous hiring relatively more when they know that the referrer has access to friends, and are willing to delegate more often when the social proximity between referrer and worker is potentially higher. In keeping with this expectation, referrers also choose workers with a greater social proximity to themselves and workers who are closer to referrers indeed pay back more to the referrer. The advantage of the lab setting is that we can isolate directed altruism as the only reason for these results.
    Keywords: Eciency wage contracts, Moral hazard, Dictator game, Referrals, Altruism, Reciprocity, Directed altruism, Social proximity, Facebook, Experiment, Social networks, Strength of ties, Spot market.
    Date: 2014
  6. By: Bicskei, Marianna; Lankau, Matthias; Bizer, Kilian
    Abstract: The question to what extent social environment affects how individuals govern their groups, has received no special academic attention, yet. Within the framework of a ten-period public goods experi&ment we analyse how social identity affects subjects' choice of punishment: They may either sanction group members by monetary and/or by non-monetary sanctions bearing differentconsequences on welfare. What is more, we are also the first to address how emotions influence the effectiveness of punishment in terms of maintaining contributions. Our results show that under the threat of both punishments identity-heterogeneous (out-) groups tend to contribute more to the public good than identity-homogenous (in-) groups. Nevertheless, subjects of out-groups are more likely to govern their group via monetary, in-group members rather via non-monetary punishment. What is more, we demonstrate that emotions of guilt and anger differently affect subsequent contributions dependent on the social environment. --
    Keywords: public goods,social identity,monetary and non-monetary peer-punishment,emotions
    Date: 2014
  7. By: Bicskei, Marianna; Lankau, Matthias; Bizer, Kilian
    Abstract: Several studies have shown that social identity fosters the provision of public goods and enhances the willingness to reciprocate cooperative behavior of group members dependent on the social environment. Yet, the question of how social identity affects negative reciprocity in identityhomogeneous and -heterogeneous groups has received only little attention. Consequently, we seek to fill this gap by examining whether social identity affects individuals' willingness to sanction deviating group members in a public good context. Moreover, we devote particular attention to the role of anger-like emotions in negative reciprocity. To test our hypotheses we employ one-shot public good games in strategy method with induced social identity. Our results indicate that members of identity homogeneous groups punish much less often and in smaller amounts than of identity heterogeneous groups when they face contributions smaller than their own. We also find that anger-like emotions influence punishment behavior much stronger when individuals are matched with members of different identities than in identity homogenous groups. These findings contribute to the better understanding of the nature of social identity and its impact on reciprocity, improving economists ability to predict behavior taking emotions also into consideration. --
    Keywords: social identity,emotions,experiment,public goods,negative reciprocity
    Date: 2014
  8. By: Dennis Dlugosch; Kristian Horn; Mei Wang
    Abstract: We study portfolio diversification in an experimental decision task, where asset returns depend on a draw from an ambiguous urn. Holding other information identical and controlling for the level of ambiguity, we find that labeling assets as being familiar or from the homeland of subjects increases portfolio weights by around 25%, respectively; although the return-generating process remains unaffected. Importantly, we only find these effects when the returns of assets are highly ambiguous. Our ambiguity robust mean-variance model accurately predicts benchmark portfolio weights of the experimental control group, where assets are not labeled: subjects allocate more wealth to assets with low ambiguity. For treatment group portfolios, which show a bias towards assets with a familiar or homeland label, the model does not hold. This misdiversification against the benchmark portfolio can be rationalized via the concept of source dependence of uncertainty attitudes.
    Keywords: Home bias, ambiguity aversion, familiarity, experiment
    JEL: C91 D14 D81 G11
    Date: 2014–04
  9. By: Gurdal, Mehmet (Bogazici University); Miller, Joshua B. (Bocconi University); Rustichini, Aldo (University of Minnesota)
    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.
    Keywords: Experiments; Rationality; Fairness
    Date: 2013
  10. By: Fochmann, Martin; Hemmerich, Kristina
    Abstract: We test the predictions of the theoretical literature initiated by the study of Domar and Musgrave (1944) with a laboratory experiment in which subjects have to decide on the composition of an asset portfolio. Our simple design enables us to distinguish between Real Tax Effects and Perception Effects when a proportional income tax, with and without a full loss offset provision, is introduced. Observed investment behavior is partially inconsistent with the theoretical predictions if we do not control for the Perception Effects. However, if we consider these effects, we find support for the theory. The isolated Perception Effects can explain the unexpected behavior observed in previous studies and has both scientific and political implications. --
    Keywords: Taxation,Domar-Musgrave Effect,Tax Perception,Risk Taking Behavior,Portfolio Choice,Behavioral Taxation
    JEL: C91 D14 H24
    Date: 2014
  11. By: Jim Engle-Warnick; Natalia Mishagina
    Abstract: We show that violations of demand theory are more numerous than previously reported in experimental two-player dictator games. We then apply a new procedure consisting of income-compensated price adjustments that makes the choice sets rationalizable. We introduce a “weighted price” function that shows that violations of revealed preference can be interpreted as the dictator's insensitivity to the price of the dictator's allocation relative to the responder's allocation. Our paper is the first to rationalize violations of demand theory in dictator games by examining the relationship between violations of GARP and prices. We suggest that weighted prices, and not only preferences, may be a component of decision making in dictator games
    Keywords: Dictator Game, WARP, Revealed Preference,
    Date: 2014–02–01
  12. By: Proto, Eugenio (University of Warwick)
    Abstract: Cooperating and trusting behavior may be explained by preferences over social outcomes (people care about others, are unselfish and help- ful), or attitudes to work and social responsibilities (plans have to be carried out, norms have to be followed). If the first hypothesis is true, Agreeable- ness, reporting stated empathy for others, should matter most; if the second, higher score in traits expressing attitude to work, intrinsic motivation (Con- scientiousness) should be correlated with cooperating behavior and trust. We find experimental support for the second hypothesis when subjects provide real mental effort in two treatments with identical task, differing by whether others' payment is affected.
