nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒12‒08
fourteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Norms Make Preferences Social By Erik Kimbrough; Alexander Vostroknutov
  2. Behavioral Economics of Education By Koch, Alexander K.; Nafziger, Julia; Nielsen, Helena Skyt
  3. Social costs of inequality: Heterogeneous endowments in public-good experiments By Keser, Claudia; Markstädter, Andreas; Schmidt, Martin; Schnitzler, Cornelius
  4. Improving voluntary public good provision by a non-governmental, endogenous matching mechanism: Experimental evidence By Reif, Christiane; Rübbelke, Dirk; Löschel, Andreas
  5. Voluntary Contributions to the Establishment and Operation of Public Goods: Theory and Experimental Evidence By Arbel, Yuval; Bar-El, Ronen; Schwarz, Mordechai E.; Tobol, Yossi
  6. Grades and Rank: Impacts of Non-Financial Incentives on Test Performance By Jalava, Nina; Joensen, Juanna Schrøter; Pellas, Elin
  7. The perils of peer punishment: evidence from a common pool resource framed field experiment By de Melo, Gioia; Piaggio, Matías
  8. Statistical Power of Within and Between-Subjects Designs in Economic Experiments By Bellemare, Charles; Bissonnette, Luc; Kröger, Sabine
  9. Expected prices as reference points: Theory and experiments By Wenner, Lukas
  10. Anchoring in economics: On Frey and Gallus on the aggregation of behavioural anomalies By Earl, Peter E.
  11. Can't Touch This! Similarity And Willingness to Keep "Dirty Money" By David Johnson; Sebastian Goerg; Jonathan Rogers
  12. Emotion Venting and Punishment in Public Good Experiments By David L. Dickinson; David Masclet
  13. The Effect of Communication Channels on Promise-Making and Promise-Keeping By Conrads, Julian; Reggiani, Tommaso
  14. Exchange asymmetries for bads? Experimental evidence By Dertwinkel-Kalt, Markus; Köhler, Katrin

  1. By: Erik Kimbrough (Simon Fraser University); Alexander Vostroknutov (Maastricht University)
    Abstract: We explore the idea that prosocial behavior in experimental games is driven by social norms imported into the laboratory. Under this view, differences in behavior across subjects is driven by heterogeneity in sensitivity to social norms. We introduce an incentivized method of eliciting individual norm-sensitivity, and we show how it relates to play in public goods, trust, dictator and ultimatum games. We show how our observations can be rationalized in a stylized model of norm-dependent preferences under reasonable assumptions about the nature of social norms. Then we directly elicit norms in these games to test the robustness of our interpretation.
    Keywords: experimental economics, norms, social preferences, conditional cooperation, reciprocity
    JEL: C91 C92 D03
    Date: 2014–10
  2. By: Koch, Alexander K. (Aarhus University); Nafziger, Julia (Aarhus University); Nielsen, Helena Skyt (Aarhus University)
    Abstract: During the last decade knowledge about human behavior from psychology and sociology has enhanced the field of economics of education. By now research recognizes cognitive skills (as measured by achievement tests) and soft skills (personality traits not adequately measured by achievement tests) as equally important drivers of later economic outcomes, and skills are seen as multi-dimensional rather than one-dimensional. Explicitly accounting for soft skills often implies departing from the standard economic model by integrating concepts studied in behavioral and experimental economics, such as self-control, willingness to compete, intrinsic motivation, and self-confidence. We review how approaches from behavioral economics help our understanding of the complexity of educational investments and outcomes, and we discuss what insights can be gained from such concepts in the context of education.
    Keywords: non-cognitive skills, schooling, educational decision making, soft skills, behavioral economics
    JEL: D03 I20
    Date: 2014–09
  3. By: Keser, Claudia; Markstädter, Andreas; Schmidt, Martin; Schnitzler, Cornelius
    Abstract: We compare voluntary contributions to the financing of a public good in a symmetric setting to those in asymmetric settings, in which four players have different, randomly allocated endowments. We observe that a weak asymmetry in the endowment distribution leads to the same contribution level as symmetry. Players tend to contribute the same proportion of their respective endowment. In a strongly asymmetric setting, where one player has a higher endowment than the three other players together, we observe significantly lower group contributions than in the other settings. The super-rich player does not contribute significantly more than what the others contribute on average and thus a much lower proportion of the endowment.
