nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2015‒01‒26
sixteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. An Experimental Study of Money Illusion in Intertemporal Decision Making By Tetsuo Yamamori Author-Name: Kazuyuki Iwata; Akira Ogawa
  2. The Short Arm of Guilt: Does it only hit who is close? By Alexander Morell
  3. Labelling and consumer behaviour: experimental evidence from a Belgian supermarket By Vlaeminck, Pieter; Jiang, Ting; Vranken, Liesbet
  4. Time Preferences and Risk Aversion: Tests on Domain Differences By Ioannou , Christos A.; Sadeh, Jana
  5. On the External Validity of Social- Preference Games: A Systematic Lab-Field Study By Matteo M. Galizzi; Daniel Navarro-Martínez
  6. Nudging parental health behavior with and without children's pestering power: fat tax, subsidy or both? By Papoutsi, Georgia S.; Nayga, Rodolfo M. Jr.; Lazaridis, Panagiotis; Drichoutis, Andreas C.
  7. Managerial vision bias and cooperative governance By Deng, Wendong; Hendrikse, George
  8. Factors influencing the purchase and consumers’ willingness to pay for ground bison By Qasmi, Bashir; Fausti, Scott
  9. Would I Care if I Knew? Image Concerns and Social Confirmation in Giving By Alexander S. Kritikos; Jonathan H. W. Tan
  10. Feedback and Emotions in the Trust Game By Ivo Bischoff; Özcan Ihtiyar
  11. Trust and trustworthiness in experimental organizations By Giuseppe Danese; Luigi Mittone
  12. The House Money Effect and Negative Reciprocity By Katarína Danková; Maroš Servátka
  13. Externalities in appropriation: Responses to probabilistic losses By Esther Blanco; Tobias Haller; James M. Walker
  14. Limited backward induction: foresight and behavior in sequential games By Marco Mantovani
  15. Turning a blind eye, but not the other cheek: on the robustness of costly punishment By Peter H. Kriss; Roberto A. Weber; Erte Xiao
  16. On the external validity of social-preference games: A systematic lab-field study By Matteo M. Galizzi; Daniel Navarro Martinez

  1. By: Tetsuo Yamamori Author-Name: Kazuyuki Iwata; Akira Ogawa
    Abstract: To examine the degree to which price fluctuations affect how individuals approach an intertemporal decision-making problem, we conduct a laboratory experiment in which subjects spend their savings on consumption over 20 periods. In the control treatment, the commodity price is constant across all periods. In the small (large) price-fluctuation treatment, the price rate of change is always 1% (20%), and the rate of change of savings is always the same as the commodity price. Therefore, the optimal amount of consumption is the same in all three treatments. Our main findings are threefold. First, the magnitude of misconsumption (i.e., the deviation from optimal consumption) is significantly high in order of the control, small price-fluctuation, and large price-fluctuation treatments. Second, in the control treatment, the magnitude of misconsumption shrinks over time, whereas it gradually increases in the small and large price-fluctuation treatments. Finally, regardless of the presence of price fluctuations, subjects exhibit under-consumption (over-saving) behavior, and the presence of price fluctuations strengthens such a tendency.
    Date: 2014–11
  2. By: Alexander Morell (Max Planck Institute for Research on Collective Goods)
    Abstract: In a laboratory experiment, I test whether guilt aversion, i.e., a preference to fulfill other people’s expectations, plays out stronger if agents are socially close. I induce two different minimal group identities in participants and randomly assign participants to one of two treatments. Senders either play a dictator game with a receiver from their own group (ingroup treatment) or from the other group (outgroup treatment). I let senders condition their amount sent on second-order beliefs. I find that, in the realm of realistic beliefs (i.e., the sender expects the receiver to expect the sender to send no more than half of the pie), the positive influence of second-order beliefs on how much the sender sends is stronger in the ingroup treatment. In both treatments, about half of the senders remain unaffected by second-order beliefs. In the ingroup treatment, unaffected senders identify less with their group than affected senders do. This is not true for the outgroup treatment.
