nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒11‒17
seven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Intergenerational Cooperation: an Experimental Study on Beliefs By Kulesz, Micaela M.; Dittrich, Dennis A. V.
  2. Omission Effects in Fairness Behavior By Gärtner, Manja; Sandberg, Anna
  3. Risk, Uncertainty and Entrepreneurship: Evidence From a Lab-in-the-Field Experiment By Martin Koudstaal; Randolph Sloof; Mirjam van Praag
  4. Second thoughts: Theory and experiment in social dilemmas By Tatsuyoshi Saijo; Yoshitaka Okano
  5. A target-based foundation for the "hard-easy effect" bias By Robert Bordley; Marco LiCalzi; Luisa Tibiletti
  6. Does Relative Grading help Male Students? Evidence from a Field Experiment in the Classroom By Eszter Czibor; Sander Onderstal; Randolph Sloof; Mirjam van Praag
  7. Are better students really less overconfident? A preliminary test of different measures By Lotito, Gianna; Maffioletti, Anna; Novarese, Marco

  1. By: Kulesz, Micaela M.; Dittrich, Dennis A. V.
    Abstract: We report on an experiment in which subjects older than 55 years old and subjects younger than 26 years old play repeatedly 4 versions of the centipede game. For each game we define four treatments that allow us to study cooperation and belief formation of these two age groups. We find that beliefs about the others' age group shape the outcome: while seniors are cooperative and generous with juniors when they incur lower opportunity costs, for juniors it is when playing with seniors that they learn the way to the theoretical solution by smoothly decreasing their cooperation levels.
    Keywords: Centipede Game, Age differences, Decision Making, Beliefs, Social Preferences.
    JEL: C9
    Date: 2014–04
  2. By: Gärtner, Manja (Department of Economics); Sandberg, Anna (Institute for International Economic Studies (IIES))
    Abstract: We investigate whether individuals are more prone to act selfishly if they can passively allow for an outcome to be implemented (omission) rather than having to make an active choice (commission). In most settings, active and passive choice alternatives differ in terms of factors such as defaults, costs of taking an action, and awareness. Isolating the distinction between active and passive choices in an experiment, we find no omission effect in fairness behavior. This suggests that increased selfishness through omission, as observed in various economic choice situations, is driven by these other factors rather than a preference for selfish omissions.
    Keywords: Fairness; Social preferences; Morals; Dictator game; Omission
    JEL: D03
    Date: 2014–09–24
  3. By: Martin Koudstaal (University of Amsterdam); Randolph Sloof (University of Amsterdam, the Netherlands); Mirjam van Praag (Copenhagen Business School, Denmark)
    Abstract: Theory predicts that entrepreneurs have distinct attitudes towards risk and uncertainty, but empirical evidence is mixed. To better understand the unique behavioral characteristics of entrepreneurs and the causes of these mixed results, we perform a large ‘lab-in-the-field’ experiment comparing entrepreneurs to managers – a suitable comparison group – and employees (n = 2288). The results indicate that entrepreneurs perceive themselves as less risk averse than managers and employees, in line with common wisdom. However, when using experimental incentivized measures, the differences are subtler. Entrepreneurs are only found to be unique in their lower degree of loss aversion, and not in their risk or ambiguity aversion. This combination of results might be explained by our finding that perceived risk attitude is not only correlated to risk aversion but also to loss aversion. Overall, we therefore suggest using a broader definition of risk that captures this unique feature of entrepreneurs; their willingness to risk losses.
    Keywords: Entrepreneurs, managers, risk aversion, loss aversion, ambiguity aversion, lab-in- the field experiment
    JEL: L26 C93 D03
    Date: 2014–10–17
  4. By: Tatsuyoshi Saijo (Kochi University of Technology); Yoshitaka Okano (Kochi University of Technology)
    Abstract: This paper shows that second thoughts are not an innocent device in our daily life, but is human wisdom that plays an important role in resolving problems such as social dilemmas. We design the simplest possible mechanism to achieve Pareto efficiency in social dilemmas, and then compare the performance of this mechanism with and without second thoughts. First, second thoughts change the payoff structure of the game in favor of cooperation. Second, the mechanism with second thoughts performs very well experimentally, even from the first period. Third, this mechanism is robust even when players deviate from rational choices.
    Keywords: Second thoughts, Social Dilemma, Cooperation
    JEL: C72 C92 D74
    Date: 2014–10
  5. By: Robert Bordley; Marco LiCalzi; Luisa Tibiletti
    Abstract: The "hard-easy effect" is a well-known cognitive bias on self-confidence calibration that refers to a tendency to overestimate the probability of success in hard-perceived tasks, and to underestimate it in easy-perceived tasks. This paper provides a target-based foundation for this effect, and predicts its occurrence in the expected utility framework when utility functions are S-shaped and asymmetrically tailed. First, we introduce a definition of hard-perceived and easy-perceived task based on the mismatch between an uncertain target to meet and a suitably symmetric reference point. Second, switching from a target-based language to a utility-based language, we show how this maps to an equivalence between the hard-perceived target/gain seeking and the easy-perceived target/loss aversion. Third, we characterize the agent's miscalibration in self-confidence. Finally, we derive sufficient conditions for the Òhard-easy effectÓ and the "reversed hard-easy effect" to hold.
    Keywords: Expected utility, Hard-easy effect bias, Endowment effect bias, Sunk cost effect bias, Benchmarking procedure, Loss-gain asymmetry, van Zwet skewness conditions
    JEL: C91 D81
    Date: 2014–10
  6. By: Eszter Czibor (University of Amsterdam); Sander Onderstal (University of Amsterdam); Randolph Sloof (University of Amsterdam); Mirjam van Praag (Copenhagen Business School, Denmark)
    Abstract: The provision of non-pecuniary incentives in education is a topic that has received much scholarly attention lately. Our paper contributes to this discussion by investigating the effectiveness of grade incentives in increasing student performance. We perform a direct comparison of the two most commonly used grading practices: the absolute (i.e., criterion-referenced) and the relative (i.e., norm-referenced) grading schemes in a large-scale field experiment at a university. We hypothesize that relative grading, by creating a rank-order tournament in the classroom, provides stronger incentives for male students than absolute grading. In the full sample, we find weak support for our hypothesis. Among the more motivated students we find evidence that men indeed score significantly higher on the test when graded on a curve. Female students, irrespective of their motivation, do not increase their scores under relative grading. Since women slightly outperform men under absolute grading, grading on a curve actually narrows the gender gap in performance.
    Keywords: Education, Test performance, Grade incentives, Competition, Gender, Field experiment
    JEL: I21 I23 A22 D03 C93
    Date: 2014–08–28
  7. By: Lotito, Gianna; Maffioletti, Anna; Novarese, Marco
    Abstract: In this work we use data from two sets of midterm exams and question-by-question evaluations of confidence levels and construct different indicators in order to study predictive ability and overconfidence. Our results show that (1) there is a significant evidence of a good ability of self-evaluation on the side of the best students; (2) worse metacognition does not seem to explain overconfidence. This suggests that different methods of investigating overconfidence might lead to results which are at least partially different from the ones discussed in the existing literature
    Keywords: overconfidence; metacognition; predictive ability; performance
    JEL: A22
    Date: 2014–10

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