nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒05‒17
eighteen papers chosen by
Marco Novarese
Universita' del Piemonte Orientale Amedeo Avogadro

  1. Social preferences in the online laboratory: a randomized experiment By Jérôme Hergueux; Nicolas Jacquemet
  2. Economic Behavior under Alcohol Influence: An Experiment on Time, Risk, and Social Preferences By L. Corazzini; A. Filippin; P. Vanin
  3. Team Reasoning as a Guide to Coordination By Lahno, Amrei M.; Lahno, Bernd
  4. Ethical Consumption and Social Context: Experimental Evidence from Germany and the United States By Ulf Liebe; Veronika A. Andorfer; Patricia A. Gwartney; Jürgen Meyerhoff
  5. Reciprocal beliefs and out-group cooperation: evidence from a public good game By Brañas-Garza, Pablo; Kernohan, David; Oyediran, Olusegun; Rivas, M. Fernanda
  6. Fairness is Intuitive By Alexander W. Cappelen; Ulrik H. Nielsen; Bertil Tungodden; Jean-Robert Tyran; Erik Wengström
  7. Preferences for Data Privacy: Sharing Personal Information with Close and Distant Peers By Schudy, Simeon; Utikal, Verena
  8. An Experimental Examination of Compensation Schemes and Level of Effort in Differentiated Tasks By Hiromasa Takahashi; Junyi Shen; Kazuhito Ogawa
  9. Is There a Development Gap in Rationality? By Cappelen, Alexander W.; Kariv, Shachar; Sørensen, Erik Ø.; Tungodden, Bertil
  10. Do Information, Price, or Morals Influence Ethical Consumption? A Natural Field Experiment and Customer Survey on the Purchase of Fair Trade Coffee By Veronika A. Andorfer; Ulf Liebe
  11. Individual and Group Cheating Behavior: A Field Experiment with Adolescents By Julie Chytilova; Vaclav Korbel
  12. Workers' Participation in Wage Setting and Opportunistic Behavior: Evidence from a Gift-Exchange Experiment By Vanessa Mertins; Jörg Franke; Ruslan Gurtoviy
  13. Expectations as Reference Points: Field Evidence from Professional Soccer By Bjoern Bartling; Leif Brandes; Daniel Schunk
  14. "Autonomy-enhancing Paternalism" By Martin Binder; Leonhard K. Lades
  15. The behavioralist as tax collector: Using natural field experiments to enhance tax compliance By Michael Hallsworth; John List; Robert Metcalfe; Ivo Vlaev
  16. Is Soft Paternalism Ethically Legitimate? - The Relevance of Psychological Processes for the Assessment of Nudge-Based Policies By Mira Fischer; Sebastian Lotz
  17. The Effects of Personality Traits and Behavioral Characteristics on Schooling, Earnings, and Career Promotion By LEE SunYoun; OHTAKE Fumio
  18. Climate Change and Psychological Adaptation: A Behavioral Environmental Economics Approach By Aronsson, Thomas; Schöb, Ronnie

  1. By: Jérôme Hergueux (IEP Paris - Sciences Po Paris - Institut d'études politiques de Paris - Institut d'Études Politiques [IEP] - Paris - PRES Sorbonne Paris Cité - Fondation Nationale des Sciences Politiques [FNSP]); Nicolas Jacquemet (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université de Strasbourg - Université Nancy II)
    Abstract: Internet is a very attractive technology for the implementation of experiments, both in order to obtain larger and more diverse samples and as a field of economic research in its own right. This paper reports on an experiment performed both online and in the laboratory, designed to strengthen the internal validity of decisions elicited over the Internet. We use the same subject pool, the same monetary stakes and the same decision interface, and control the assignment of subjects between the Internet and a traditional university laboratory. We apply the comparison to the elicitation of social preferences in a Public Good game, a dictator game, an ultimatum bargaining game and a trust game, coupled with an elicitation of risk aversion. This comparison concludes in favor of the reliability of behaviors elicited through the Internet. We moreover find a strong overall parallelism in the preferences elicited in the two settings. The paper also reports some quantitative differences in the point estimates, which always go in the direction of more other-regarding decisions from online subjects. This observation challenges either the predictions of social distance theory or the generally assumed increased social distance in internet interactions.