    Date: 2014–11
  3. By: Vlaeminck, Pieter; Jiang, Ting; Vranken, Liesbet
    Abstract: Using an incentive-compatible framed field experiment, we investigate whether consumers’ food consumption is more eco-friendly when the information about a product’s environmental impact is more easily accessible. Through an online choice experiment, we identify a food label that is perceived to be the most easily accessible for assessing a product’s eco- friendliness among six alternatives. This new graded food label is subsequently tested in an experimental food market embedded in a Belgium supermarket. We find that the presence of the new graded food label leads to more eco-friendly food consumption relative to the label currently used in the supermarket, i.e. the graded label increases the overall eco-friendliness of our subjects’ food consumption by about 10%.
    Keywords: Food labelling, Field Experiment, Environmental Information Provision, Consumer Behaviour, Consumer/Household Economics, Institutional and Behavioral Economics,
    Date: 2014–08
  4. By: Ioannou , Christos A.; Sadeh, Jana
    Abstract: The design and evaluation of environmental policy requires the incorporation of time and risk elements as many environmental outcomes extend over long time periods and involve a large degree of uncertainty. Understanding how individuals discount and evaluate risks with respect to environmental outcomes is a prime component in designing effective environmental policy to address issues of environmental sustainability, such as climate change. Our objective in this study is to investigate whether subjects' time preferences and risk aversion across the monetary domain and the environmental domain differ. Crucially, our experimental design is incentivized: in the monetary domain, time preferences and risk aversion are elicited with real monetary payoffs, whereas in the environmental domain, we elicit time preferences and risk aversion using real (bee-friendly) plants. We find that subjects' time preferences are not significantly different across the monetary and environmental domains. In contrast, subjects' risk aversion is significantly different across the two domains. More specifically, subjects (men and women) exhibit a higher degree of risk aversion in the environmental domain relative to the monetary domain. Finally, we corroborate earlier results, which document that women are more risk averse than men in the monetary domain. We show this finding to, also, hold in the environmental domain.
    Date: 2014–12–28
  5. By: Matteo M. Galizzi; Daniel Navarro-Martínez
    Abstract: We present a lab-field experiment designed to assess systematically the external validity of social preferences elicited in a variety of experimental games. We do this by comparing behavior in the different games with a number of behaviors elicited in the field and with self-reported behaviors exhibited in the past, using the same sample of participants. Our results show that the experimental social-preference games do a poor job in explaining both social behaviors in the field and social behaviors from the past.
    Keywords: social preferences, experimental games, external validity, field behavior
    JEL: C92 C93 D03
    Date: 2015–01
  6. By: Papoutsi, Georgia S.; Nayga, Rodolfo M. Jr.; Lazaridis, Panagiotis; Drichoutis, Andreas C.
    Abstract: We study the effect of several food fiscal policies as a way of nudging consumers towards a healthier way of eating. Our experimental design varies prices of healthier and unhealthier alternatives of food products for children. We also examine the interplay of children’s pestering power. Results from our lab experiment suggest that (a) implementing a fat tax and a subsidy simultaneously can nudge parents to choose healthier products, (b) providing information regarding the fiscal policies in place can further increase the impact of the intervention, and (c) kid’s pestering power is one of the causes of the policies’ moderate effectiveness.
    Keywords: Choice experiment, Fat tax, Subsidy, Information, Pestering power, Health Economics and Policy,
    Date: 2014–08
  7. By: Deng, Wendong; Hendrikse, George
    Abstract: Member and professional CEOs of cooperatives differ regarding their managerial vision toward upstream and downstream projects. We show that the managerial vision bias will cause inefficiency in the project implementation. Cooperatives with member CEOs are extremely upstream-focused because of the cascaded negative vision bias toward the downstream projects. When the downstream activities become more important, cooperatives need to replace the member CEOs by professional CEOs. However, a cooperative with a professional CEO may still be less efficient than an IOF (investor owned firm) if the member-dominated Board of Directors’ negative bias toward the downstream projects is too large. To solve this problem, the cooperative must include outside directors in the board to ease the negative bias of the Board of Directors toward the downstream projects.
    Keywords: Vision Bias, Cooperatives, Governance, Institutional and Behavioral Economics,
    Date: 2014–08
  8. By: Qasmi, Bashir; Fausti, Scott
    Abstract: A consumer preference study that included willingness to pay and consumer sensory experiments was conducted for ground bison versus ground beef. A total of 82 subjects completed the study. The initial statistical analysis suggest that there is consistent consumer behavior with respect to consumer preference and frequency of consumption within species consumption options, but consistent consumer behavior appears to weaken when across species consumption preferences is compared to across species frequency of consumption patterns.
