nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒11‒07
fifteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Higher-order Risk Preferences in Social Settings - An Experimental Analysis By Timo Heinrich; Thomas Mayrhofer
  2. Somebody may scold you! A dictator experiment By Agnès Festré; Garrouste Pierre
  3. Giving, taking, and gender in dictator games By Subhasish M. Chowdhury; Joo Young Jeon; Bibhas Saha
  4. Information Effect Regarding Inequality of Opportunities on Redistribution: A Lab Experiment By Gustavo Caballero
  5. Hunger Feeds More The Hungry: Evidence On Cognitive And Affective Empathy By Ioannou, Christos A.; Golshirazi, Farnoush
  6. «Must Reward Hard Work»? An Experiment on Personal Responsibility and Preferences for Redistribution By Sergio Beraldo; Massimiliano Piacenza; Gilberto Turati
  7. Doing it now or later with payoff externalities: Experimental evidence on social time preferences By Giovanni Ponti; Ismael Rodríguez Lara; Daniela Di Cagno
  8. Overcoming moral hazard with social networks in the workplace: An experimental approach By Dhillon, Amrita; Peeters, Ronald; Yuksel, Ayse Muge
  9. Is Self-Reported Risk Aversion Time Variant? By Seeun Jung; Carole Treibich
  10. Whom are you talking with? An experiment on credibility and communication structure By Gilles Grandjean; Marco Mantovani; Ana Mauleon; Vincent Vannetelbosch
  11. Behavioral Economics of Crime Rates and Punishment Levels By Saori Chiba; Kaiwen Leong
  12. Preference Elicitation under Oath By Nicolas Jacquemet; Robert-Vincent Joule; Stephane Luchini; Jason Shogren
  13. Organizing public good provision: Lessons from managerial accounting By Benito Arruñada; Stephen Eliot Hansen
  14. An approximate dual-self model and paradoxes of choice under risk By Fudenberg, Drew; Levine, David K.; Maniadis, Zacharias
  15. An Experimental Study of Persuasion Bias and Social Influence in Networks By Jordi Brandts; Ayça Ebru Giritligil; Roberto A. Weber

  1. By: Timo Heinrich; Thomas Mayrhofer
    Abstract: We study higher-order risk preferences, i.e. prudence and temperance, next to risk aversion in social settings. Previous experimental studies have shown that higher-order risk preferences affect the choices of individuals deciding privately on lotteries that only affect their own pay-off. Yet, most risky and financially relevant decisions in the field are made in the social settings of households or organizations. We aim to narrow the gap between laboratory and field evidence by creating a more realistic decision making environment in the laboratory that allows us to identify the influence of different social settings under controlled conditions. We elicit higher-order risk preferences of individuals and systematic ally vary how an individual’s decision is made (alone or while communicating with a partner) and who is affected by the decision (only the individual or the partner as well). In doing so, we can isolate the effects of other-regarding concerns and communication on choices. We observe that individuals become more risk-averse when the partner is able to communicate with the decision maker. However, we do not observe an influence of social settings on prudence and temperance. Our results reveal that the majority of choices are risk-averse, prudent, and temperate across social settings.
    Keywords: Experiment; individual decisions; group decisions; risk aversion; prudence; temperance
    JEL: C91 C92 D70 D81
    Date: 2014–10
  2. By: Agnès Festré (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université Nice Sophia Antipolis (UNS)); Garrouste Pierre (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université Nice Sophia Antipolis (UNS))
    Abstract: In this contribution, we investigate the effects of observation-only and observation with feedback from a third-party, in a one-shot dictator game (DG). In addition to a baseline condition (DG), a third-party anonymous subject is introduced who either silently observes or observes and gives feedback by choosing one of seven messages consisting of varying degrees of (dis)satisfaction. We found that observation coupled with feedback significantly increases dictators' propositions, while no significant effect is found for observation-only. We conclude that regard by others matters only if it is linked to social factors such as communication. This complements the literature that argues that altruistic behavior is instrumental in serving other selfish (or non-purely altruistic) ends such as self-reputation or social approval. This experiment contributes to the growing literature aimed at decreasing the artificiality of DG designs, by increasing their practicability and external validity
    Keywords: social psychology; game theory; communication; beliefs; observation; altruistic behavior
    Date: 2015
  3. By: Subhasish M. Chowdhury (University of East Anglia); Joo Young Jeon (University of East Anglia); Bibhas Saha (Durham University)
    Abstract: We investigate whether a pure framing has any effect on the decisions made in a dictator game. We run a between subject dictator game with a giving and a taking frame whilst keeping the strategy space the same. Complying with the literature we find no overall difference in the amount allocated to the recipient across treatments. Contributing to the literature we further find that females are not only more altruistic than males; they also allocate significantly more to the recipient in the taking game compared to the giving game. Males do not show such behavior. A taking frame makes males significantly more selfish, but females significantly more egalitarian compared to a giving frame.
