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on Cognitive and Behavioural Economics |
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Issue of 2014‒10‒03
thirteen papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale “Amedeo Avogadro” |
| By: | Anastasios Koukoumelis (Max Planck Institute of Economics, Jena); M. Vittoria Levati (University of Verona, and Max Planck Institute of Economics, Jena) |
| Abstract: | We report on an experiment designed to explore whether a written expression of disapproval affects future levels of cooperation. In between two identical public goods games, participants play a mini dictator game that, depending on the treatment, either gives or does not give the recipient the opportunity to text the dictator. The recipients of an unfair offer contribute significantly less in the second public goods game. Yet, the contribution reductions are significantly smaller in the treatments allowing for recipient communication. To control for belief-based explanations of these findings, we run treatments where we elicit beliefs about the others' contributions. It turns out that the reductions in contributions, but not the reductions in beliefs, of the unfairly treated recipients are notably smaller when messaging is possible. This tends to suggest that allowing for communication opportunities helps to curtail selfishness. |
| Keywords: | Public goods game, dictator minigame, emotions, cooperation |
| JEL: | C72 C91 C92 D63 |
| Date: | 2014–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2014-022&r=cbe |
| By: | Charles Yuji Horioka (School of Economics, University of the Philippines Diliman) |
| Abstract: | This paper provides an introduction to the field of evolutionary economics with emphasis on the evolutionary theory of household behavior. It shows that the goal of evolutionary economics is to improve upon neoclassical economics by incorporating more realistic and empirically grounded behavioral assumptions and technological innovation and that the goal of the evolutionary theory of household behavior is to improve upon the neoclassical theory of household behavior by replacing the neoclassical assumption of selfish utility maximization with bounded rationality and satisficing and by incorporating the reaction of households to the introduction of new goods and services. The paper concludes with a brief discussion of loss aversion and self-interest vs. altruism. |
| Keywords: | Altruism, altruistic bequest motive, behavioral assumptions, behavioral economics, bequest motives, bounded rationality, consumption behavior, creative destruction, destructive technologies, dynastic bequest motive, evolution, evolutionary economics |
| JEL: | A12 B15 B25 B52 D11 D91 E21 O31 O33 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:phs:dpaper:201412&r=cbe |
| By: | Concetta Sorropago (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza") |
| Abstract: | The financial crisis of recent years has deeply questioned the ability of the traditional economic models to help to govern the complexity of the modern financial world. A growing number of scholars, practitioners, and regulators agree that the recurring financial crisis as well as the overwhelming evidence of market anomalies could be explained only resorting to behavioral finance. Behavioral finance has been able to identify the individual investor irrationality but unable to quantify its total effect on the market in terms of price deviation from fundamental. Quantitative Behavioral Finance (QBF) is an emerging discipline that attempts to model the impact of human cognitive biases over asset prices. The aim of this paper is to provide an overview of its theoretical foundations and its challenges. The paper is divided in two parts. In the first one, we present a much selected literature review of the key theoretical foundations. Why does this new field of study emerge ? What topics does it study ? Which disciplines have contributed the most and why ? In the second part, the paper sketches an outline and provides a preliminary, set of references about the agent-based model approach as one of the most promising line of research in quantitative modeling the behavioral investorsÕ impact on the market. The literature surveyed supports the use of this class of models because of their capability in copying with heterogeneous agentsÕ behaviours either rational or bounded rational without losing the ability to identify and examine how each of them operates separately or in interaction. Taken as a whole, the articles reviewed here indicate that many open issues remains both on the theoretical design of agent based models, due to the large degree of freedom of modelers, and on the empirical use of this class of models for real political economic implications, due to the arduous methods for the model validation, calibration and estimation. |
| Keywords: | Literature review ; Behavioral Finance ; Agent Computational Economics |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:aeg:report:2014-13&r=cbe |
| By: | James C. Cox; Rudolf Kerschbamer; Daniel Neururer |
