nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒08‒16
fifteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Let the market decide: an experimental study of competition and fairness By Bartling Björn; Grieder Manuel; Zehnder Christian
  2. Providing global public goods: Electoral delegation and cooperation By Kocher, Martin G.; Tan, Fangfang; Yu, Jing
  3. Risk Preferences may be Time Preferences: A Comment on Andreoni and Sprenger (2012) By Ulrich Schmidt
  4. An Experimental Study of Network Formation with Limited Observation By Michael Caldara; Michael McBride
  5. What drives failure to maximize payoffs in the lab? A test of the inequality aversion hypothesis By Nicolas Jacquemet; Adam Zylbersztejn
  6. The Power of Stereotyping and Confirmation Bias to Overwhelm Accurate Assessment: The Case of Economics, Gender, and Risk Aversion By Julie A. Nelson
  7. Identity Changes and the Efficiency of Reputation Systems By Wibral, Matthias
  8. Entitlement in a Real Effort Ultimatum Game By Michael D. Carr; Phil Mellizo
  9. I wanna live my life: Locus of Control and Support for the Welfare State By Ludek Kouba; Hans Pitlik
  10. People are not ‘rational’: An empirical study of the deviation between actual and shortest travel time paths By Wenyun Tang; David Levinson
  11. Congruent Behavior without Interpersonal Commitment: Evidence from a Common Pool Resource Game By Mantilla, Cesar
  12. What makes an efficient theme for a creativity session? By Sophie Hooge; Albert David
  13. Does Tenure Make Researchers Less Productive? The Case of the “Specialist†By Joao Ricardo Faria; Peter McAdam
  14. Social Beliefs And Learning Motivation: Role Of Organizational Justice By Olga A. Gulevich
  15. A Case of Framing Effects: The Elicitation of Time Preferences By Paola Manzini; Marco Mariotti

  1. By: Bartling Björn; Grieder Manuel; Zehnder Christian
    Abstract: Is competition perceived as a fair procedure? We report data from laboratory experiments where a powerful buyer can trade with one of several sellers. Sellers who feel shortchanged can engage in counterproductive behavior to punish the buyer. We find that the same unfavorable terms of trade trigger significantly less punishment if the buyer uses a competitive auction to determine the terms of trade than if she uses her authority to dictate the same terms directly. Our results inform the debate on the fairness of market outcomes by showing that the use of a competitive procedure can, by itself, affect how people judge unequal distributive outcomes.
    Keywords: Competition, authority, markets, fairness, responsibility, procedures
    JEL: C91 D03 D63
    Date: 2014–05
  2. By: Kocher, Martin G.; Tan, Fangfang; Yu, Jing
    Abstract: This paper experimentally examines the effect of electoral delegation on providing global public goods shared by several groups. Each group elects a delegate who can freely decide on each group member’s contribution (including the contribution of herself) to the global public good. Our results show that people mostly vote for delegates who assign equal contributions for every group member. However, in contrast to standard theoretical predictions, unequal contributions across groups drive cooperation down over time, and it decreases efficiency by almost 50% compared to the benchmark. This pattern is not driven by delegates trying to exploit their fellow group members, as indicated by the theory – quite to the opposite, other-regarding preferences and a re-election incentives guarantee that delegates assign equal contributions for all group members. Since the source of the resulting inefficiency is the polycentric nature of global public goods provision together with other-regarding preferences, we use the term Pinefficiency to describe our finding.
    Keywords: Global Public Goods; Delegation; Cooperation; Experiment
    JEL: C92 D72 H41
    Date: 2014–07–24
  3. By: Ulrich Schmidt
    Abstract: In an intensively discussed paper, Andreoni and Sprenger (2012) , henceforth A&S, present an experiment where subjects can allocate money between two different points of time under the condition of risk. A&S claim that their results refute discounted expected utility (DEU) as well as prospect theory and other models relying on probability weighting. In this note I will show that the theoretical analysis of A&S is inappropriate and, therefore, that their claims are not valid. It turns out that the experimental results of A&S are fully in line with DEU. The main problem of A&S ´s analysis is that is confounds income with consumption. There exist several other comments on A&S (Miao andZhong, 2012; Epper and Fehr-Duda, 2014 and Cheung, 2014) which discuss interesting aspects of the analysis of A&S but have not identified the theoretical implications of equalizing consumption and income
    Keywords: Time Preferences
    JEL: C91 D81 D91
    Date: 2014–07
  4. By: Michael Caldara (Economic Science Institute, Chapman University); Michael McBride (Department of Economics, University of California-Irvine)
    Abstract: Many social and economic networks emerge among actors that only partially observe the network when forming network ties. We ask: what types of network architectures form when actors have limited observation, and does limited observation lead to less efficient structures? We report numerous results from a laboratory experiment that varies both network observation and the cost of forming links. Overall, we find that limited network observation does not inevitably lead to highly inefficient networks but instead might actually inhibit inefficient positional jockeying among actors.
