nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒09‒05
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Divided Loyalists or Conditional Cooperators? Creating Consensus about Cooperation in Multiple Simultaneous Social Dilemmas By Matthew W. McCarter; Anya C. Samak; Roman M. Sheremeta
  2. Testing the strength and robustness of the attraction effect in consumer decision making By Paolo Crosetto; Alexia Gaudeul
  3. The focal point in the Traveller’s Dilemma: An Experimental Study By Morone, Andrea; Morone, Piergiuseppe
  4. "Preference for Flexibility and Random Choice: an Experimental Analysis" By Mark Dean; John McNeil
  5. The CCCTB option – an experimental study By Claudia Keser; Gerrit Kimpel; Andreas Oestreicher
  6. Awareness programs and change in taste-based caste prejudice By Ritwik Banerjee; Nabanita Datta Gupta
  7. Waste Prevention and Social Preferences: The Role of Intrinsic and Extrinsic Motivations By Grazia Cecere; Susanna Mancinelli; Massimiliano Mazzanti
  8. Individual and Group Behaviour Toward Risk: A Short Survey By Temerario, Tiziana
  9. Fragility of the Commons under Prospect-Theoretic Risk Attitudes By Ashish R. Hota; Siddharth Garg; Shreyas Sundaram
  10. Personality Has Minor Effects on Panel Attrition By David Richter; John Körtner; Denise Saßenroth

  1. By: Matthew W. McCarter (University of Texas – San Antonio and Economic Science Institute); Anya C. Samak (University of Wisconsin – Madison); Roman M. Sheremeta (Case Western Reserve University and the Economic Science Institute)
    Abstract: The current social dilemma literature lacks theoretical consensus regarding how individuals behave when facing multiple simultaneous social dilemmas. The divided-loyalty hypothesis, from organizational theory, predicts that cooperation will decline as individuals experience multiple social dilemmas with different compared to the same group members. The conditional-cooperation hypothesis, from behavioral economics, predicts that cooperation will increase as individuals experience multiple social dilemmas with different compared to the same group members. We employ a laboratory experiment to create consensus between these literatures and find support for the conditional-cooperation hypothesis. The positive effect of interacting with different group members comes from participants having an opportunity to shift their cooperative behavior from the less cooperative to the more cooperative group.
    Keywords: cooperation, conditional cooperation, defection, loyalty, experiments, public goods, social dilemmas
    Date: 2014
  2. By: Paolo Crosetto (University of Grenoble); Alexia Gaudeul (Friedrich Schiller University Jena)
    Abstract: We report the results of an original experiment that was designed to test the strength and robustness of the attraction effect. Rather than the usual simple tests for this effect, we consider a conceptually simple consumer purchasing task where alternatives are however difficult to evaluate. For the attraction effect to be observed, the consumer must go through two steps: the first is to find out that two or more options are comparable, which leads him to exclude the dominated alternatives. The second is to favor the dominant option over those that are not comparable. Our experiment allows us to determine whether and how many individuals stop before each of those two steps. The results confirm the existence of an attraction effect in our setting, but the effect is not strong. Indeed, only a minority of subjects perform the second step. The effect is not robust to introducing larger differences in prices among options and to widening the range of options to choose from. We conclude by showing that our subjects would benefit from relying more on performing asymmetric dominance editing rather than on their skills in the purchasing task.
    Keywords: Asymmetric Dominance Editing, Attraction Effect, Comparability, Consumer Choice, Experimental Economics, Pricing Formats
    JEL: C91 D12 D83
    Date: 2014–08–22
  3. By: Morone, Andrea; Morone, Piergiuseppe
    Abstract: This paper provides an experimental test of the traveller’s dilemma. Our investigation aims to address the research hypothesis that introducing a reference point à la Schelling (set equal to the Pareto optimal solution) might drive people away from rationality even when the size of the penalty/reward is high. Experimental findings reported in this paper provide answers to this question showing that the reference point did not encourage coordination around the Pareto optimal choice.
    Keywords: traveller’s dilemma; focal point; individual decision
    JEL: C9 D7
    Date: 2014
  4. By: Mark Dean; John McNeil
    Abstract: People may be uncertain about future preferences, leading to both a preference for flexibility in choice between menus and stochastic choice from menus. This paper describes an experimental test of preference uncertainty in a realeffort task. We observe subjects’ preferences over menus of work contracts, along with their choices of effort levels from those contracts. Our results suggest that preference uncertainty is important: 48% of our subjects exhibited strict preference for flexibility. A model of preference uncertainty (Ahn and Sarver (2013)) well describes the relationship between choice of and from menus: subjects willing to pay to include an option in a contact were more likely to use that option, and those that used an option were prepared to pay for it. We show that the introduction of an explicit stochastic element to the contract increased preference for flexibility, suggesting a causal role for uncertainty in menu preferences
    Keywords: #
    Date: 2014
  5. By: Claudia Keser; Gerrit Kimpel; Andreas Oestreicher
    Abstract: The objective of this paper is to look into the probability that, given the choice, corporate groups would opt for taxation on a consolidated basis. Consolidation would allow them to offset losses crossborder but remove the opportunity to exploit international tax-rate differentials between entities via transfer pricing. We present a laboratory experiment in which we investigate to what extent a corporation would be inclined to take up the consolidation option and how this would impact on the corporation’s location of investment and its transfer pricing activities involving locations outside the consolidated group. We use a 2-by-2 treatment design with two levels of tax-rate differential between two investment locations, and two different remuneration functions allowing the participants to act as owners or managers of a company.