    Keywords: experimental economics,linear public good,income heterogeneity
    JEL: C92 D63 H41
    Date: 2014
  4. By: Reif, Christiane; Rübbelke, Dirk; Löschel, Andreas
    Abstract: Social norms can help to foster cooperation and to overcome the free-rider problem in private provision of public goods. This paper focuses on the enforcement of social norms by a self-introduced punishment and reward scheme. We analyse if subjects achieve to implement a norm-enforcement mechanism at their own expense by applying the theory of non-governmental norm-enforcement by Buchholz et al. (2014) in a laboratory experiment. Based on their theory without central authority and endogenously determined enforcement mechanism, we implement a two-stage public good game: At the first stage subjects determine the strength of penalty/reward on their own and in the second stage they decide on their contributions to the public good. We find that the mechanism by Buchholz et al. (2014) leads to a higher public good contribution than without the use of any mechanism. Only in a few cases groups end up with a zero enforcement mechanism. This result indicates that subjects are apparently willing to contribute funds for implementing an enforcement mechanism. Moreover, higher enforcement parameters lead to higher public good contributions in the second stage, although too high enforcement parameters lead to unreachable theoretical optima.
    Keywords: laboratory experiment,public good,matching mechanism,social norms,norm enforcement
    JEL: H41 C92
    Date: 2014
  5. By: Arbel, Yuval (School of Business, Carmel Academic Center); Bar-El, Ronen (Open University of Israel); Schwarz, Mordechai E. (Open University of Israel); Tobol, Yossi (Jerusalem College of Technology (JTC))
    Abstract: We study the dynamics of the private provision of a public good that requires both capacity buildup and ongoing operating costs. We show that setting a time limit for the collection of contributions dedicated to capacity buildup minimizes the utility loss at the Nash equilibrium. We test the theoretical model empirically by conducting contribution game experiments with religious Jewish students for the procurement of sustainable supplies for their campus synagogues and ongoing operations. The empirical findings support the model's prediction and demonstrate that the theory fairly describes the pattern of contributions when the group of contributors attributes high intrinsic value to the public good. More specifically, we find that total contributions increase over time, contributions to the capacity buildup increase with the time limit and with the number of contributors, and contributions to the capacity buildup decrease with ongoing operating costs. Additionally, we determine that gender and culture affect the pattern of contributions. We also find that individuals prefer to contribute to sustainable supplies, rather than to their ongoing operations. Our paper has practical implications for the financing of public goods through voluntary provisions.
    Keywords: differential games, experiment, public goods, voluntary provision
    JEL: C73 C91 C92 H41
    Date: 2014–10
  6. By: Jalava, Nina (Stockholm School of Economics); Joensen, Juanna Schrøter (Stockholm School of Economics); Pellas, Elin (Stockholm School of Economics)
    Abstract: How does effort respond to being graded and ranked? This paper examines the effects of non-financial incentives on test performance. We conduct a randomized field experiment on more than a thousand sixth graders in Swedish primary schools. Extrinsic non-financial incentives play an important role in motivating highly skilled students to exert more effort. We find significant differences in test scores between the intrinsically motivated control group and three of four extrinsically motivated treatment groups. The only treatment not increasing test performance is criterion-based grading on an A-F scale, which is the typical grading method. Test performance is significantly higher if employing rank-based grading or giving students a symbolic reward. The motivational strengths of the non- financial incentives differ across the test score distribution, across the skill distribution, with peer familiarity, and with respect to gender. Boys are only motivated by rank-based incentives, while girls are also motivated by receiving a symbolic reward. Rank-based grading and symbolic rewards tend to crowd out intrinsic motivation for students with low skills, while girls also respond less to rank-based incentives if tested with less familiar peers.