    Keywords: Social experiment ; Field experiment ; Internet Methodology ; Randomized assignment
    Date: 2014
  2. By: L. Corazzini; A. Filippin; P. Vanin
    Abstract: We report results from an incentivized laboratory experiment to provide controlled evidence on the causal effects of alcohol consumption on risk preferences, time perception and altruism. Our design allows disentangling the pharmacological effects of alcohol intoxication from those mediated by expectations, as we compare behaviors of three groups of subjects: those participating to an experiment with no reference to alcohol, those exposed to the possibility of consuming alcohol but assigned to a placebo and those having effectively consumed alcohol. Once randomly assigned to one treatment, subjects were administered a series of consecutive economic tasks, being the sequence kept constant across treatments. After controlling for both the willingness to pay and the potential misperception of probabilities as elicited in the experiment, we do not detect any effect of alcohol in depleting subjects’ risk tolerance. On the contrary, we find that alcohol intoxication increases impatience. Moreover, we find that alcohol makes subjects less generous as we detect a negative relationship between the blood alcohol concentration and the amount of money donated to NGOs.
    JEL: D03 I10 C91
    Date: 2014–05
  3. By: Lahno, Amrei M.; Lahno, Bernd
    Abstract: A particular problem of traditional Rational Choice Theory is that it cannot explain equilibrium selection in simple coordination games. In this paper we analyze and discuss the solution concept for common coordination problems as incorporated in the theory of Team Reasoning (TR). Special consideration is given to TR's concept of opportunistic choice and to the resulting restrictions in using private information. We report results from a laboratory experiment in which teams were given a chance to coordinate on a particular pattern of behavior in a sequence of HiLo games. A modification of the stage game offered opportunities to improve on the team goal through changing this accustomed pattern of behavior. Our observations throw considerable doubt on the idea of opportunistic team reasoning as a guide to coordination. Contrary to what TR would predict, individuals tend to stick to accustomed behavioral patterns. Moreover, we find that individual decisions are at least partly determined by private information not accessible to all members of a team. Alternative theories of choice, in particular cognitive hierarchy theory may be more suitable to explain the observed pattern of behavior.
    Keywords: team reasoning; collective agency; coordination; opportunistic choice; laboratory experiment
    JEL: C91 C92 D03 D70
    Date: 2014–04
  4. By: Ulf Liebe; Veronika A. Andorfer; Patricia A. Gwartney; Jürgen Meyerhoff
    Abstract: This research examines the role of social context in ethical consumption, specifically, the extent to which anonymity and social control influence individuals' decisions to purchase organic and Fair Trade coffee. Our research design overcomes biases of prior research by combining framing and discrete choice experiments in a survey. We systematically vary coffee growing method (organic or not), import status (Fair Trade or not), flavor, and price across four social contexts that vary in degree of anonymity and normative social control. The social contexts are buying coffee online, in a large grocery store, in a small neighborhood shop, and for a meeting of a human rights group. Subjects comprise 1,103 German and American undergraduate students. We find that social context indeed influences subjects' ethical consumer decisions, especially in situations with low anonymity and high social control. In addition, gender, coffee buying, and subjective social norms trigger heterogeneity regarding stated ethical consumption and the effects of social context. These results suggest previous research has underestimated the relevance of social context for ethical consumption and overestimated altruistic motives of ethical consumers. Our study demonstrates the great potential of discrete choice experiments for the study of social action and decision making processes in sociology.
    Keywords: ethical consumption, choice experiment, framing effect, social context, social norms
    Date: 2014–04–26
  5. By: Brañas-Garza, Pablo; Kernohan, David; Oyediran, Olusegun; Rivas, M. Fernanda
    Abstract: This experimental study examines latent racial prejudice toward out-groups among 152 Spanish college students when they make guesses about the contributions of others in a public good game. Prejudice is examined firstly from the perspective of a two-sided, implicitly-held belief toward any of the specified out-groups: Africans, Asians, Latin Americans and Western. Secondly, from an ordinal perspective of highest negative (positive) prejudice. Lastly models of racial beliefs are fitted for the four out-groups. Results suggest subjects expect Africans and Latin Americans to be less cooperative, but Asians and Western to be more cooperative, than they actually are. We also find that racial prejudices do not have unique determinants across the out-groups under study, nor do the determining factors work in similar directions.