    Keywords: International company taxation, separate accounting, formula apportionment, transfer pricing, experimental economics,
    JEL: C91 H25 M41
    Date: 2014–04–01
  6. By: Ritwik Banerjee (Department of Economics and Business, Aarhus University, Denmark); Nabanita Datta Gupta (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: Becker’s theory of taste-based discrimination predicts that relative employment of the discriminated social group will improve if there is a decrease in the level of prejudice for the marginally discriminating employer. In this paper we experimentally test this prediction offered by Becker (1971) in the context of caste in India, with management students (potential employers in the near future) as subjects. First, we measure caste prejudice and show that awareness through a TV social program reduces implicit prejudice against the lower caste and the reduction is sustained over time. Second, we find that the treatment reduces the prejudice levels of those in the left tail of the prejudice distribution - the group which can potentially affect real outcomes as predicted by the theory. And finally, a larger share of the treatment group subjects exhibit favorable opinion about reservation in jobs for the lower caste.
    Keywords: Caste prejudice, taste-based discrimination, implicit association test, laboratory experiment, media influence
    JEL: C91 O1 J15
    Date: 2014–08–18
  7. By: Grazia Cecere (Telecom Ecole de Management, Institut Mines Telecom, France. Université Paris Sud, RITM, France.); Susanna Mancinelli (Dept. of Economics and Management. University of Ferrara, Italy.); Massimiliano Mazzanti (Dept. of Economics and Management. University of Ferrara, Italy. CERIS CNR Milan. SEEDS – Sustainability Environmental Economics Dynamics Studies.)
    Abstract: It is only recently that EU policies have started defining targets for waste reduction despite waste prevention being at the top of the ‘waste hierarchy’. Against this backdrop, we examine whether individual behavior towards waste reduction is more strongly driven by extrinsic motivations such as social norms, or intrinsic motivations, such as altruistic preferences. We exploit a new survey covering 22,759 individuals from EU27 countries. Our results suggest that individual preferences matter to move beyond an orientation based on recycling, to achieve a reduction of the sources of waste. Behaviour patterns which lead to waste reduction are seldom socially oriented, seldom exposed to peer pressure, and very reliant on purely ‘altruistic’ attitudes.
    Keywords: intrinsic motivations, extrinsic motivations, social norms, recycling, waste reduction, green preferences.
    JEL: Q53 R11 K42
    Date: 2014–08
  8. By: Temerario, Tiziana
    Abstract: In the real life groups, rather than individuals, take the most part of decisions. So that it is useful to study how groups take a decision in different strategic environments. This paper provides an overview of previous research about groups’ preferences over risk. I compare different experimental designs and examine their different results, focusing on how groups reach agreement in risky choices, compared with individuals.
    Keywords: Risk attitude; preferences; uncertainty; pairwise choice; review; groups;
    JEL: C91 C92 D81
    Date: 2014–08
  9. By: Ashish R. Hota; Siddharth Garg; Shreyas Sundaram
    Abstract: We study a common-pool resource game where the resource experiences failure with a probability that grows with the aggregate investment in the resource. To capture decision making under such uncertainty, we model each player's risk preference according to the value function from prospect theory. We show the existence and uniqueness of a pure strategy Nash equilibrium when the players have arbitrary (potentially heterogeneous) risk preferences and under natural assumptions on the rate of return and failure probability of the resource. Greater competition, vis-a-vis the number of players, increases the failure probability at the Nash equilibrium, and we quantify this effect by obtaining (tight) upper bounds on the failure probability at the equilibrium for a large number of players with respect to the failure probability under investment by a single player. We further examine the effects of heterogeneity in risk preferences of the players with respect to two characteristics of the prospect-theoretic value function: loss aversion and diminishing sensitivity. Heterogeneity in attitudes towards loss aversion always leads to higher failure probability of the resource at the equilibrium when compared to the case where players have identical risk preferences, whereas there is no clear trend under heterogeneity in the diminishing sensitivity parameter.
    Date: 2014–08
  10. By: David Richter; John Körtner; Denise Saßenroth
    Abstract: In light of the recent interest in using longitudinal panel data to study personality development, it is important to know if personality traits are related to panel attrition. We analyse the effects of personality on panel drop-out separately for an 'older' subsample (started in 1984), a relatively 'young' subsample (started in 2000), and a 'new' subsample (started in 2009) of the German Socio-Economic Panel (SOEP) study. We found that openness slightly decreases the probability of panel drop-out in all three samples. For the 'older' subsample only, we found a small negative effect of agreeableness on panel drop-out. We control for age, sex, education, migration background, and the number of inhabitants in the region of the respondents.
    Date: 2014

This nep-cbe issue is ©2014 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.