nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒08‒25
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Social Risk: the Role of Warmth and Competence By Jeffrey V. Butler; Joshua B. Miller
  2. Mind the Gap: Bridging the Perception and Reality of Crime Rates with Information By Martín Ardanaz; Ana Corbacho; Mauricio Ruiz-Vega
  3. Social psychology and gender efficiency wage gap By Jellal, Mohamed
  4. Web-enhanced procrastination? How online lecture recordings affect binge study and academic achievement By Andreas Chai
  5. De Gustibus Non Est Disputandum: An Experimental Investigation By Dasgupta, Utteeyo; Gangadharan, Lata; Maitra, Pushkar; Mani, Subha
  6. Behavioral Dimensions of Contests By Roman M. Sheremeta
  7. The magic of storytelling: How curiosity and aesthetic preferences work By Bianchi, Marina
  8. Collective choices under ambiguity By M. Vittoria Levati; Stefan Napel; Ivan Soraperra
  9. Personality Characteristics, Educational Attainment and Wages: An Economic Analysis Using the British Cohort Study By Pamela Lenton
  10. Applying Insights from Behavioral Economics to Policy Design By Madrian, Brigitte

  1. By: Jeffrey V. Butler; Joshua B. Miller
    Abstract: Previous research has documented a behavioral distinction between "social risk" and financial risk. For example, individuals tend to demand a premium on the objective probability of a favorable outcome when that outcome is determined by a human being instead of a randomizing device (Bohnet, Greig, Herrmann, and Zeckhauser 2008; Bohnet and Zeckhauser 2004). In this paper we ask whether social risk is always aversive, answering in the negative and identifying factors that can eliminate, or even change the sign of, the social risk premium. Motivated by the stereotype content model from the social psychology literature, which we argue has straightforward predictions for situations involving social risk (Fiske, Cuddy, and Glick 2007), we focus on two factors: "warmth", synonymous with intent, and "competence." We investigate these factors using a between-subjects experimental design that implements slight modifications of the binary trust game of Bohnet and Zeckhauser across treatments. Our results indicate that having risk generated by another human being does not, on its own, lead to a social risk premium. Instead, we find that a positive risk premium is demanded when a counter-party has interests con icting with one's own (low warmth) and, additionally, is competent. We find a negative social risk premium -i.e., social risk seeking- when the counter-party has contrary interests but lacks competence. JEL Classification: Z1, C91, D81 Keywords: Social Risk, Social Perception, Intention, Betrayal Aversion, Trust
    Date: 2014
  2. By: Martín Ardanaz; Ana Corbacho; Mauricio Ruiz-Vega
    Abstract: Gains from government crime-reducing programs are not always visible to the average citizen. The media overexpose crime events, but the absence of crime rarely makes the news, increasing the risk that citizen may have inaccurate perceptions of security. Through a survey experiment carried out in Bogota, Colombia, a city that experienced a substantial reduction in homicides over the last decade, as well as a noticeable drop in robberies, this paper tests the effect that communicating objective crime trends could have on such perceptions. The results show that information improves perceptions of safety and police effectiveness, and lowers distrust in the police. However, the information treatment is not able to impact those with biased priors, and tends to weaken over time. A more active and regular engagement with citizens regarding these trends is needed to bridge the gap between perception and reality.
    Keywords: Police, Citizen Security & Crime Prevention, Information, Beliefs, Perception, Crime
    Date: 2014–08
  3. By: Jellal, Mohamed
    Abstract: Our paper introduces the dimension of social psychology in a model of efficiency wages and gender diversity. In this context, we show that women earn lower wages than men but provide in return relatively less effort. Therefore in order to increase women's productivity, the firm increases their level of employment. In our efficiency-wage theory, women’s lower wages is explained by assuming that efficiency-wages function for women are believed to be different from those of men. This could be the case if the firm believes that women do not react with more effort to higher wages because they are not work career oriented, so it might not be worth it to pay them high wages. In that case, firms would employ more women for the minimum possible wage. This assumption can be based on stereotypes describing about women as more averse to wage competition pressure than men and less career oriented.
    Keywords: Gender Diversity, Social Psychology ,Stereotypes, Efficiency Wage Gap.
    JEL: J01 J31 J7 J71 J82 Z1
    Date: 2014–08–11
  4. By: Andreas Chai
    Keywords: Procrastination, binge study, online lecture recordings
    JEL: I20 D91 A22
    Date: 2014–04
  5. By: Dasgupta, Utteeyo; Gangadharan, Lata; Maitra, Pushkar; Mani, Subha
    Abstract: The goal of this paper is to examine stability in preferences using the Stigler- Becker state-dependent framework. Using a randomized intervention that changes the opportunity sets of individuals we construct a unique panel data from an artefactual field experiment and evaluate whether the change in the state space influences our selected indicators of preferences: risk, competitiveness, and confidence. We find that there is considerable heterogeneity of preferences across individuals at a point in time; risk and competitive preferences inter-temporally are consistent with state-dependent preferences, while measures of confidence seem to depend on past experiences.