    Keywords: Beliefs, Implicit Cognition, Multiculturalism, Prejudice, Public Good Game, Stereotypes
    JEL: C91 H41 J15
    Date: 2014–05–13
  6. By: Alexander W. Cappelen (Department of Economics, Copenhagen University); Ulrik H. Nielsen (Department of Economics, Copenhagen University); Bertil Tungodden (Norwegian School of Economics); Jean-Robert Tyran (Department of Economics, Copenhagen University); Erik Wengström (Department of Economics, Copenhagen University)
    Abstract: In this paper we provide new evidence showing that fair behavior is intuitive to most people. We find a strong association between a short response time and fair behavior in the dictator game. This association is robust to controls that take account of the fact that response time might be affected by the decision-maker's cognitive ability and swiftness. The experiment was conducted with a large and heterogeneous sample recruited from the general population in Denmark. We find a striking similarity in the association between response time and fair behavior across groups in the society, which suggests that the predisposition to act fairly is a general human trait.
    Keywords: Response Time, Dictator Game, Experiment, Fairness
    JEL: C90 D03 D60
    Date: 2014–04–02
  7. By: Schudy, Simeon; Utikal, Verena
    Abstract: We provide evidence that people have preferences for data privacy and show that these preferences partly reflect people’s interest in controlling who receives their private information. Participants of an experiment face the decision to share validated personal information with peers. We compare preferences for sharing potentially embarrassing information (body weight and height) and non-embarrassing information (address data) with geographically proximate or distant peers. We find that i) participants are willing to give up substantial monetary amounts in order to keep both types of information private, ii) data types are valued differently, and iii) prices for potentially embarrassing information tend to be higher for geographically proximate than distant peers.
    Keywords: preferences; data privacy; information transmission; experiment
    JEL: C91 D80 D82
    Date: 2014–05
  8. By: Hiromasa Takahashi (Faculty of International Studies, Hiroshima City University, Japan); Junyi Shen (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Kazuhito Ogawa (Faculty of Sociology, Kansai University, Japan)
    Abstract: We examine the influence of different compensation schemes on exertion of effort for differentiated tasks. The first type of task is assumed to be boring and has no intrinsic motivation, while the second is assumed to be interesting, and has a higher intrinsic motivation. The results are as follows: (1) in the first task, standard economic theory, which claims higher pay should result in higher effort, does not hold. (2) Standard economic theory holds for the second task, which predicts that the higher the incentive, the more effort one exerts, and achieves a higher performance on average.
    Keywords: Real effort experiment, Intrinsic motivation, Loss aversion, Fixed pay, Incentive pay
    JEL: M52 J33
    Date: 2014–05
  9. By: Cappelen, Alexander W. (Dept. of Economics, Norwegian School of Economics and Business Administration); Kariv, Shachar (University of California, Berkeley); Sørensen, Erik Ø. (Dept. of Economics, Norwegian School of Economics and Business Administration); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: We report an experimental test of the four touchstones of rationality in choice under risk – utility maximization, stochastic dominance, expected-utility maximization and small-stakes risk neutrality – with students from one of the best universities in the United States and one of the best universities in Africa, the University of Dar es Salaam. Although the US and the Tanzanian subjects come from different backgrounds and face different economic prospects, they are united by being among the most able in their societies. Importantly, many of whom will exercise an outsized influence over economic and political affairs. We find very small or no significant differences between the two samples in the degree of rationality according to a number of standard economic measures. An alternative approach is to take cognitive ability (IQ) as a proxy for economic rationality. We show that a canonical IQ test indicates a much larger development gap in rationality relative to our economic tests.
    Keywords: Development; rationality; revealed preference; stochastic dominance; expected utility; risk aversion; cognitive ability; experiment.