    Keywords: Personality Traits, Cooperation, Effort Provision
    Date: 2013
  13. By: Ghoshal, Sayantan (Glasgow University); Jana, Smarajit (Durbar University); Mani, Anandi (University of Warwick); Mitra, Sandip (ISI Kolkata); Roy, Sanchari (University of Warwick)
    Abstract: This paper examines whether psychological empowerment can mitigate mental constraints that impede efforts to overcome the effects of social exclusion. Using a randomized control trial, we study a training program specifically designed to reduce stigma and build self-efficacy among poor and marginalized sex workers in Kolkata, India. We find positive and significant impacts of the training on self-reported measures of efficacy, happiness and self-esteem in the treatment group, both relative to the control group as well as baseline measures. We also find higher effort towards improving future outcomes as measured by the participants’ savings choices and health-seeking behaviour, relative to the control group. These findings highlight the need to account for psychological factors in the design of antipoverty programmes.
    Keywords: social exclusion, self-efficacy, self-esteem, future-orientation, sex workers
    Date: 2013
  14. By: Jonathan de Quidt
    Abstract: Empirically, labor contracts that financially penalize failure induce higher effort provision than economically identical contracts presented as paying a bonus for success, an effect attributed to loss aversion. This is puzzling, as penalties are infrequently used in practice. The most obvious explanation is selection: loss averse agents are unwilling to accept such contracts. I formalize this intuition, then run an experiment to test it. Surprisingly, I find that workers were 25 percent more likely to accept penalty contracts, with no evidence of adverse or advantageous selection. Consistent with the existing literature, penalty contracts also increased performance on the job by 0.2 standard deviations. I outline extensions to the basic theory that are consistent with the main results, but argue that more research is needed on the long-term effects of penalty contracts if we want to understand why firms seem unwilling to use them.
    Keywords: loss aversion, reference points, framing, selection, Mechanical Turk
    JEL: D03 J41 D86
    Date: 2014–04
  15. By: Bicskei, Marianna; Lankau, Matthias; Bizer, Kilian
    Abstract: This article analyzes how the anticipation of peer-punishment affects cooperativeness in the provision of public goods under social identity. For this purpose we conduct one-shot public good games with induced social identity and implement in-group, out-group and random matching protocols. Our measure of cooperativeness is subjects' conditional contribution elicited via the strategy method, which allows for observing behavior contingent on every possible level of group members' cooperation. We demonstrate, firstly, that the social environment is a determinant of how the threat of peer-punishment influences cooperation. The strongest increase is clearly evident when subjects interact with members of different identities, which is especially the case for individuals who were initially categorized as freeriders. Secondly, anticipation of peer-punishment clearly eliminates the typically existing ingroup bias without punishment and renders out-group members to be as cooperative as ingroups members. Lastly, the results indicate that the institutions of peer-punishment and social identity may be complemented in order to raise subjects' cooperativeness. --
    JEL: C92 D03 D73 H41
    Date: 2014
  16. By: Möllerström, Johanna (Harvard University); Reme, Bjørn-Atle (Telenor Research, Oslo); Sørensen, Eric Ø. (NHH Norwegian School of Economics, Bergen)
    Abstract: We conduct a laboratory experiment where third-party spectators can redistribute resources between two agents, thereby offsetting the consequences of controllable and uncontrollable luck. Some spectators go to the limits and equalize all or no inequalities, but many follow an interior allocation rule previously unaccounted for by the fairness views in the literature. These interior allocators regard an agent’s choice as more important than the cause of her low income and do not always compensate bad uncontrollable luck. Instead, they condition such compensation on the agent’s decision regarding controllable luck exposure, even though the two types of luck are independent.
    Keywords: Fairness; Responsibility; Option luck; Brute luck; Experiment
    JEL: C91 D63 D81 H23
    Date: 2014–03–21

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