nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒05‒24
fifteen papers chosen by
Marco Novarese
Universita' del Piemonte Orientale Amedeo Avogadro

  1. The Future in Mind: Aspirations and Forward-Looking Behaviour in Rural Ethiopia By Tanguy Bernard; Stefan Dercon; Kate Orkin; Alemayehu Seyoum Taffesse
  2. Risk of loss towards an agent based model By Simone Pace
  3. Do Consumers Pay More Using Debit Cards than Cash? An Experiment By Runnemark, Emma; Hedman, Jonas; Xiao, Xiao
  4. Beware of Popular Kids Bearing Gifts: A Framed Field Experiment By Chen, Jingnan; Houser, Daniel; Montinari, Natalia; Piovesan, Marco
  5. Cognitive Dissonance, Confirmatory Bias and Inadequate Information Processing: Evidence from Experimental Auctions By Cao, Ying; Just, David R.; Wansink, Brian
  6. The relationship between objective and subjective wealth is moderated by financial control and mediated by money anxiety By Gasiorowska, Agata
  7. The Behavioralist as Nutritionist: Leveraging Behavioral Economics To Improve Child Food Choice and Consumption By John A. List; Anya Savikhin Samek
  8. Preferences and beliefs in a sequential social dilemma: A within-subjects analysis By Blanco, Mariana; Engelmann, Dirk; Koch, Alexander K.; Normann, Hans-Theo
  9. Loss and Other-Regarding Preferences: Evidence From Dictator Game By Armenak Antinyan
  10. Experience in Public Goods Experiments By Conte, Anna; Levati, Vittoria; Montinari, Natalia
  11. Predictable and Predictive Emotions: Explaining Cheap Signals and Trust Re-Extension By Eric Schniter; Roman M. Sheremeta
  12. Life Transitions and Food Choice Behavior in Older Adults: How Changes in Social Relationships are Linked to Changes in Brand Preferences By Reitmeier, Martina; Roosen, Jutta
  13. Organizational coordination and costly communication with boundedly rational agents By Dietrichson, Jens; Jochem, Torsten
  14. Food Choices under Stress: Considering Internet Usage and Social Support By Drescher, Larissa S.; Hasselbach, Johanna
  15. Peers at work: From the field to the lab By van Veldhuizen, Roel; Oosterbeek, Hessel; Sonnemans, Joep

  1. By: Tanguy Bernard; Stefan Dercon; Kate Orkin; Alemayehu Seyoum Taffesse
    Abstract: Poor people often do not make investments, even when returns are high. One possible explanation is that they have low aspirations and form mental models which ignore some options for investment. This paper reports on findings of an innovative experiment to test this in rural Ethiopia. Firstly, individuals were randomly invited to watch documentaries about people from similar communities who had succeeded in agriculture or small business, without help from government or NGOs. A placebo group watched an Ethiopian entertainment programme and a control group were simply surveyed. Secondly, the number of invitees was varied by village to assess the importance of peer effects in the formation of aspirations. Six months after the screening of the documentaries, aspirations had improved among treated individuals but did not change in the placebo or control groups. Effects were larger for those with higher aspirations at baseline. We also find evidence of treatment effects on savings and credit behaviour, children’s school enrolment and investments in children’s schooling, suggesting that changes in aspirations can translate into changes in forward-looking behaviour. There are also positive treatment effects on a set of related measures from psychology and sociology, including a measure of locus of control, which theory predicts should behave in similar ways to aspirations. We also find that peer effects result in further impact on educational spending and induce more work and less leisure. That a one-hour documentary shown six months earlier induces such actual behavioural change offers challenging and promising areas for further research and the design of poverty-related interventions.
