nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2014‒12‒29
fifteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Risk Seekers May Be Antisocial After All By Da Silva, Sergio
  2. What drives the association between health and portfolio choice? By Kronenberg, C.;; van Kippersluis, H.;; Rohde, K.I.M.;
  3. An Experimental Investigation into Queueing Behavior By Anna Conte; Marco Scarsini; Oktay Sürücü
  4. The long-term impact of matching and rebate subsidies when public goods are impure: Field experimental evidence from the carbon offsetting market By Kesternich, Martin; Löschel, Andreas; Römer, Daniel
  5. Dishonesty under Scrutiny By van de Ven, Jeroen; Villeval, Marie Claire
  6. Individual Perceptions of Local Crime Risk By Salm, Martin; Vollaard, Ben
  7. The effect of charitable giving on workers’ performance. Experimental evidence By Gary Charness; Ramón Cobo-Reyes; Angela Sanchez
  8. The two faces of independence: betweenness and homotheticity By Daniel R. Burghart; Thomas Epper; Ernst Fehr
  9. Time to Abandon Group Thinking in Economics - Updated By Da Silva, Sergio
  10. Altruistic Economic Behaviors and Implicit Worldviews By Masao Ogaki; SunYoun Lee; Byung-Yeon Kim; Hyeog Ug Kwon; Hyoung-Seok Lim; Fumio Ohtake
  11. Bargaining with a residual claimant: An experimental study By Embrey M.S.; Hyndman K.; Riedl A.M.
  12. Emotions-at-risk: An experimental investigation into emotions, option prices and risk perception By Bosman, Ronald; Kräussl, Roman; van Galen, Thomas
  13. Career Prospects and Effort Incentives: Evidence from Professional Soccer By Jeanine Miklós-Thal; Hannes Ullrich
  14. Fostering and Measuring Skills: Improving Cognitive and Non-cognitive Skills to Promote Lifetime Success By Tim Kautz; James J. Heckman; Ron Diris; Bas ter Weel; Lex Borghans
  15. Individual perceptions of local crime risk By Salm, M.; Vollaard, B.A.

  1. By: Da Silva, Sergio
    Abstract: Undergraduates were given a battery of psychological tests to gauge their degree of antisocial personality traits (psychopathy, Machiavellianism and nihilism). The students also responded to questionnaires to assess their attitudes toward risk and intertemporal choice. Biological attributes of the respondents were also collected. We found a correlation between psychopathic, Machiavellian and nihilistic traits in the sample, and also that risk seekers were antisocial. Additionally, we found, on average, that younger subjects presented higher levels of psychopathy; atheists were more Machiavellian; and atheists who were anxious tend to be nihilists. Moreover, boys born from younger mothers were more risk seeking than girls born from older mothers. We also found older subjects to be less patient.
    Keywords: Risk, Patience, Psychopathy, Machiavellianism, Nihilism, Biological attributes
    JEL: D03 D81
    Date: 2014–10–30
  2. By: Kronenberg, C.;; van Kippersluis, H.;; Rohde, K.I.M.;
    Abstract: There is a persistent association between health and portfolio choice, but hardly anything is known about the underlying sources of heterogeneity: what makes healthier individuals hold more risky assets? This paper uses rich Dutch longitudinal data to take into account and explain unobserved heterogeneity in the association between health and portfolio choice. We show that the association largely reflects unobserved heterogeneity, which is driven partly by behavioural variables. Yet even when adding an extensive set of behavioural variables including risk aversion, stock aversion, loss aversion, time preferences, and mental accounting, the association betweenhealth and portfolio choice does not completely vanish.