    Keywords: altruism, dictator game, taking game, framing, gender
    JEL: C91 D64 D84 J16
    Date: 2014
  4. By: Gustavo Caballero (University of Calgary)
    Abstract: This paper presents evidence from a laboratory experiment regarding the effect of information about opportunities and effort in redistributive behaviour. In the experiment, individuals are randomly selected into one of two groups, each endowed with differing probabilities of earning $20. By exerting effort, individuals increase their probability of earning the $20 but conditional on effort the difference in probabilities remain constant so groups are determining opportunities. After initial earnings are determined, I examine redistribution using a dictator game where the dictator earned $20 and the receiver earned $0. Treatments vary the level of inequality of opportunities and information regarding receivers' opportunities and effort. I find dictators consistently rewarding receivers' high effort. However, dictators do not consider receivers' opportunities nor their own opportunities when redistributing.
    Keywords: Information, redistribution, inequality of opportunities, lab experiment
    JEL: C91 D6
    Date: 2014–10–15
  5. By: Ioannou, Christos A.; Golshirazi, Farnoush
    Abstract: We investigate experimentally the impact of cognitive and affective empathy on behavior. A novelty of the study is that we do so directly without invoking responses to questionnaires, but by manipulating the state of hunger of participants in the single-shot Dictator game during the holy month of Ramadan. Our sample consists of male workers in the Sepaahaan (car battery) manufacturing factory in the city of Isfahan in Iran. We find that, only, affective empathy amplifies altruistic behavior. More specifically, hungry dictators transfer more money to hungry recipients than fed dictators. The difference is statistically as well as economically significant.
    Date: 2014–09–23
  6. By: Sergio Beraldo (Università di Napoli Federico II and CSEF); Massimiliano Piacenza (Università di Torino); Gilberto Turati (Università di Torino)
    Abstract: This study designs a laboratory experiment to investigate the link between personal responsibility and individual preferences for redistribution. We contribute to the literature by considering two key insights: first, effort is costly; second, its fruits can be grasped only in the future. Participants face a crucial trade-off between providing a costly effort or free-riding on their fellows’ effort, playing in a context where the size and the distribution of the pie depend both on circumstances beyond their control, and on their choice of working hard and voting for redistribution. Our findings suggest that people tend to reward effort: the demand for redistribution decreases when the observed average effort in the society increases and the cost of effort is higher. Moreover, people ask for less redistribution the more they are interested in the future. These results hold controlling for a number of other possible determinants of the preferences for redistribution
    Keywords: income redistribution, personal responsibility, individual effort, social mobility, inter-temporal preferences
    JEL: C91 D63 D91 H24 H31
    Date: 2014–10–18
  7. By: Giovanni Ponti (Universidad de Alicante); Ismael Rodríguez Lara (Universidad de Alicante); Daniela Di Cagno (School of Government)
    Abstract: We report experimental evidence on the effects of social preferences on intertemporal decisions. To this aim, we set up an intertemporal Dictator Game and investigate whether (and how) subjects change theirchoices, compared with those they had taken in absence of any payoff externality in a previous stage of the experiment. We run two treatments -INFO and BELIEF, respectively- depending on whether Dictators know -or are asked to elicit- their assigned Recipients' risk and time preferences. We find that high (own) risk aversion is associated with low (own) discounting. We also find that (heterogeneous) socialtime preferences are significant determinants of choices, in that Dictators display a marked propensityto account for the Recipients' intertemporal concerns.