    Keywords: Preference stability, State Contingent Preferences, Artefactual Field Experiment
    JEL: C9 D01 D03
    Date: 2014–08–18
  6. By: Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and The Economic Science Institute, Chapman University)
    Abstract: The standard theoretical description of rent-seeking contests is that of rational individuals or groups engaging in socially inefficient behavior by exerting costly effort. Experimental studies find that the actual efforts of participants are significantly higher than predicted in the models based on rational behavior and that over-dissipation of rents (or overbidding or over-expenditure of resources) can occur. Although over-dissipation cannot be explained by the standard rational-behavior theory, it can be explained by incorporating behavioral dimensions into the standard model, such as (1) the utility of winning, (2) relative payoff maximization, (3) bounded rationality, and (4) judgmental biases. These explanations are not exhaustive but provide a coherent picture of important behavioral dimensions to be considered when studying rent-seeking behavior in theory and in practice.
    Keywords: rent-seeking, contests, experiments, overbidding, over-dissipation
    Date: 2014
  7. By: Bianchi, Marina
    Abstract: Why do we love stories? That this is not an idle question is shown by the fact that we spend an enormous amount of time in our lives following stories: telling and listening to them; reading them; watching them on television or in films or on stage. Despite their recurrent similarity and even predictability, we continue to enjoy them. The paper brings to bear on this question two different strands of current literature in experimental psychology: the literature on aesthetic preferences, and the literature on curiosity and interest. The paper discusses how, in the case of storytelling in particular, though also of creative activities in general, there are two types of curiosity at work: explorative curiosity - associated with investigating new ideas for the simple joy of it and regardless of source - and specific curiosity, corresponding to focused exploration and aimed at solving problems for which the accuracy and relevance of information is of importance. In both cases curiosity is felt as an intensely pleasant experience, which is affected not only by external, but also by the internal stimuli of novelty and challenge. But how does interest/curiosity solidify into preferences that have stability enough to guarantee guidance yet sufficient flexibility to allow for change? The answer explored here highlights the distinction between comfort goods and activities and creative goods and activities. The latter, which allow for complexity, variety and multiplicity of dimensions have a transformative power that allows also for sustained stimulation and interest. The broader aim is to analyze the behavior of individual preferences in consumption activity, not only of art, the usual focus in discussion of aesthetic preferences, but also of all those goods and activities that can be called creative. --
    JEL: D01 D11
    Date: 2014
  8. By: M. Vittoria Levati (University of Verona and Max Planck Institute of Economics, Jena); Stefan Napel (University of Bayreuth); Ivan Soraperra (University of Verona)
    Abstract: We investigate experimentally whether collective choice matters for individual attitudes to ambiguity. We consider a two-urn Ellsberg experiment: one urn offers a 45% chance of winning a fixed monetary prize, the other an ambiguous chance. Participants choose either individually or in groups of three. Group decision rules vary. In one treatment the collective choice is taken by majority; in another it is dictated by two group members; in the third it is dictated by a single group member. We observe high proportions of ambiguity averse choices in both individual and collective decision making. Although a majority of participants display consistent ambiguity attitudes across their decisions, collective choice tends to foster ambiguity aversion, especially if the decision rule assigns asymmetric responsibilities to group members. Previous participation in laboratory experiments may miti- gate this.
    Keywords: Ambiguity aversion, majority voting, dictatorship
    JEL: C91 C92 D71 D81
    Date: 2014–08–19
  9. By: Pamela Lenton (Department of Economics, University of Sheffield, UK)
    Abstract: We look at the influence of personality traits and cognitive ability on both educational attainment and on the wages of individuals in the UK labour market at age 33 using the British Cohort Study. We control for a new cluster of nine personality characteristics, some of which we consider likely to influence labour market outcomes. We find that some personality characteristics have significant influence on the acquisition of educational qualifications, in particular internal and external locus of control, conscientiousness and extroversion. Our findings on the extrovert-introvert dimension of personality are paradoxical: we find that males with extrovert personalities have a significantly reduced probability of gaining degree level education, but within the labour market males are rewarded for this characteristic.
    Keywords: educational attainment; human capital; personality characteristics
    JEL: J24
    Date: 2014–08
  10. By: Madrian, Brigitte
    Abstract: The premise of this article is that an understanding of psychology and other social science disciplines can inform the effectiveness of the economic tools traditionally deployed in carrying out the functions of government, which include remedying market failures, redistributing income, and collecting tax revenue. An understanding of psychology can also lead to the development of different policy tools that better motivate desired behavior change or that are more cost-effective than traditional policy tools. The article outlines a framework for thinking about the psychology of behavior change in the context ofmarket failures. It then describes the research on the effects of a variety of interventions rooted in an understanding of psychology that have policy-relevant applications. The article concludes by discussing how an understanding of psychology can also inform the use and design of traditional policy tools for behavior change, such as financial incentives.
    Date: 2014

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