    Keywords: aspirations, expectations, future-oriented behaviour, media interventions
    JEL: D03 I31
    Date: 2014
  2. By: Simone Pace (Dipartimento di Filosofia della Scienza ed Epistemologia, University of Pavia)
    Abstract: The financial world is basically divided in two: on one hand there are the experts, on the other hand the uninitiated. And, very often, it is a system that works: in very few (and very crazy) decided in fact to heal themselves, while the majority supports this division between secular and experts or specialists, going to the doctor in case of an illness, and getting a diagnosis and a cure that will put out the profane state of malaise in exchange for a financial benefit. The strange thing is, though, that in the economy not doing so. To better present the matter experts and laymen will consider them for what they have in common, their basic human and what separates them, the knowledge of the object. I will try to evaluate the effect of a greater knowledge on how to manage risk, as it is called the unexpected in the economy, and decisions arising therefrom, profane than the alternative. Experts and laymen in this chapter represent two different ways of approaching complexity: a top-down approach, with its strategy of op-posing the complexity as much complexity in the form of an elaborate theoretical framework, and a bottom-up approach, with the respective strategy of managing complexity through simplicity (which is, basi-cally, the daughter of complexity, as we'll see). Using the concept of epistemic arrogance, stemming from econom-ic’s practice of a science in which the points of view and the currents are sufficiently numerous to very often force themselves to such arro-gance as a defense mechanism, we’ll see its effects as a dynamic of authority-power, laying on human docility. This paper is substantially to be understood as an attempt to adapt the ecological agent-based modeling to a field that has, in my opinion, all papers in order to show, at least in theory (but I will try to use, whenever I can be, practical research, based on Nobel laureate Daniel Kahneman's research and sprung up in recent years in behavioral economics) the potential, from the philosophical point of view of epistemology of complexity, for a greater understanding and exploitation of the risk, providing major chances of comprehension and exploitation of risk intended as an effect of emergence, the main com-plex system’s feature. So I’ll see that there is, indeed, a constructive chance from the con-venience of the secular model of risk management, trying to re-evaluate the way it consciously ruling fallacious to proceed; this has been made trying to opposing, at the use of a highly complex knowledge making use of logical-mathematical sophistication to its progress, a hard-wired heuristic system, that is based on the principle of less-is-more, a source of transparency, robustness, and cognitive fluidity: characters whose importance is too often overlooked, especially in econometric’s research.
    Keywords: Agent-based economics, heuristics, qualitative economics
    JEL: B49
    Date: 2014–05
  3. By: Runnemark, Emma (Department of Economics, Lund University); Hedman, Jonas (Department of IT Management, Copenhagen Business School); Xiao, Xiao (Department of IT Management, Copenhagen Business School)
    Abstract: We conduct an incentivized experiment to test whether the willingness to pay is higher for debit cards compared to cash for three consumer products. Our findings support this conjecture also after controlling for cash availability, spending type, price familiarity and consumption habits of the products. The evidence thus suggests that different representations of money matters for consumer behavior.
    Keywords: payment methods; debit cards; cash; willingness-to-pay
    JEL: D03 D10 E42
    Date: 2014–05–21
  4. By: Chen, Jingnan (ICES, Department of Economics, George Mason University); Houser, Daniel (ICES, Department of Economics, George Mason University); Montinari, Natalia (Department of Economics, Lund University); Piovesan, Marco (Department of Economics, University of Copenhagen)
    Abstract: The literature on pro-social behavior shows that older children are more generous than younger children; however, the level of individual generosity is heterogeneous even between children of the same age. This paper investigates whether a child’s popularity affects a child’s generosity. Our participants – 231 children, six to twelve years old – decide how many of their four colored wristbands they want to share with another anonymous child. We manipulate the visibility of this decision: in treatment Public, the decisions are revealed to the entire class at the end of the game, whereas in treatment Private children’s decisions remain secret. In addition, we elicited each child’s network of friends using an innovative “seating map” mechanism. Our results reveal that more popular children are more generous in Public than Private decision environments, while less popular children behave similarly in both cases. Moreover, older children in Public display greater generosity than (i) older children in Private and (ii) younger children in either Public or Private. Finally, in Public, older and more popular children share more than less popular older children, and more than younger children regardless of popularity; whereas, in Private there is no effect of popularity on children of any age.
