nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒11‒22
nine papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Gender and economic preferences in a large random sample By Boschini, Anne; Dreber, Anna; von Essen, Emma; Muren, Astri; Ranehill, Eva
  2. Cognitive load and strategic sophistication By Allred, Sarah; Duffy, Sean; Smith, John
  3. Simplified approval mechanism for social dilemmas By Xiaochuan Huang; Takehito Masuda; Yoshitaka Okano; Tatsuyoshi Saijo
  4. Cognitive constraints increase estimation biases: Cognitive load and delay in judgments By Allred, Sarah; Crawford, L. Elizabeth; Duffy, Sean; Smith, John
  5. Hold on to it? An Experimental Analysis of the Disposition Effect By Matteo Ploner
  6. Dishonesty under scrutiny By Jeroen van de Ven; Marie Claire Villeval
  7. Predictable and Predictive Emotions: Explaining Cheap Signals and Trust Re-Extension By Schniter, Eric; Sheremeta, Roman
  8. Shirking, Monitoring, and Risk Attitudes By Seeun Jung; Kenneth Houngbedji
  9. Emotions-at-Risk: An Experimental Investigation into Emotions, Option Prices and Risk Perception By Roman Kräussl; Ronald Bosman; Thomas van Galen

  1. By: Boschini, Anne (Linköping University); Dreber, Anna (Stockholm School of Economics); von Essen, Emma (Aarhus University); Muren, Astri (Dept. of Economics, Stockholm University); Ranehill, Eva (University of Zurich)
    Abstract: We explore gender differences in preferences related to altruism, fairness, cooperation, trust, coordination, risk and competitiveness in an experiment with a large random sample of the Swedish population. In addition to a baseline treatment, we have treatments where participants are primed with their gender or know the counterpart’s gender. We find no behavioral differences between treatments, but some gender differences within specific treatments: men are in some instances less generous, more trusting, and more competitive than women. Aside from a lack of gender differences in risk taking, our results are roughly in line with previous literature.
    Keywords: Gender differences; Random sample; Social preferences; Risk-taking; Competitiveness; Dictator games; Priming; Experiment
    JEL: C91 C93 J16
    Date: 2014–10–23
  2. By: Allred, Sarah; Duffy, Sean; Smith, John
    Abstract: We study the relationship between the cognitive load manipulation and strategic sophistication. The cognitive load manipulation is designed to reduce the subject's cognitive resources that are available for deliberation on a choice. In our experiment, subjects are placed under a high cognitive load (given a difficult number to remember) or a low cognitive load (given a number that is not difficult to remember). Subsequently, the subjects play a one-shot game then they are asked to recall the number. This procedure is repeated for various games. We find a nuanced and nonmonotonic relationship between cognitive load and strategic sophistication. This relationship is consistent with two effects. First, subjects under a high cognitive load tend to exhibit behavior consistent with the reduced ability to compute the optimal decision. Second, the cognitive load tends to affect the subject's perception of their relative standing in the distribution of the available cognitive resources. The net result of these two opposing effects depends on the strategic setting. Our experiment provides evidence on the literature that examines the relationship between measures of cognitive ability and strategic sophistication.
    Keywords: bounded rationality, experimental economics, working memory load, cognition, strategic sophistication, rational inattention
    JEL: C72 C91
    Date: 2014–10–22
  3. By: Xiaochuan Huang (DT Captical Management Co., LTD.); Takehito Masuda (Research Center for Social Design Engineering, Kochi University of Technology); Yoshitaka Okano (Kochi University of Technology); Tatsuyoshi Saijo (Kochi University of Technology)
    Abstract: We develop the simplified approval mechanism (SAM) for n-player public good provision with binary choice. The SAM provides each cooperator a chance to revise his choice when players’ choices are not unanimous. Hence, players can easily retaliate against defection as widely proposed in repeated game theory or conditionally cooperate as observed in voluntary contribution game experiments. The SAM implements the cooperative outcome in backward elimination of weakly dominated strategies (BEWDS). The implementation result also holds in limit logit agent quantal response equilibrium (LAQRE). The average cooperation rate in the SAM experiment is 86.6% across 15 periods, which increases to 96.0% after period 5. Analyzing choice data and responses to the pre-play questionnaires reveals that subjects defect because of free-riding motivations or feelings of uncertainty in others’ cooperation. After observing defections, cooperators switch to defection, which decreases cooperation rates between the first and second stages of each period.