    Keywords: Networks; Limited observation; Coordination
    JEL: C92 D83 D85
    Date: 2014–07
  5. By: 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); Adam Zylbersztejn (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: Experiments based on the Beard and Beil (1994) two-player coordination game robustly show that coordination failures arise as a result of two puzzling behaviors: (i) subjects are not willing to rely on others' self-interested maximization, and (ii) self-interested maximization is not ubiquitous. Such behavior is often considered to challenge the relevance of subgame perfectness as an equilibrium selection criterion, since weakly dominated strategies are actually used. We report on new experiments investigating whether inequality in payoffs between players, maintained in most lab implementations of this game, drives such behavior. Our data clearly show that the failure to maximize personal payoffs, as well as the fear that others might act this way, do not stem from inequality aversion. This result is robust to varying the saliency of decisions, repetition-based learning and cultural differences between France and Poland.
    Keywords: Coordination Failure ; Subgame perfectness ; Non-credible threats; Laboratory experiments; Social Preferences; Inequality Aversion
    Date: 2014
  6. By: Julie A. Nelson
    Abstract: Behavioral research has revealed how normal human cognitive processes can tend to lead us astray. But do these affect economic researchers, ourselves? This article explores the consequences of stereotyping and confirmation bias using a sample of published articles from the economics literature on gender and risk aversion. The results demonstrate that the supposedly “robust†claim that “women are more risk averse than men†is far less empirically supported than has been claimed. The questions of how these cognitive biases arise and why they have such power are discussed, and methodological practices that may help to attenuate these biases are outlined.
    Keywords: stereotyping, bias, confirmation bias, gender, risk aversion, effect size, index of similarity
    JEL: D83 D03 D81 J16 B41 C9
    Date: 2013–11
  7. By: Wibral, Matthias (University of Bonn)
    Abstract: Reputation systems aim to induce honest behavior in online trade by providing information about past conduct of users. Online reputation, however, is not directly connected to a person, but only to the virtual identity of that person. Users can therefore shed a negative reputation by creating a new account. We study the effects of such identity changes on the efficiency of reputation systems. We compare two markets in which we exogenously vary whether sellers can erase their rating profile and start over as new sellers. Buyer trust and seller trustworthiness decrease significantly when sellers can erase their ratings. With identity changes, trust is particularly low towards new sellers since buyers cannot discriminate between truly new sellers and opportunistic sellers who changed their identity. Nevertheless, we observe positive returns on buyer investment under the reputation system with identity changes, and our evidence suggests that trustworthiness is higher than in the complete absence of a reputation system.
    Keywords: identity changes, reputation, trust
    JEL: C91 D02 L14
    Date: 2014–05
  8. By: Michael D. Carr; Phil Mellizo
    Abstract: Data from lab experiments support the claim that individuals have social preferences. Most models of social preferences, however, consider only the distribution of outcomes, not the source of the endowment used in the game. Once the source is considered, outcomes in the ultimatum game are more difficult to interpret. We extend the ultimatum game to allow for responder-produced endowments. We find that offers increase when the responder produces the endowment, but rejection rates are lower. Further, offers remain below 100% of the endowment, suggesting that unproductive proposers feel entitled to a part of the endowment, and responders respect this right.
    JEL: C91 D30 D63
    Date: 2013–09
  9. By: Ludek Kouba (Department of Economics, Faculty of Business and Economics, Mendel University in Brno); Hans Pitlik (Austrian Institute of Economic Research (WIFO), Arsenal Objekt 20, 1030 Vienna, Austria)
    Abstract: The purpose of this paper is to propose a general informal institution determining human ways of thinking and codes of behaviour, thus, in our case, individual support for the Welfare State. For that reason, we recommend employing the two closely related and complementary psychological concepts - locus of control and self-efficacy. We follow a comprehensive concept of the Welfare State, measuring attitudes towards government intervention and income redistribution, using the survey data from the World Values Survey, as well as different indicators for perceived governance quality. Our empirical results show that people with an internal locus of control and high self-efficacy believing in their ability to control their own lives report substantially less positive attitudes towards income equalization and government interventions. Additionally, a higher confidence in government actors and low confidence in major private companies amplify the Welfare State preferences under an external locus of control.
    Keywords: Locus of control, life control, self-efficacy, informal institutions, Welfare State
    JEL: B52 I38
    Date: 2014–07
  10. By: Wenyun Tang; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: Few empirical studies of revealed route characteristics have been reported in the literature. This study challenges the widely applied shortest path assumption by evaluating routes followed by residents of the Minneapolis - St. Paul metropolitan area, as measured by the GPS Component of the 2011 Twin Cities Travel Behavior Inventory. It finds that most travelers used paths longer than the shortest path. Some reasons for this are conjectured.