    Keywords: test-taking, performance incentives, effort, extrinsic and intrinsic motivation, randomized experiment
    JEL: I20 I21 D03 C93
    Date: 2014–08
  7. By: de Melo, Gioia; Piaggio, Matías
    Abstract: We provide experimental evidence on the effects of non-monetary punishment by peers among communities of Uruguayan fishers exploiting a common pool resource (CPR). We combined this treatment with an in-group (groups from a single community) / mixed group (groups composed of fishers from different communities) treatment. Our aim is to compare the effects of non-monetary sanctions in a context in which individuals exploiting a CPR belong to different communities relative to the case in which only individuals from the same community are allowed to exploit the resource. We find that mixed groups—unlike in-groups—reduce their exploitation of the resource in response to the threat of punishment. We do not find any differences in behavior between in-groups and mixed groups when the possibility of being punished is not available. The effectiveness of non-monetary punishment is reduced because cooperation was not perceived as the unique social norm. In such cases there is substantial antisocial punishment, which leads to increased extraction of the CPR by those who are unfairly punished. These findings indicate that effective peer punishment requires coordination to prevent antisocial targeting and to clarify the social signal conveyed by punishment.
    Keywords: non-monetary punishment, in-group bias, framed field experimen, social preferences, commmon pool resource, Community/Rural/Urban Development, Environmental Economics and Policy, Institutional and Behavioral Economics, D03, O12, C93,
    Date: 2014
  8. By: Bellemare, Charles (Université Laval); Bissonnette, Luc (Laval University); Kröger, Sabine (Université Laval)
    Abstract: This paper discusses the choice of the number of participants for within-subjects (WS) designs and between-subjects (BS) designs based on simulations of statistical power allowing for different numbers of experimental periods. We illustrate the usefulness of the approach in the context of field experiments on gift exchange. Our results suggest that a BS design requires between 4 to 8 times more subjects than a WS design to reach an acceptable level of statistical power. Moreover, the predicted minimal sample sizes required to correctly detect a treatment effect with a probability of 80% greatly exceed sizes currently used in the literature. Our results suggest that adding experimental periods in an experiment can substantially increase the statistical power of a WS design, but have very little effect on the statistical power of the BS design. Finally, we discuss issues relating to numerical computation and present the powerBBK package programmed for STATA. This package allows users to conduct their own analysis of power for the different designs (WS and BS), conditional on user specified experimental parameters (true effect size, sample size, number of periods, noise levels for control and treatment, error distributions), statistical tests (parametric and nonparametric), and estimation methods (linear regression, binary choice models (probit and logit), censored regression models (tobit)).
    Keywords: within-subjects design, between-subjects design, sample sizes, statistical power, experiments
    JEL: C8 C9 D03
    Date: 2014–10
  9. By: Wenner, Lukas
    Abstract: I show theoretically that applying the model of Köszegi and Rabin (2006) to a simple purchasing decision where consumers are ex-ante uncertain about the price realisation, gives - when changing the underlying distribution of expected prices - rise to counterintuitive predictions in contrast with a 'good deal model" where consumers are predicted to be disappointed (rejoice) when the realised price is perceived as being worse (better) than the other possible realisation. While the underlying ideas of both models are similar with respect to expectation-based reference points, the different results come from the concept of Personal Equilibrium in Köszegi and Rabin (2006). The experimental results show some support for the simpler good deal model for a number of different real consumption goods though the support is weaker for goods that either have a salient market price or no market price outside of the experiment.
    Keywords: Reference Points,Loss Aversion,Price Expectations,Experimental Consumer Choice
    JEL: D03 C91 D84
    Date: 2014
  10. By: Earl, Peter E.
    Abstract: This paper examines the research area identified by Frey and Gallus (Aggregate Effects of Behavioral Anomalies: A New Research Area, 2014) and the relationship between it and the choices that economists make. It supports the Frey and Gallus view that, as a consequence of individuals employing external inputs rather than relying upon their own judgemental capacities, the quality of decision-making may differ at the market and macro levels from what has been observed in laboratory experiments. It seeks to forestall potential moves by rational choice theorists to argue that such processes, imposed by competitive pressures, will swiftly eliminate anomalous behaviour. But it questions Frey and Gallus's use of conventional rational choice theory as the reference point for judging the quality of real-world decisions. It argues that choice is an activity based on evolving sets of habits and rules, rather than based on give preference systems, and that Frey and Gallus's failure to consider alternative reference points is itself a manifestation of anchoring.