    Keywords: social dilemma, public good, experiment
    JEL: C72 C92 D74 H41 P43
    Date: 2014–10
  4. By: Allred, Sarah; Crawford, L. Elizabeth; Duffy, Sean; Smith, John
    Abstract: Previous work has demonstrated that memory for simple stimuli can be biased by information about the category of which the stimulus is a member. These biases have been interpreted as optimally integrating noisy sensory information with category information. A separate literature has demonstrated that cognitive load can lead to biases in social cognition. Here we link the two, asking whether delay (Experiment 1) and cognitive load (Experiment 2) affect the extent to which observers' memories for simple line stimuli are affected by category information. We found that delay and cognitive load have similar effects: both manipulations increase the weight of category information on memory for stimuli. We discuss the broad implications of such findings on fields such as eyewitness testimony.
    Keywords: cognitive load; delay; judgment; estimation biases; memory; category effects
    JEL: C91
    Date: 2014–08–30
  5. By: Matteo Ploner
    Abstract: This paper experimentally investigates a well-known anomaly in portfolio management, i.e. the fact that paper losses are realized less than paper gains (disposition effect). The existence of the disposition effect is documented in a simple risk task which demonstrates that the anomaly is most likely due to a higher degree of risk aversion of those experiencing a loss in a prior investment relative to those experiencing a gain. However, when an “emotionally colder” choice protocol is adopted, a reverse dispo- sition effect is observed. The results of the study may help design trading rules to overcome the pitfalls of the disposition effect.
    Keywords: Disposition Effect, Decision Making under Uncertainty, Behavioral Finance, Experiments, Prospect Theory
    Date: 2014
  6. By: Jeroen van de Ven (ACLE (University of Amsterdam) and Tinbergen Institute. Address: Valckeniersstraat 65-67, 1018 XE Amsterdam, The Netherlands); Marie Claire Villeval (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)
    Abstract: We investigate how different forms of scrutiny affect dishonesty, using Gneezy’s (2005) deception game. We add a third player whose interests are aligned with those of the sender. We find that lying behavior is not sensitive to revealing the sender’s identity to the observer. The option for observers to communicate with the sender, and the option to reveal the sender’s lies to the receiver also do not affect lying behavior. Even more striking, senders whose identity is revealed to their observer do not lie less when their interests are misaligned with those of the observer.
    Keywords: Deception, lies, dishonesty, social image, experiment
    JEL: C91 D83
    Date: 2014
  7. By: Schniter, Eric; Sheremeta, Roman
    Abstract: Despite normative predictions from economics and biology, unrelated strangers will often develop the trust necessary to reap gains from one-shot economic exchange opportunities. This appears to be especially true when declared intentions and emotions can be cheaply communicated. Perhaps even more puzzling to economists and biologists is the observation that anonymous and unrelated individuals, known to have breached trust, often make effective use of cheap signals, such as promises and apologies, to encourage trust re-extension. We used a pair of trust games with one-way communication and an emotion survey to investigate the role of emotions in regulating the propensity to message, apologize, re-extend trust, and demonstrate trustworthiness. This design allowed us to observe the endogenous emergence and natural distribution of trust-relevant behaviors, remedial strategies used by promise-breakers, their effects on behavior, and subsequent outcomes. We found that emotions triggered by interaction outcomes are predictable and also predict subsequent apology and trust re-extension. The role of emotions in behavioral regulation helps explain why messages are produced, when they can be trusted, and when trust will be re-extended.
    Keywords: emotion, cheap signal, promise, apology, trust game, reciprocity, experiment
    JEL: C9 C91 C92
    Date: 2014–10–15
  8. By: Seeun Jung; Kenneth Houngbedji (Université de Cergy-Pontoise, THEMA; Paris School of Economics)
    Abstract: This paper studies the effect of risk attitudes on effort under different monitor- ing schemes. It uses a theoretical model which relaxes the assumption of agents being risk neutral, and investigates changes of effort as monitoring varies. The pre- dictions of the theoretical model are tested using an original experimental setting where the level of risk attitudes is measured and monitoring rates vary exogenously. Our results show that shirking decreases with risk aversion, being female, and mon- itoring. Moreover, monitoring is more effective to curtail shirking behaviours for subjects who are less risk averse, although the size of the impact is rather small.
    Keywords: Shirking; Monitoring; Risk under Uncertainty; Effort
    JEL: C91 D61 D81 D86
    Date: 2014
  9. By: Roman Kräussl; Ronald Bosman; Thomas van Galen (LSF)
    Abstract: This paper experimentally investigates how emotions are associated with option prices and risk perception. Using a binary lottery, we find evidence that the emotion ‘surprise’ plays a significant role in the negative correlation between lottery returns and estimates of the price of a put option. Our findings shed new light on various existing theories on emotions and affect. We find gratitude, admiration, and joy to be positively associated with risk perception, although the affect heuristic predicts a negative association. In contrast with the predictions of the appraisal tendency framework (ATF), we document a negative correlation between option price and surprise for lottery winners. Finally, the results show that the option price is not associated with risk perception as commonly used in psychology.
    Keywords: Risk perception, emotions, affect heuristic, option prices, experiment
    JEL: D81 D03 G17
    Date: 2014

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