| Abstract: | This paper reports the results of experiments designed to isolate the impact of various combinations of the following motives on trustworthiness: (i) unconditional other-regarding preferences -- like altruism, inequality aversion, quasi-maximin, etc.; (ii) deal-responsiveness -- reacting to actions that allow for a mutual improvement by adopting behavior that implies a mutual improvement; (iii) gift-responsiveness -- reacting to choices that allow the trustee to obtain an improvement by adopting actions that benefit the trustor; and (iv) vulnerability-responsiveness -- reacting to the vulnerability of the trustor by adopting actions that do not hurt the trustor. Our results indicate that -- besides unconditional other-regarding preferences -- vulnerability-responsiveness is an important determinant of trustworthiness even in cases where the vulnerability of the trustor does not come together with a gift to the trustee. Motivated by our empirical findings we provide formal definitions of trust and trustworthiness based on revealed willingness to accept vulnerability and the response to it. |
| Keywords: | trustworthiness, trust, trust game, investment game, deal-responsiveness, gift-responsiveness, vulnerability-responsiveness, generosity, reciprocity |
| JEL: | C70 C91 D63 D64 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2014-06&r=cbe |
| By: | Belot, Michele; van de Ven, Jeroen |
| Abstract: | We provide experimental evidence on the ability to detect deceit in a buyer-seller game with asymmetric information. Sellers have private information about the buyer's valuation of a good and sometimes have incentives to mislead buyers. We examine if buyers can spot deception in face-to-face encounters. We vary (1) whether or not the buyer can interrogate the seller, and (2) the contextual richness of the situation. We find that the buyers' prediction accuracy is above chance levels, and that interrogation and contextual richness are important factors determining the accuracy. These results show that there are circumstances in which part of the information asymmetry is eliminated by people's ability to spot deception. |
| Keywords: | Deception, lie detection, asymmetric information, face-to-face interaction, experiment, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:edn:sirdps:536&r=cbe |
| By: | Christian Cordes (University of Bremen) |
| Abstract: | This article reviews the most important transfers of this kind into evolutionary economics. It broadly differentiates between approaches that draw on an analogy construction to the biological sphere, those that make metaphorical use of Darwinian ideas, and avenues that are based on the fact that other forms of – cultural – evolution rest upon foundations laid before by natural selection. It is shown that an evolutionary approach within economics informed by insights from cognitive science, evolutionary biology, and anthropology contributes to more realistic models of human behavior in economic contexts. |
| Keywords: | evolutionary economics, human behavior, biological evolution, cultural evolution, generalized Darwinism, continuity hypothesis, Neo-Schumpeterians, American Institutionalism, competition |
| JEL: | B15 B25 B52 D03 Z1 |
| Date: | 2014–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2014-02&r=cbe |
| By: | David P. Byrne; Andrea La Nauze; Leslie A.Martin |
| Abstract: | Information programs that leverage peer comparisons are used to encourage pro-social behavior in many contexts. We document how imperfect information generates heterogenous responses to treatments involving personalized feedback and peer comparisons. In our field experiment in retail electricity, we find that most households either overestimate or underestimate their relative energy consumption pre-treatment. Households that overestimated respond to new information by temporarily increasing electricity consumption, whereas households that underestimated take steps that lead to long term energy conservation. We explore the implications of these results for the external validity and design of information programs. |
| JEL: | C93 D12 D84 L94 Q41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:mlb:wpaper:1180&r=cbe |
| By: | Alejandro Francetich; David M. Kreps |
| Abstract: | The problemof choosing an optimal toolkit day after day,when there is uncertainty concerning the value of different tools that can only be resolved by carrying the tools, is a multi-armed bandit problem with nonindependent arms. Accordingly, except for very simple specifications, this optimization problem cannot (practically) be solved. Decision takers facing this problem presumably resort to decision heuristics, “sensible” rules fordeciding which tools to carry, based on past experience. In this paper, we examine and compare the performance of a variety of heuristics, some very simple and others inspired by the computer-science literature on these problems. Some asymptotic results are obtained, especially concerning the long-run outcomes of using the heuristics, hence these results indicate which heuristics do well when the discount factor is close to one. But our focus is on the relative performance of these heuristics for discount factors bounded away from one, which we study through simulation of the heuristics on a collection of test problems. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:524&r=cbe |