    Keywords: Rationality, Route Choice, User Equilibrium, GPS Study, Travel Behavior, Networks
    JEL: R40
    Date: 2014
  11. By: Mantilla, Cesar
    Keywords: Common pool resource experiment, lie aversion, preferences for consistency
    JEL: A13 C93 D03
    Date: 2014
  12. By: Sophie Hooge (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris); Albert David (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)
    Abstract: Despite literature has widely investigated the logics of ideation, at early stages of innovation and product development processes (Bjork and Magnusson, 2009; Boeddrich, 2004; Girotra et al., 2010), very few contributions deal with the very starting point of the ideation process, i.e. the initial theme given to workshops participants. Nevertheless, scholars' works on the nature of stimuli and examples (Smith et al.,1993; Ward et al., 2004) underlined they could generate heterogeneous effects on the efficiency of the ideation stage. Moreover, whereas efficiency criteria for creativity sessions are well known (fluency, flexibility, originality, elaboration), creativity techniques focus on the improvement and monitoring of ideation management: the problem of designing the initial theme is seldom included in the design parameters of creativity sessions, as if it was not considered as an issue in research on creativity management. Yet, one consequence of the above mentioned literature results is that it should be a key efficiency factor: the formulation could play a key role in conditioning cognitive involvement of individuals and managerial goals achievement. This paper focuses on this specific problem of formulating an efficient theme for a creativity session and its implications on cognitive involvement of facilitators and participants, and the achievement of managerial goals of the session. Based on a single case study led through collaborative action research with the French postal service operator, our research analyses the impacts of the formulation in three innovative-oriented creativity workshops the authors have organized and steered from May to October 2013. The three workshops themes were built to experiment the impact of the theme formulation on: 1/ creativity techniques efficiency according traditional criteria and facilitators' cognitive involvement; and 2/ participants' satisfaction assessed through their ability to link the theme, thus the generated ideas, to the company's innovation strategy. The exploratory study confirms that the formulation of the theme has important consequences, both cognitive and managerial. A first set of results suggests two main dimensions to describe the nature and structure of a theme naming: the accuracy level of the formulation and the degree of conceptual tension. A second set of results is about concrete reasoning when designing the theme and implementing in the formulation links to the firm's strategy. A third set of results is about consequences of theme formulation on the way the creativity session is designed and steered. Key dimensions include: 1/ The degree of cognitive implication of facilitators; 2/ The nature of stimuli and idea generation techniques used during the session (generic versus custom-made); 3/ The degree of commitment of the actors (designers of the theme, facilitators and participants) to the organization's strategy, i.e. to what gives value to the output of the creativity session.
    Keywords: Creativity; theme formulation; cognitive involvement; performance
    Date: 2014–06–17
  13. By: Joao Ricardo Faria (University of Texas at El Paso); Peter McAdam (University of Surrey)
    Abstract: Many studies suggest that research productivity falls after tenure is granted. We have however limited choice-theoretic understanding of why this should occur. With some simplifying assumptions, we rationalize this as follows. Scholars are assumed to be “specialistsâ€: their research productivity consists in transforming Ph.D. chapters into publishable papers. We show how a department that hired such a scholar provides incentives to maximize research productivity. We show his research productivity and publication paths are then characterized by a “bang-bang†solution, i.e., either he works with maximum or minimum effort. The department sets the scholar’s wages proportional to the department’s impatience to spur his productivity, and only succeeds if he turns out to be more impatient than the department. The paper provides a novel perspective on academic productivity and the tenure system.
    JEL: D29 A29 M51
    Date: 2014–08
  14. By: Olga A. Gulevich (National Research University Higher School of Economics)
    Abstract: This study explored the relation between social beliefs, organizational justice evaluation, and learning motivation. Three hypotheses were tested. Hypothesis 1 suggested that justice evaluation is negatively related to amotivation and positively related to intrinsic learning motivation. According to Hypothesis 2, dangerous and jungle world beliefs are positively related to amotivation and negatively related to intrinsic learning motivation. Hypothesis 3 suggested that the relation between social beliefs and learning motivation is moderated by organizational justice evaluation. Participants were 895 first and fourth year students of four Russian universities. They completed the ‘Dangerous World Beliefs Scale’, ‘Jungle Word Beliefs Scale’, ‘Organizational Justice Scale’ and ‘Academic Motivation Scale’. The results supported Hypotheses 1 and 2, but not Hypothesis 3.
    Keywords: self-determination theory, learning motivation, organizational justice, dangerous world belief, jungle world belief
    JEL: Z
    Date: 2014
  15. By: Paola Manzini (University of St Andrews and IZA); Marco Mariotti (University of St Andrews)
    Abstract: We compare three methods for the elicitation of time preferences in an experimental setting: the Becker-DeGroot-Marschak procedure (BDM); the second price auction; and the multiple price list format. The first two methods have been used rarely to elicit time preferences. All methods used are perfectly equivalent from a decision theoretic point of view, and they should induce the same `truthful' revelation i dominant strategies. In spite of this, we find that framing does matter: the money discount rates elicited with the multiple price list tend to be higher than those elicited with the other two methods. In addition, our results shed some light on attitudes towards time, and they permit a broad classification of subjects depending on how the size of the elicited values varies with the time horizon
    Keywords: time preferences, elicitation methods, BDM, Auctions, MPL
    JEL: C91 D9
    Date: 2014–07–21

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