    Keywords: popularity; children; field experiment; public decision making; pro-social behavior
    JEL: C93 J13
    Date: 2014–05–21
  5. By: Cao, Ying; Just, David R.; Wansink, Brian
    Abstract: Using psychological terms such as cognitive dissonance and confirmation bias, this study reveals how individual consumers inadequately process (food safety) information, pay limited attention to signals, and make purchase decisions that are bias towards their initial choices. While it is expected that reading extra information about potential risk associated with the food decreases consumers' willingness to pay (WTP), the magnitude of the impact varies across individuals. In general, consumer's judgment and information processing depend a lot on their initial beliefs or consumption status. They tend to use higher bidding prices to justify previous behaviors and selectively pay attention to information in favor of their initial choices. Using an incentive compatible auction mechanism, this study elicited consumers' WTP under different informational settings. Results showed that consumers bid much higher when they chose to commit to food items (treatment) than when they were randomly assigned (control), suggesting cognitive dissonance. On average, the bidding premium was about 13 cents (roughly 30%) higher for low-risk food item and 30 cents (almost 60%) higher for high-risk item. The bidding premiums were further enlarged as food safety information was revealed to consumers. Confirmatory bias hypothesis was supported by the finding that those who made commitment earlier were more reluctant to change the bids despite of increased risk perceptions. In terms of market responses, due to psychological biases among consumers, demand curves were less possible to shift down under food safety risk. Results in this study implied that consumers were less responsive to public information due to their existing habits. Extra strategies would be needed to increase the efficiency of public communication to promote health.
    Keywords: Cognitive Dissonance, Conrmatory Bias, Risk Perception, Self-Justication, Consumer/Household Economics, Institutional and Behavioral Economics, D03, D12, D44,
    Date: 2014–04
  6. By: Gasiorowska, Agata
    Abstract: Prior research has showed that the subjective perception of objective wealth might be affected by various individual difference variables, such as one’s love of money, level of aspirations, and materialistic inclinations. This paper examines a model of subjective wealth that controls attitudes toward money and objective wealth. Subjective wealth has been operationalized as a combination of the assessment of financial situation, the ability to make ends meet and perceived adequacy of income to fulfill needs and wants. Objective wealth has been captured by personal net income as well as household income. Results show that two dimensions of money attitudes affect the subjective perception of objective wealth. Individuals' perceived financial control (the ability to budget, monitor, and control their money) serves as a moderator for the relationship between objective and subjective wealth: The relationship between the two is stronger for individuals high in financial control and planning than for those low. Furthermore, money anxiety (worry and indecisiveness regarding money-related issues) is negatively related to objective measures of wealth and its subjective evaluation, and partially mediates the objective–subjective wealth relationship.
    Keywords: income, money attitudes, objective wealth, subjective wealth, wealth perception
    JEL: D12 D14 D31
    Date: 2014–05–06
  7. By: John A. List; Anya Savikhin Samek
    Abstract: Childhood obesity has reached epidemic proportions in the U.S., with now almost a third of children ages 2-19 deemed overweight or obese. In this study, we leverage recent findings from behavioral economics to explore new approaches to tackling one aspect of childhood obesity: food choice and consumption. Using a field experiment where we include more than 1,500 children, we report several key insights. First, we find that individual incentives can have large influences: in the control, only 17% of children prefer the healthy snack, whereas the introduction of small incentives increases take-up of the healthy snack to roughly 75%, more than a four-fold increase. There is some evidence that the effects continue after the treatment period, consistent with a model of habit formation. Second, we find little evidence that the framing of incentives (loss versus gain) matters. While incentives work, we find that educational messaging alone has little influence on food choice. Yet, we do observe an important interaction effect between messaging and incentives: together they provide an important influence on food choice. For policymakers, our findings show the power of using incentives to combat childhood obesity. For academics, our approach opens up an interesting combination of theory and experiment that can lead to a better understanding of theories that explain healthy decisions and what incentives can influence them.