    Keywords: Heuristics and biases,infinite regress,rationality
    JEL: A10 B00 D70
    Date: 2014
  11. By: David Johnson (University of Calgary); Sebastian Goerg; Jonathan Rogers
    Abstract: Traditionally, larger than equilibrium allocations by proposers in Dictator Games (gifts) have been explained by aspects of altruism, reciprocity, and fairness. However, this assumes the gift to be mutually desirable to the proposer and responder. Giving may also be driven by a desire of the proposer to rid herself of the gift or to generate obligation on the part of the responder. We examine this by using three sources to generate the endowment in a Dictator Game:(1) undergraduate students, (2) Amazon Mechanical Turk workers, and (3) users of a racially/ethnically charged web forum. This endowment is provided to subjects in a traditional laboratory experiment. We find no significantcant differences in the proposer allocation decisions across the three sources. Rather we find that proposer affect toward the source of the endowment affects the allocation decision. Our results suggest that decision making can be strongly influenced by the provider of income shocks.
    Keywords: Experiment; Inequality; Approval
    JEL: C78 C91 C99 D31 D64 D74
    Date: 2014–11–10
  12. By: David L. Dickinson (Appalachian State University, CA, USA); David Masclet (CREM UMR CNRS 6211, University of Rennes 1, France and CIRANO, Montréal, Canada)
    Abstract: Experimental studies have shown that sanctions effectively deter free riding within groups. However, the over-use of costly punishment may actually harm overall welfare. A main reason for over-punishment is that free-riders generate negative emotions that likely favor excessive punishments. In this paper we ask whether the venting of one’s emotions in different ways can reduce the level of excessive punishment in a standard VCM-with-punishment environment while preserving the norm enforcement properties of punishment. We find that venting emotions reduces (excessive) punishment, and under certain conditions the net effect is an increase in final payoffs (i.e., welfare) to the group.
    Keywords: sanctions, public good, experiment, venting emotions
    JEL: C92 H41 D63
    Date: 2014–11
  13. By: Conrads, Julian (University of Cologne); Reggiani, Tommaso (University of Cologne)
    Abstract: This paper investigates the effect of different communication channels on promise-making and promise-keeping in a helping situation. Four treatments differ with respect to the communication channel employed to solicit unincentivized cooperation, i.e., face-to-face, phone call and two different sorts of computer-mediated communication. The less anonymous (face-to-face, phone) the interpersonal interaction is due to the different communication channels, the higher the propensity of an agent to make a promise. Treatment effects, however, vanish if we then look at the actual promise-keeping rates across treatments as more anonymous channels (computer-mediated) do not perform relatively worse than more direct channels.
    Keywords: promises, communication, experimental economics, organizational behavior, behavioral ethics
    JEL: D02 D83 C91
    Date: 2014–10
  14. By: Dertwinkel-Kalt, Markus; Köhler, Katrin
    Abstract: Whereas exchange asymmetries for goods are well known, we provide a first incentivized test of exchange asymmetries for bads (i.e., items yielding a negative utility). On the one hand, prospect theory predicts an endowment effect for goods and bads, on the other hand, attention-based theories such as salience theory predict an endowment effect for goods, but a reverse endowment effect (i.e., a particular high willingness to switch) for bads. Since both strands of research often make the same predictions concerning biased decision making, the investigation of exchange asymmetries for bads is a key element to distinguish between their validity. In our experiment, we find a strong endowment effect for bads, so that our results speak in favor of prospect theory.
    Keywords: Loss Aversion,Salience Theory,Prospect Theory,Endowment Effect
    JEL: D03
    Date: 2014

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