    Keywords: intertemporal decisions, time preferences, social preferences.
    Date: 2014–09
  8. By: Dhillon, Amrita (King's College London); Peeters, Ronald (Maastricht University); Yuksel, Ayse Muge (Maastricht University)
    Abstract: The use of social networks in the workplace has been documented by many authors, although the reasons for their widespread prevalence are less well known. In this paper we present evidence based on a combined eld-laboratory experiment that social networks are used by employers to reduce worker moral hazard. The worker chooses an eort level given a xed wage under dierent settings of social proximity. Social proximity is captured using actual Facebook friendship information revealed anonymously to subjects once they have been recruited. Since employers themselves do not have access to social connections, they delegate the decision to referrers who can select among workers with dierent degrees of social proximity to themselves. We show that employers choose referrals over anonymous hiring about 80% of the time. In keeping with our predictions, referrers also choose workers with a greater social proximity to themselves and workers who are closer to referrers indeed pay back more to the referrer. The advantage of the lab setting is that we can isolate moral hazard and directed altruism as the main driving forces for these results.
    Keywords: Eciency wage contracts, Moral hazard, Dictator game, Referrals, Altruism, Reciprocity, Directed altruism, Social proximity, Facebook, Experiment, Social networks, Strength of ties, Spot market.
    Date: 2014
  9. By: Seeun Jung; Carole Treibich (Université de Cergy-Pontoise, THEMA; CNRS & EHESS)
    Abstract: We examine a Japanese Panel Survey in order to check whether self-reported risk aversion varies over time. In most panels, risk attitude variables are collected only once (found in only one survey wave), and it is assumed that self-reported risk aversion reflects the individual's time-invariant component of preferences to- ward risk. Nonetheless, the question could be asked as to whether the financial and macro shocks a person faces over his lifetime modify his risk aversion. Our em- pirical analysis provides evidence that risk aversion is composed of a time-variant part and shows that the variation cannot be ascribed to measurement error or noise given that it is related to income shocks. Taking into account the fact that there are time-variant factors in risk aversion, we investigate how often it is preferable to collect the risk aversion measure in long panel surveys. Our result suggests that the best predictor of current behavior is the average of risk aversion, where risk aversion is collected every two years. It is therefore advisable for risk aversion measures to be collected every two years in long panel surveys.
    Keywords: Risk Aversion; Panel Data
    JEL: C33 D31 J11
    Date: 2014
  10. By: Gilles Grandjean; Marco Mantovani; Ana Mauleon; Vincent Vannetelbosch
    Abstract: The paper analyzes the role of the structure of communication - i.e. who is talking with whom - on the choice of messages, on their credibility and on actual play. We run an experiment in a three-player coordination game with Pareto ranked equilibria, where a pair of agents has a profitable joint deviation from the Pareto-dominant equilibrium. According to our analysis of credibility, the subjects should communicate and play the Pareto optimal equilibrium only when communication is public. When pairs of agents exchange messages privately, the players should play the Pareto dominated equilibrium and disregard communication. The experimental data conform to our predictions: the agents reach the Pareto-dominant equilibrium only when announcing to play it is credible. When private communication is allowed, lying is prevalent, and players converge to the Pareto-dominated equilibrium. Nevertheless, at the individual level, players’ beliefs and choices tend to react to messages even when these are non-credible.
    Keywords: cheap talk, coordination, coalitions, experiment
    JEL: C72 C91 D03 D83
    Date: 2014–10
  11. By: Saori Chiba; Kaiwen Leong
    Abstract: Empirical studies have shown, paradoxically, that increasing the probability of apprehension can correlate with an increase in the total number of criminal actions. To examine this phenomenon, this paper develops a theory of "personal rules" based on the tradeoff between oneÕs self-image of criminal productivity and the temptation Ð salience of the present Ð of taking the easy way out by committing a crime. This theory analyzes transformation of lapses into precedents that undermine future self-restraint. The foundation for this transformation is imperfect recall of oneÕs own criminal productivity within certain defined parameters, which leads people to draw inaccurate inferences from their past actions. Rationalization may lead to overestimation of the expected utility of committing a crime when the opportunity presents itself.