    JEL: C93 I15
    Date: 2014–05
  8. By: Blanco, Mariana; Engelmann, Dirk; Koch, Alexander K.; Normann, Hans-Theo
    Abstract: In empirical analyses of games, preferences and beliefs are typically treated as independent. However, if beliefs and preferences interact, this may have implications for the interpretation of observed behavior. Our sequential social dilemma experiment allows us to separate different interaction channels. When subjects play both roles in such experiments, a positive correlation between first- and second-mover behavior is frequently reported. We find that the observed correlation primarily originates via an indirect channel, where second-mover decisions influence beliefs through a consensus effect, and the first-mover decision is a best response to these beliefs. Specifically, beliefs about second-mover cooperation are biased toward own second-mover behavior, and most subjects best respond to stated beliefs. However, we also find evidence for a direct, preference-based channel. When first movers know the true probability of second-mover cooperation, subjects' own second moves still have predictive power regarding their first moves. --
    Keywords: Beliefs,consensus effect,social dilemma,experimental economics
    JEL: C72 C90
    Date: 2014
  9. By: Armenak Antinyan (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: The paper aims at studying other-regarding preferences of decision makers in the domain of losses. For this purpose the framework of the Dictator Game is adopted, with two research questions under investigation. First, how will the dictator divide the pie with an anonymous recipient, after a bi-directional loss of equal amount? Second, how will the dictator divide the pie with a poor recipient from a third world country after a bidirectional loss, where the loss of the recipient is bigger than that of the dictator? Interestingly, the data illustrate that other-regarding motives of the dictators do not vanish in any of the treatments in which losses are introduced. The results are explained from the perspective of power-dependence relationship between the dictator and the recipient (Handgraaf et al., 2008, van Dijk and Vermunt, 2000).
    Keywords: Dictator Games, Loss, Other-Regarding Preferences
    JEL: C90 D63 D64 I30
    Date: 2014–03
  10. By: Conte, Anna (Max Planck Institute of Economics); Levati, Vittoria (University of Verona, Department of Economics); Montinari, Natalia (Department of Economics, Lund University)
    Abstract: We use information on students' past participation in economic experiments, as stored in our database, to analyze whether behavior in public goods games is affected by experience (i.e., previous participation in social dilemma-type experiments) and history (i.e., participation in experiments of a different class than the social dilemma). We have three main results. First, at the aggregate level, the amount subjects contribute and expect others to contribute decrease with experience. Second, a mixture model reveals that the proportion of unconditional cooperators decreases with experience, while that of selfish individuals increases. Finally, history also influences behavior, although to a lesser extent than experience. Our findings have important methodological implications for researchers, who are urged to control for subjects' experience and history in their experiments if they want to improve the external validity and replicability of their results.
    Keywords: Public goods experiments; Social preferences; Mixture models; Experience; History
    JEL: C35 C51 C72 H41
    Date: 2014–05–18
  11. By: Eric Schniter (Economic Science Institute, Chapman University); Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and Economic Science Institute, Chapman University)
    Abstract: Despite normative predictions from economics and biology, unrelated strangers can often develop the trust necessary to reap gains from one-shot economic exchange opportunities. This appears to be especially true when declared intentions and emotions can be cheaply communicated. Perhaps even more puzzling to economists and biologists is the observation that anonymous and unrelated individuals, known to have breached trust, often make effective use of cheap signals, such as promises and apologies, to encourage trust re-extension. We used a pair of trust games with one-way communication and emotion surveys to investigate the role of emotions in regulating the propensity to message, apologize, re-extend trust, and demonstrate trustworthiness. This design allowed us to observe the endogenous emergence and natural distribution of trust-relevant behaviors, remedial strategies used by promise-breakers, their effects on behavior, and subsequent outcomes. We found that emotions triggered by interaction outcomes are predictable and also predict subsequent apology and trust re-extension. The role of emotions in behavioral regulation helps explain why messages are produced, when they can be trusted, and when trust will be re-extended.