    JEL: D01 D03 D81 O12
    Date: 2014–01–28
  10. By: Veronika A. Andorfer; Ulf Liebe
    Abstract: We address ethical consumption using a natural field experiment on the actual purchase of Fair Trade (FT) coffee in three supermarkets in Germany. Based on a quasi-experimental before-and-after design the effects of three different treatments - information, 20% price reduction, and a moral appeal - are analyzed. Sales data cover actual ethical purchase behavior and avoid problems of social desirability. But they offer only limited insights into the motivations of individual consumers. We therefore complemented the field experiment with a customer survey that allows us to contrast observed (ethical) buying behavior with self-reported FT consumption. Results from the experiment suggest that only the price reduction had the expected positive and statistically significant effect on FT consumption. In the customer survey, however, we find that the personal norm has the strongest effect on both self-reported and observed purchases of FT products.
    Keywords: ethical consumption, Fair Trade, natural field experiment, survey, observed and self-reported behavior
    Date: 2014–04–26
  11. By: Julie Chytilova (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Vaclav Korbel (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Dishonest activities with negative consequences for others and society are often undertaken by individuals as well as groups of people. In this paper, we use a field experiment among students aged 11-16 years to study whether there is a difference between individual and group cheating behavior. We find that students cheat, but not to the maximum extent possible. On average, groups are more inclined to cheat than individuals, but there are important differences across age. While there is no evidence of dishonesty among younger individuals, older individuals as well as younger and older groups cheat and do so to a similar extent. The way in which groups are formed does not seem to matter.
    JEL: C93 D63 D70
    Date: 2014–03
  12. By: Vanessa Mertins (Institute for Labour Law and Industrial Relations in the EU, University of Trier); Jörg Franke (University of Dortmund (TU), Department of Economics); Ruslan Gurtoviy (University of Trier)
    Abstract: Our study analyzes the consequences of workers' participation in the wage setting process on effort exertion. The experimental design is based on a modified giftexchange game where the degree of workers’ involvement in the wage setting process is systematically varied among the workers. The experimental data reveals that workers' participation leads actually to a decline in effort exertion which can be explained by negative reciprocity of the respective worker. These results put some recently observed positive effects from workers' participation in experimental labor markets into perspective and are more in line with the ambiguous results from empirical studies.
    Keywords: participation, labor market, gift-exchange game, personnel economics, reciprocity
    JEL: C72 C91 J33 L23 M52 M55
    Date: 2014–03
  13. By: Bjoern Bartling (Department of Economics, University of Zurich, Swizerland); Leif Brandes (Warwick Business School, University of Warwick, UK); Daniel Schunk (Department of Economics, Johannes Gutenberg-Universitaet Mainz, Germany)
    Abstract: We show that professional soccer players and their coaches exhibit reference-dependent behavior during matches. Controlling for the state of the match and for unobserved heterogeneity, we show on a minute-by-minute basis that players breach the rules of the game, measured by the referee’s assignment of cards, significantly more often if their teams are behind the expected match outcome, measured by pre-play betting odds of large professional bookmakers. We further show that coaches implement significantly more offensive substitutions if their teams are behind expectations. Both types of behaviors impair the expected ultimate match outcome of the team, which shows that our findings do not simply reflect fully rational responses to referencedependent incentive schemes of favorite teams falling behind. We derive these results in a data set that contains more than 8’200 matches from 12 seasons of the German Bundesliga and 12 seasons of the English Premier League.