    Keywords: Crime, Imperfect Recall,Willpower.
    JEL: D03 D81 K42
    Date: 2014–10
  12. By: Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Robert-Vincent Joule (LPS-AIX - Laboratoire de Psychologie Sociale - Université de Provence - Aix-Marseille I : EA849); Stephane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR7316); Jason Shogren (Departement of Economics and Finance, University of Wyoming - University of Wyoming)
    Abstract: Eliciting sincere preferences for non-market goods remain a challenge due to the discrepency between hypothetical and real behavior and false zeros. The gap arises because people either overstate hypothetical values or understate real commitments or a combination of both. Herein we examine whether the traditional real-world institution of the solemn oath can improve preference elicitation. Applying the social psychology theory on the oath as a truth-telling-commitment device, we ask our bidders to swear on their honour to give honest answers prior to participating in an incentive-compatible second-price auction. The oath is an ancillary mechanism to commit bidders to bid sincerely in a second-price auction. Results from our induced valuation testbed treatments suggest that the oath-only auctions outperform all our other auctions (real and hypothetical). In our homegrown valuation treatments eliciting preferences for dolphin protection, the oath-only design induced people to treat as binding both their experimental budget constraint (i.e., lower values on the high end of the value distribution) and participation constraint (i.e., positive values in place of the zero bids used to opt-out of auction). Based on companion treatments, we show the oath works through an increase in the willingness to tell the truth, due to a strengthening of the intrinsic motivation to do so.
    Keywords: Oath; Commitment; Vickrey auction; Hypothetical bias; Induced values; Homegrown values
    Date: 2013–01
  13. By: Benito Arruñada; Stephen Eliot Hansen
    Abstract: This paper applies ideas and findings from Managerial Accounting to the problem of public good provision. It first links the problems of traditional bureaucracies with those of "discretionary expense centers", which are characterized by poor user and supplier incentives as well as overproduction. It then describes alternative hybrid organizations that delegate authority and provide incentives on some dimensions, while maintaining control on others. Finally, it illustrates the ideas with several cross-country case studies on public registries, illustrating that such hybrids may provide a superior, if imperfect, solution to the problems that governments face when lacking sufficient information to directly control the activities of public goods' providers.
    Keywords: Public Good Provision, Managerial Accounting.
    JEL: H40 M48
    Date: 2014–09
  14. By: Fudenberg, Drew; Levine, David K.; Maniadis, Zacharias
    Abstract: We derive a simplified version of the model of Fudenberg and Levine, 2006 and Fudenberg and Levine, 2011 and show how this approximate model is useful in explaining choice under risk. We show that in the simple case of three outcomes, the model can generate indifference curves that “fan out†in the Marschak–Machina triangle, and thus can explain the well-known Allais and common ratio paradoxes that models such as prospect theory and regret theory are designed to capture. At the same time, our model is consistent with modern macroeconomic theory and evidence and generates predictions across a much wider set of domains than these models.
    Date: 2014
  15. By: Jordi Brandts (Institutd'AnalisiEconomica(CSIC); Barcelona GSE); Ayça Ebru Giritligil (Murat Sertel Center for Advanced Economic Studies; İstanbul Bilgi University); Roberto A. Weber (Department of Economics, University of Zurich)
    Abstract: In many areas of social life individuals receive information about a particular issue of interest from multiple sources. When these sources are connected through a network then proper aggregation of this information by an individual involves taking into account the structure of this network. The inability to aggregate properly may lead to various types of distortions. In our experiment a number of agents all want to find out the value of a particular parameter unknown to all. Agents receive private signals about the parameter and agents can communicate their estimates of the parameter repeatedly through a network, the structure of which is known by all players. We present results from experiments with four different networks. We find that the information of agents who have more outgoing links in a network gets more weight in the information aggregation of the other agents than it optimally should. Our results are consistent with the model of “persuasion bias” of De Marzo et al. (2003) and at odds with an alternative heuristic according to which the most influential agents are those with more incoming links.
    Date: 2014–10

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