| By: | Bonroy, O.; Garapin, A.; Llerena, D. |
| Abstract: | This paper considers the effects of the opportunity to change partners on communication. We experiment a standard cheap talk game where a player observes a private forecast before disclosing it (truthfully or untruthfully) in a message that he/she sends to his/her partner. Two treatments are applied: i) each two-player team remains unchanged until the experiment ends; and ii) players are offered the possibility to change their partner. We find that the opportunity to change partners affects communication in the relationship positively. Interestingly, this effect is explained by more beliefs in the messages and not by more truthful disclosure. |
| Keywords: | ASYMMETRIC DOMINANCE EDITING;ATTRACTION EFFECT;COMPARABILITY;CONSUMER CHOICE;EXPERIMENTAL ECONOMICS;PRICING FORMATS |
| JEL: | C90 D82 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:2014-05&r=cbe |
| By: | Andreas Pondorfer; Toman Omar Mahmoud; Katrin Rehdanz; Ulrich Schmidt |
| Abstract: | We use a controlled experiment to analyze gender differences in risk preferences and stereotypes about risk preferences of men and women across two distinct island societies in the Pacific: the patrilineal Palawan in the Philippines and the matrilineal Teop in Papua New Guinea. We find no gender differences in actual risk preferences, but evidence for culture-specific stereotypes. Like men in Western societies, Palawan men overestimate women’s actual risk aversion. By contrast, Teop men underestimate women’s actual risk aversion. We argue that observed differences in stereotypes between the two societies are determined by the different social status of women |
| Keywords: | Gender roles, culture, stereotype, experiment, risk aversion |
| JEL: | C93 D81 J15 J16 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1957&r=cbe |
| By: | Mark Ottoni-Wilhelm (Indiana University Purdue University-Indianapolis); Lise Vesterlund (University of Pittsburgh); Huan Xie (Concordia University) |
| Abstract: | The extant experimental design to investigate warm glow and altruism elicits a single measure of crowd-out. Not recognizing that impure altruism predicts crowd-out is a function of giving-by-others, this design's power to reject pure altruism varies with the level of giving-by-others, and it cannot identify the strength of warm glow and altruism preferences. These limitations are addressed with a new design that elicits crowd-out at a low and at a high level of giving-by-others. Consistent with impure altruism we find decreasing crowd-out as giving-by-others increases. However warm glow is weak in our experiment and altruism largely explains why people give. |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:crd:wpaper:14002&r=cbe |
| By: | Robert Nuscheler; Kerstin Roeder |
| Abstract: | Invoking Yaari's dual theory we develop a model of individual vaccination decisions that incorporates quasi-hyperbolic discounting (present-biasedness), risk aversion, and information. We test the resulting hypotheses for the flu season 2010/2011 using a representative German data set. It turns out that quasi-hyperbolic discounting men vaccinate with a significantly lower probability than exponential discounters; they tend to procrastinate. There is no such delay in the prevention behavior of women who tend to vaccinate despite their distorted time preference. Risk aversion is positively related to the probability to vaccinate for men, while the association is negative for women. Well informed individuals have a much higher propensity to vaccinate than poorly informed individuals. Our results suggest that public health policy should not only concentrate on providing information about the flu and the flu shot but also increase the awareness that distorted time preferences may have a bearing on individual prevention decisions. |
| Keywords: | flu shot, prevention, quasi-hyperbolic discounting, risk aversion, information, public health |
| JEL: | D03 D81 H42 I11 I18 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:cch:wpaper:14c004&r=cbe |
| By: | Dalton, Patricio S.; Ghosal, Sayantan |
| Abstract: | This paper examines whether the degree of confidence and overconfidence in one's ability is determined biologically. In articular, we study whether foetal testosterone exposure correlates with an incentive-compatible measure of confidence within an experimental setting. We find that men (rather than women) who were exposed to high testosterone levels in their mother's womb are less likely to overestimate their actual performance, which in turn helps them to gain higher monetary rewards. Men exposed to low prenatal testosterone levels, instead, set unrealistically high expectations which results in self-defeating behaviour. These results from the lab are able to reconcile hitherto disconnected evidence from the field, by providing a link between traders'overconfidence bias, long-term financial returns and prenatal testosterone exposure. |
| Keywords: | 2D:4D, testosterone, neuroeconomics, expectations, overcon dence, self-confidence, goals, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:edn:sirdps:564&r=cbe |