    Keywords: emotions, promises, apologies, trust game, reciprocity, experiments
    Date: 2014
  12. By: Reitmeier, Martina; Roosen, Jutta
    Abstract: Despite their growing economic influence, older consumers are often neglected as a target group because they are considered brand loyal and not flexible in their consumption habits. However, previous research suggests that life transitions may be associated with changes in older consumers’ behavior. To investigate whether late-life transitions predict a greater likelihood of changing food related brand preferences, we conducted two studies, examining four focus groups (preliminary study) and analyzing real purchase data of German consumers from 2004 to 2008 (main study). Our findings provide empirical evidence that life transitions (e.g., transition to retirement) increase the likelihood of changes in food-related brand preferences for older consumers. These findings have implications for policy makers and marketing practitioners.
    Keywords: Health Economics and Policy, Institutional and Behavioral Economics,
    Date: 2014
  13. By: Dietrichson, Jens (Department of Economics, Lund School of Economics and Management, Lund University); Jochem, Torsten (Faculty of Economics and Business, University of Amsterdam)
    Abstract: How does costly communication affect organizational coordination? This paper develops a model of costly communication based on the weakest-link game and boundedly rational agents. Solving for the stochastically stable states, we find that communication increases the possibilities for efficient coordination compared to a setting where agents cannot communicate. But as agents face a trade-off between lowering the strategic uncertainty for the group and the costs of communication, the least efficient state is still the unique stochastically stable one for many parameter values. Simulations show that this is not just a long run phenomena, the stochastically stable state is the most frequent outcome also in the short run. Making communication mandatory induces efficient coordination, whereas letting a team leader handle communication increases efficiency when the leader expects others to follow and has enough credibility. The results are broadly consistent with recent experimental evidence of communication in weakest-link games.
    Keywords: Organizational coordination; Commmunication; Stochastic stability; Bounded rationality; Simulation
    JEL: C73 D23 L22 L23
    Date: 2014–04–09
  14. By: Drescher, Larissa S.; Hasselbach, Johanna
    Abstract: It is a known fact that stress negatively affects food choices. Consequentially, this paper analyzes three different research questions using a sample of 330 international students in Germany. Firstly, it is observed if stress affects students’ motivations to eat, i.e. if it triggers changes in the motivation behind food choices. Results show that this is not the case. Secondly, it is tested if social support acts as a buffer on the relationship between stress and healthy eating, similarly to the model proposed by Lakey and Cohen (2000), where social support buffers the negative consequences of stress on health. Specifically, it is tested whether social support affects Internet usage and subsequently if Internet usage is a coping strategy and eases the negative consequences of stress on healthy eating. Taking into account that there is no effect of social support on Internet usage and since Internet usage does not moderate the relationship between stress and healthy eating, the paper continues to show that instead social support is a moderator for the relationship between stress and healthy eating. Interestingly however, Internet usage has a direct and positive relationship with healthy eating, i.e. the more the Internet is used the healthier do students eat. Thirdly, the paper elaborates on the question if students in Germany use the Internet as an information source for diet and health related problems for example on social media sites and additionally if the use of this information did change their dietary behavior. Results show that people with high dietary information search tendencies are 1.76 times more likely to change their diets due to the information found online. The results of this study are important for public policy measures dealing with student health.
    Keywords: Stress, healthy eating, Food Choice Motives, Internet usage, social support, comfort eating, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Health Economics and Policy,
    Date: 2014
  15. By: van Veldhuizen, Roel; Oosterbeek, Hessel; Sonnemans, Joep
    Abstract: In an in influential study, Mas and Moretti (2009) found that worker effort is positively related to the productivity of workers who see him, but not workers who do not see him. They interpret this as evidence that social pressure can reduce free riding. In this paper we report an attempt to reproduce the findings of Mas and Moretti in a lab experiment. Lab experiments have the advantage of being able to shut down alternative channels through which workers can influence the productivity of colleagues whom they observe. Although the subjects in our experiment are aware of the productivity of others and although there is sufficient scope for subjects to vary their productivity, we find no evidence of the type of peer effects reported by Mas and Moretti. This suggests that their findings are less generalizable than has been assumed. --
    Keywords: peer effects,experiment,laboratory experiment
    JEL: C91 J24
    Date: 2014

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