    Keywords: health; portfolio choice; panel data; elderly;
    JEL: C23 D14 G11 I19
    Date: 2014–11
  3. By: Anna Conte (Max Planck Institute of Economics, Jena, and WBS, University of Westminster, EQM Department); Marco Scarsini (Dipartimento di Economia e Finanza, LUISS, Roma); Oktay Sürücü (Center for Mathematical Economics, Bielefeld University)
    Abstract: We conduct an experiment meant to explore the factors driving customers' decisions in a queueing system. Under different time allowance conditions, the experimental subjects are asked to join one of two queues that differ in their length, server speed, and entry fee. We investigate some aspects of a queue on which subjects base their decision and what is the effect of time pressure on their decision criteria. We find that only a proportion of subjects behave rationally and use the relevant information efficiently. The size of this proportion increases when time limitation is relaxed. The rest of the subjects seem to adopt a rule of thumb that ignores the information on server speed and follows the shorter queue. Consequently, these subjects use less time than rational types when making their decisions. Furthermore, time pressure harms decision performance since the presence of time limitation stresses a great deal of subjects and causes them to use time inefficiently.
    Keywords: Queues with entry fee, join the shortest queue, laboratory experiments, decision time
    JEL: C91 L00 C33 C35
    Date: 2014–11–25
  4. By: Kesternich, Martin; Löschel, Andreas; Römer, Daniel
    Abstract: In this paper, we investigate both short- and long-term impacts of financial stimuli on public goods provision when contributions are tied to individual harm-related behavior. We conduct a large-scaled field experiment to examine voluntary contributions to a carbon offsetting program during the online purchase of a bus ticket. We systematically vary the individual payoff structure by introducing different matching grants (1/3:1, 1:1, 3:1) and price rebates (r-25%, r-50%, r-75%). Our results show that price rebates are more effective than matching schemes in raising participation rates while matching grants induce higher contributions to the offsetting program. We suspect differences in the personal responsibility for the compensated emissions to drive this result. Analyzing repeated bookings, we find decreasing treatment effects for returning customers except for the case of 1:1 matching grants. The equal matching scheme is also the only intervention that increases net contributions of customers compared to the control group.
    Keywords: voluntary carbon offsets,randomized field experiment,public goods,rebate subsidy,matching subsidy
    JEL: H41 C93 D03 L92
    Date: 2014
  5. By: van de Ven, Jeroen (University of Amsterdam); Villeval, Marie Claire (CNRS, GATE)
    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: 2014–11
  6. By: Salm, Martin (Tilburg University); Vollaard, Ben (Tilburg University)
    Abstract: We provide evidence that perceptions of crime risk are severely biased for many years after a move to a new neighborhood. Based on four successive waves of a large crime survey, matched with administrative records on household relocations, we find that the longer an individual lives in a neighborhood, the higher their perception of the crime rate in the neighborhood. This finding holds irrespective of whether the move is from a relatively low-crime to a relatively high-crime area or vice versa. We find that avoidance behavior adjusts in line with the observed changes in beliefs.
    Keywords: heuristic, victimization, crime
    JEL: D81 K42 K14
    Date: 2014–11
  7. By: Gary Charness (University of California at Santa Barbara); Ramón Cobo-Reyes (University of Exeter Business School.); Angela Sanchez (University of Exeter Business School.)
    Abstract: We investigate how donating worker earnings for voluntary extra work, a form of corporate social responsibility, affects worker behavior. In our experiment, participants performed a realeffort task. Subjects were asked to enter real data (from an unrelated experiment) for 60 minutes and were paid on a piece-rate basis. After the 60 minutes, they were then asked if they wished to stay for up to another 30 minutes; we varied the piece-rate pay and whether it was paid to the worker or to a charity. Our results show that when the piece rate paid is relatively high, workers do more extra work when they are directly paid this piece rate as compared to when their earnings are instead paid to a charity. However, with low piece rates, this relationship reverses and workers are much more motivated when the money is donated to a charity instead of when it is paid directly to them. This approach is potentially a win-win outcome for at least firms and charities. We also find that when we only pay a small amount to workers, their behavior differs only modestly from the situation in which we do not pay at all.
    Keywords: labor market, gift exchange-game, delegation, responsibility-allevietion, experiments.