    Keywords: reference points, expectations, experience, high stakes, competition
    JEL: C23 D03 D81 D84
    Date: 2014–04–17
  14. By: Martin Binder; Leonhard K. Lades
    Abstract: Behavioral economics has shown that individuals sometimes make decisions that are not in their best interests. This insight has prompted calls for behaviorally informed policy interventions popularized under the notion of "libertarian paternalism." This type of "soft" paternalism aims at helping individuals without reducing their freedom of choice. We highlight three problems of libertarian paternalism: the difficulty of detecting what is in the best interest of an individual, the focus on freedom of choice at the expense of a focus on autonomy, and the neglect of the dynamic effects of libertarian-paternalistic policy interventions. We present a form of soft pa-ternalism called "autonomy-enhancing paternalism" that seeks to constructively remedy these problems. Autonomy-enhancing paternalism suggests using insights from subjective well-being research in order to determine what makes individuals better off. It imposes an additional con-straint on the set of permissible interventions highlighting the importance of autonomy in the sense of the capability to make critically reflected (i.e., autonomous) decisions. Finally, it acknowledges that behavioral interventions can change the strength of individual decision-making anomalies over time as well as influence individual preference learning. We illustrate the differences between libertarian paternalism and autonomy-enhancing paternalism in a sim-ple formal model in the context of optimal sin nudges.
    Keywords: Libertarian Paternalism; Behavioral Economics; Subjective Well-Being; Autonomy; Preference Learning; Welfare Economics
    JEL: B52 D18 D63 I18
    Date: 2014–05
  15. By: Michael Hallsworth; John List; Robert Metcalfe; Ivo Vlaev
    Abstract: Tax collection problems date back to the earliest recorded history of mankind. This paper begins with a simple theoretical construct of paying (rather than declaring) taxes, which we argue has been an overlooked aspect of tax compliance. This construct is then tested in two large natural field experiments. Using administrative data from more than 200,000 individuals in the UK, we show that including social norms and public goods messages in standard tax payment reminder letters considerably enhances tax compliance. The field experiments increased taxes collected by the Government in the sample period and were cost-free to implement, demonstrating the potential importance of such interventions in increasing tax compliance.
    Date: 2014
  16. By: Mira Fischer (University of Cologne); Sebastian Lotz (Stanford University)
    Abstract: In this article we develop a taxonomy of behavioral policy measures proposed by Thaler and Sunstein (2008). Based on this taxonomy, we discuss the ethical legitimacy of these measures. First, we explain two common reservations against nudges (choice architecture) rooted in utilitarian and Kantian ethics. In addition to wellbeing, we identify freedom of action and freedom of will (autonomy) as relevant ethical criteria. Then, using practical examples, we develop a taxonomy that classifies nudges according to the psychological mechanisms they use and separately discuss the legitimacy of several types of behavioral policy measures. We hope to thereby make a valuable contribution to the debate on the ethical legitimacy of behavioral policy making.
    Date: 2014–05–09
  17. By: LEE SunYoun; OHTAKE Fumio
    Abstract: By analyzing the Japanese and U.S. survey data, this study investigates whether non-cognitive skills, as measured by Big 5 personality traits and behavioral characteristics indicated by risk aversion rate, time discount rate, and (over) confidence, explain the variation in educational and labor market outcomes. The obtained results indicate that non-cognitive skills, as well as behavioral characteristics, account for a significant portion in explaining the variation in schooling, wages, and career promotion. Some interesting country differences, particularly in educational attainment, are found in agreeableness and consciousness, which may suggest the existence of country-specific, non-cognitive determinants of educational success. With respect to labor market outcomes, in both Japan and the United States, conscientiousness seems to contribute to male earnings, whereas extraversion and emotional stability are more important predictors of female earnings. For career promotion, extraversion is an important determinant for the probability of being promoted to a management position among males in both countries. The overall findings suggest that personality traits are associated with educational and career success to different degrees between countries and genders.
    Date: 2014–05
  18. By: Aronsson, Thomas (Department of Economics, Umeå School of Business and Economics); Schöb, Ronnie (School of Business and Economics)
    Abstract: Economic models of climate policy (or policies to combat other environmental problems) typically neglect psychological adaptation to changing life circumstances. People may adapt or become more sensitive, to different degrees, to a deteriorated environment. The present paper addresses these issues in a simple model of tax policy to combat climate change and elaborates on the consequences for optimal climate policies, and argues from a normative point of view that psychological adaptation needs to be taken into account by a pure welfarist government, which aims at internalizing an intertemporal externality.
    Keywords: Behavioral environmental economics; climate change; intertemporal externalities; adaptation; sensitization; taxation
    JEL: D03 D61 D91 H21
    Date: 2014–05–06

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