nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒07‒21
six papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Managing Intrinsic Motivation in a Long-Run Relationship By Kfir Eliaz; Ran Spiegler
  2. Detecting false positives in experimental auctions: A case study of projection bias in food consumption By Teresa Briz; Andreas C. Drichoutis; Rodolfo M. Nayga, Jr
  3. Anchoring or Loss Aversion? Empirical Evidence from Art Auctions By Kathryn Graddy; Lara Loewenstein; Jianping Mei; Mike Moses; Rachel A J Pownall
  4. If I close my eyes, nobody will get hurt. The effect of ignorance on performance in a real effort experiment By Agne Kajackaite
  5. Giving and promising gifts: experimental evidence on reciprocity from the field By J. Michelle Brock; Andreas Lange; Kenneth L. Leonard
  6. Getting a healthy start? Nudge versus economic incentives By Rachel Griffith; Sarah Smith; Stephanie von Hinke Kessler Scholder

  1. By: Kfir Eliaz (Tel Aviv University, Eitan Berglas School of Economics; University of Michigan, Economics Department); Ran Spiegler (Tel Aviv University, Eitan Berglas School of Economics; Centre for Macroeconomics (CFM))
    Abstract: We study a repeated principal-agent interaction, in which the principal offers a "spot" wage contract at every period, and the agent’s outside option follows a Markov process with i.i.d shocks. If the agent rejects an offer, the two parties are permanently separated. At any period during the relationship, the agent is productive if and only if his wage does not fall below a "reference point" (by more than an infinitesimal amount), which is defined as his lagged-expected wage in that period. We characterize the game’s unique subgame perfect equilibrium. The equilibrium path exhibits an aspect of wage rigidity. The agent’s total discounted rent is equal to the maximal shock value.
    Date: 2014–06
  2. By: Teresa Briz (Departamento de Econom a, E.T.S.Ingenieros Agr onomos, Universidad Polit ecnica de Madrid, Madrid,); Andreas C. Drichoutis (Department of Agricultural Economics, Agricultural University of Athens, Greece); Rodolfo M. Nayga, Jr (Department of Agricultural Economics & Agribusiness, Division of Agriculture, University of Arkansas, Fayetteville, AR 72701, USA,)
    Abstract: In this paper we argue that valuable information can be conveyed by looking at data coming from the training rounds of experimental auctions. As a case study, we use data from an experiment that seeks to elaborate on the mediating role of mood states on projection bias. Following a mood induction procedure, subjects are found to bid more under negative mood (as compared to positive mood) for products that are delivered in the future but bid less under negative mood for products that are delivered in present time. We show that if one had neglected insights gained from the training auction data, the researcher would have fallen prey to a case of a false positive result.
    Keywords: projection bias, experimental auctions, type I error, false positive
    JEL: C12 C90
    Date: 2014
  3. By: Kathryn Graddy (Department of Economics, International Business School, Brandeis University); Lara Loewenstein (Brandeis University); Jianping Mei (Cheung Kong Graduate School of Business); Mike Moses (Beautiful Asset Advisors LLC); Rachel A J Pownall (Maastricht University and Tilburg University)
    Abstract: We find evidence for the behavioral biases of anchoring and loss aversion. We find that anchoring is more important for items that are resold quickly, and we find that the effect of loss aversion increases with the time that a painting is held. The evidence in favor of anchoring and loss aversion with this large dataset validates previous results and adds to the empirical evidence a finding of increasing loss aversion with the length a painting is held. We do not find evidence that investors can take advantage of these behavioral biases.
    Keywords: D03, D44, Z11
    Date: 2014–06
  4. By: Agne Kajackaite (University of Cologne)
    Abstract: This paper tests whether staying ignorant about the negative consequences of one's own actions affects agents' performance in a real effort experiment. We conducted treatments in which subjects' effort either increased only one's own payoff or also increased the donation to a bad charity. Ignorance was introduced by letting agents to decide whether or not to learn if the effort benefits the charity. Overall, we find that in the conditions with complete information agents exert significantly higher efforts if there are no benefits for the bad charity. With respect to ignorance, we show that (i) almost a third of agents stay ignorant, and (ii) the ignorant agents exert significantly more effort than agents who know that their effort benefits the bad charity. We also find evidence for a sorting of low social types into ignorance, as exogenously uninformed agents exert less effort than ignorant agents.
    Keywords: ignorance, moral wiggle room, experiment, real effort
    JEL: C91 D03 D80 M52
    Date: 2014–06
  5. By: J. Michelle Brock (European Bank for Reconstruction and Development); Andreas Lange (University of Hamburg, Department of Economics); Kenneth L. Leonard (University of Maryland, Department of Agricultural and Resource Economics)
    Abstract: In this study, we consider how gift-exchange and bonus systems function in a natural field setting by measuring the effort response of participants to non-monetary gifts over time. Our field experiment tests the difference in effort response to unconditional gifts delivered immediately, promised unconditional gifts delivered later, and conditional gifts linked to reaching a specific performance target. We find important benefits from promising to give an unconditional gift later: participants respond positively to a promised gift twice by increasing effort when the gift is promised and again when it is received. A promised gift outperforms both the unconditional gift delivered immediately, which leads to a single positive response, and the conditional gift based on performance, which does not trigger any significant behavioural change after the gift is delivered. The study lends insights into the relative effectiveness of gift-exchange and bonus systems and the temporal structure of reciprocal exchange.
    Keywords: gift exchange, reciprocity, health care, field experiment, Tanzania
    JEL: C93 I1 J41 O1
    Date: 2014–01
  6. By: Rachel Griffith; Sarah Smith; Stephanie von Hinke Kessler Scholder
    Abstract: We compare the effects of economic incentives with a “nudge” (a policy intervention that aims to influence behaviour through changing the “choice architecture”) in relation to improving dietary choices. We study a large-scale, nationally-implemented policy – the UK Healthy Start Scheme – that aimed to increase fruit and vegetable consumption. The policy combined standard economic incentives with elements of nudge, the most important of which is a potential labelling effect. We show that the scheme was successful; the estimated intention to treat effect indicates that spending on fruit and vegetables increased by 15 per cent, or roughly two-thirds of a portion per household per day. The response can be attributed entirely to the economic incentive effects; there is no evidence of any effect from the nudge aspects of the policy.
    Keywords: dietary choices; nudge policies; targeted benefits
    JEL: D12 I18
    Date: 2014–06

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