    Date: 2014–04–27
  8. By: Daniel R. Burghart; Thomas Epper; Ernst Fehr
    Abstract: Many studies document failures of expected utility’s key assumption, the independence axiom. Here, we show that independence can be decomposed into two distinct axioms – betweenness and homotheticity – and that these two axioms are necessary and sufficient for independence. Thus, independence can fail because homotheticity, betweenness, or both are violated. Most research has focused on models that assume subjects will violate both axioms or models that assume subjects will satisfy betweenness but violate homotheticity. Our decomposition of independence into betweenness and homotheticity allows us to show, however, that a significant share of subjects obey homotheticity but violate betweenness. Using data from a revealed preference experiment, and without making any parametric assumptions, we show that 1/3 of participants belong in the neglected class of preferences that violate independence but satisfy homotheticity, indicating that betweenness is violated. Another 1/3 of participants satisfy independence. The remaining 1/3 fail both independence and homotheticity and may also fail betweenness. Our results provide useful constraints on future modeling attempts by highlighting, in a non-parametric way, an empirically relevant class of preferences.
    Keywords: Revealed preferences, risk preferences, expected utility, independence axiom, betweenness, homotheticity, consumer choice, aggregation
    JEL: C91 D11 D12 D83
    Date: 2014–11
  9. By: Da Silva, Sergio
    Abstract: Group thinking is the notion that natural selection favors what is good for the group or the species, not for the individual. Most mainstream evolutionary biology rejects this idea and natural selection is viewed as working on the individual’s genes to promote their own survival and reproduction. Here I show through a couple of examples how group thinking also pervades economics. I argue that the reason for the mistake relies on the fact that economics fails to ground itself in the underlying knowledge provided by biology. Then I suggest how economics can aspire more than being applied logic and turn into a scientific discipline by placing biology on its basis. Finally, I outline how economics should treat group behavior properly.
    Keywords: Economic methodology, Biological basis of economics, Group thinking, Group behavior
    JEL: B41
    Date: 2014–03–31
  10. By: Masao Ogaki; SunYoun Lee; Byung-Yeon Kim; Hyeog Ug Kwon; Hyoung-Seok Lim; Fumio Ohtake
    Abstract: The main purpose of this paper is to study how individual differences in implicit worldviews regarding categories versus relationships affect altruistic behavior towards parents, children and non-family members, using the survey data of Korea, Japan and the US. Altruism and intergenerational transfers have been widely studied in economics (Fehr and Schmidt, 2006). Despite the reluctance to use a cultural factor as the determinant for the economic outcomes because of its ambiguity and difficulty of the measurement, extent literature in the field of economics has recently analyzed the possible impacts of individual beliefs and preferences on a variety of economic outcomes (Guiso et al. 2006). Since the variation is not explained by income differences, a natural candidate for explaining such variation is culture. Some researchers have found elements in explicit worldviews (or belief systems) such as confidence in worldview beliefs have statistically significant effects on intergenerational altruistic attitudes and explain substantial proportions of international differences in them (Akkemik et al. 2013; Kubota et al. 2013). Our research question is how worldviews affect altruistic economic behavior towards parents, children and non-family members. Following an approach of studying cultures in anthropology explained in Hiebert (2008), we see a worldview behind each culture. Here, a worldview consists of the explicit and implicit levels. He posits different types of logics at the implicit level of the worldviewÂ\algorithmic logic and relational logic. This difference corresponds with NisbettÂfs (2003, pp. 139-147) hypothesis based on intellectual traditions in ancient Greece and ancient China is that Westerners would have a greater tendency to categorize objects than would Easterners. Nisbett cites experimental evidence for his hypothesis. It should be noted that it is not that every Westerner categorizes and every Easterner uses relationships. The difference is in distributions. More Westerners use categories than Easterners even though an individual Westerner may use relationships. We used survey data of Korea, Japan and the US that contains various measures of implicit and explicit worldviews, and individual preferences. We found that implicit worldviews as well as confidence in spiritual beliefs in explicit worldviews have statistically significant effects on some altruistic attitudes. This paper mainly differs from the previous literature in that it uses unique data that represent implicit worldviews about categories and relationships. The estimation results of this study contribute to shedding light on the effect of an individual foundational framework that is formulated at the implicit level on altruistic economic behaviors.
    Keywords: culture; implicit and explicit worldviews; categories; relationships; altruism
    JEL: D03 D64
    Date: 2014–11
  11. By: Embrey M.S.; Hyndman K.; Riedl A.M. (GSBE)
    Abstract: We experimentally investigate a bargaining environment in which players negotiate over a xed payment to one player, while the other player receives the residual from a random pie realization after subtracting the xed payment. Contrary to the intuition that risk exposure is detrimental, we show that residual claimants are able to extract a risk premium, which is increasing in risk exposure. In some cases the premium is so high that it is advantageous to bargain over a risky pie rather than a risk-less pie. Contrary to theory, the comparatively less risk averse residual claimants benet the most. Moreover, bargaining frictions increase as risk increases, and we document more frequent disagreements as risk increases. When given the chance to choose a less or more risky distribution over which to bargain, residual claimants tend to choose the more risky distribution only when there is the possibility of an equal-split ex-post. Our results suggest that theoretical bargaining models require some separation between the determinants of bargaining power and fair compensation for risk exposure.
    Keywords: Cooperative Games; Design of Experiments: Laboratory, Group Behavior; Criteria for Decision-Making under Risk and Uncertainty;
    JEL: C71 C92 D81
    Date: 2014
  12. By: Bosman, Ronald; Kräussl, Roman; van Galen, Thomas
    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
  13. By: Jeanine Miklós-Thal; Hannes Ullrich
    Abstract: It is difficult to test the prediction that future career prospects create implicit effort incentives because researchers cannot randomly “assign†career prospects to economic agents. To overcome this challenge, we use data from professional soccer, where employees of the same club face different external career opportunities depending on their nationality. We test whether the career prospect of being selected to a Euro Cup national team affects players' pre-Cup performances, using nationals of countries that did not participate in the Euro Cup as a control group. We find that the Euro Cup career prospect has positive effects on the performances of players with intermediate chances of being selected to their national team, but negative effects on the performances of players whose selection is very probable. Our findings have implications for the incentive effects of within-firm promotions and of external career opportunities.
    Keywords: incentives, effort, career concerns, reputation, contests, tournaments, promotions
    JEL: D23 L29 M52
    Date: 2014
  14. By: Tim Kautz; James J. Heckman; Ron Diris; Bas ter Weel; Lex Borghans
    Abstract: IQ tests and achievement tests do not capture non-cognitive skills — personality traits, goals, character and motivations that are valued in the labour market, in school and elsewhere. For many outcomes, their predictive power rivals or exceeds that of cognitive skills. Skills are stable across situations with different incentives. Skills are not immutable over the life cycle. While they have a genetic basis they are also shaped by environments, including families, schools and peers. Skill development is a dynamic process. The early years are important in shaping all skills and in laying the foundations for successful investment and intervention in the later years. During the early years, both cognitive and non-cognitive skills are highly malleable. During the adolescent years, non-cognitive skills are more malleable than cognitive skills. The differential plasticity of different skills by age has important implications for the design of effective policies.<P> This paper reviews a variety of interventions across different stages of the life cycle. We interpret these studies using an economic model of skill development. Many effective programs work because they foster non-cognitive skills. Some have annual rates of return that are comparable to those from investments in the stock market. Parental involvement is an important component of successful early interventions just as successful adolescent mentoring is an age-appropriate version of parental involvement. Building an early base of skills that promote later-life learning and engagement in school and society is often a better strategy than waiting for problems to occur.
    Keywords: technology of skill formation, skills beget skills, early childhood investment, mentoring, non-cognitive skills, character, personality
    Date: 2014–11–25
  15. By: Salm, M. (Tilburg University, TILEC); Vollaard, B.A. (Tilburg University, TILEC)
    Abstract: We provide evidence that perceptions of crime risk are severely biased for many years after a move to a new neighborhood. Based on four successive waves of a large crime survey, matched with administrative records on household relocations, we find that the longer an individual lives in a neighborhood, the higher their perception of the crime rate in the neighborhood. This finding holds irrespective of whether the move is from a relatively low-crime to a relatively high-crime area or vice versa. We find that avoidance behavior adjusts in line with the observed changes in beliefs.
    Keywords: heuristic; Victimization; crime
    JEL: D81 K42
    Date: 2014

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