    Keywords: consumer sensory panel, willingness to pay, bison, beef, Consumer/Household Economics, Institutional and Behavioral Economics, Q19, D12,
    Date: 2015–01–15
  9. By: Alexander S. Kritikos; Jonathan H. W. Tan
    Abstract: This paper experimentally investigates the nature of image concerns in gift giving. For this, we test variants of dictator and impunity games where the influences of social preferences on behavior are kept constant across all games. Givers maximize material payoffs by pretending to be fair when receivers do not know the actual surplus size, implying that portraying an outward appearance of norm compliance matters more than actual compliance. In impunity games, receivers can reject gifts with no payoff consequence to givers. In the face of receivers’ feedback, some givers ensure positive feedback by donating more while some avoid negative feedback by not giving at all. Removing feedback reduces the incentive to give altogether. Differing behavior in the four games implies that social confirmation plays a crucial role in the transmission of image concerns in giving.
    Keywords: Dictator, impunity, experiment, image, social confirmation
    JEL: C78 C92
    Date: 2014
  10. By: Ivo Bischoff (University of Kassel); Özcan Ihtiyar (University of Kassel)
    Abstract: We conduct an experiment on the impact of feedback in the Trust Game. In our treatment group, the Trustee has the opportunity to give feedback to the Investor (free in choice of wording and contents). The feedback option is found to reduce the share of Investors who sent no resources to the Trustee, while the impact on average behavior is less pronounced. The notion proposed by Xiao and Houser (2005, PNAS) according to which verbal feedback and monetary sanctions are substitutes is not supported. We use the PANAS-scale (Mackinnon et al., 1999) to capture change in subjects’ short-run affective state during the experiment. Receiving feedback has an impact on the Investors’ short-run affective state but giving feedback is not found to have an effect on Trustees’ short-run affective state.
    Keywords: Trust Game, Feedback, Short-run affect, Emotions
    JEL: C91 D03 D63
    Date: 2015
  11. By: Giuseppe Danese; Luigi Mittone
    Abstract: In this paper we discuss two instruments through which corporate law attempts to promote trust and trustworthiness in business organizations: (i) monitoring of the manager by a principal, as in the agency approach; (ii) moral suasion, as in the approach according to which managers are “fiduciaries”. We present the results of a laboratory experiment designed to investigate the effectiveness of these two instruments in promoting: (i) profitable, but at the same time risky, entrustments of assets to a manager from a group of investors earning their endowment through real effort; (ii) a higher payback for those investors who entrust more assets to the manager. The first is a measure of trust of the investors in the manager, while the second is a measure of the manager’s trustworthiness. We find that moral suasion increases the investors’ trust. Monitoring also increases the investors’ trust, but only in the case in which the manager is not aware of the experimental identity of his/her principal. The manager is trustworthy up to a certain degree, regardless of the governance structure of the organization and of the accuracy with which she observes each investor’s entrustment. Finally, we find a modest positive effect of noise on trust, but no strong effect of noise on effort or trustworthiness.
    JEL: K22 C92 L21
    Date: 2015
  12. By: Katarína Danková; Maroš Servátka (University of Canterbury)
    Abstract: In the vast majority of laboratory experiments documenting the existence of reciprocity subjects are endowed with windfall funds. In many environments with salient fairness considerations such endowments are known to inflate subjects’ other-regarding behavior, thereby creating a so-called “house money effect.” This suggests that laboratory experiments might also overestimate reciprocal behavior. In this study we identify two reasons why the source of endowment might matter for negative reciprocity: (1) Using earned – as opposed to windfall money – might increase the costs of negative reciprocity due to this money being in a different mental account and therefore lead to less retaliation. (2) Appropriating some of the decision-maker’s endowment consisting of earned money might be considered a stronger violation of property rights and lead to more retaliation. While we find experimental support for the latter conjecture, we also observe that subjects actually retaliate more with their earned money than with windfall money as long as at least a part of their endowment is earned. However, conditional of earning a part of their endowment, subjects do not seem to distinguish between situations when they retaliate using earned money versus using windfall, suggesting that their main motivation is the violation of property rights established by performing a real-effort task. Our results thus point out that endowing subjects with windfall funds, absent of clearly established property rights, deflates their negatively reciprocal responses.
    Keywords: Experiment; House Money; Real Effort, Reciprocity; Taking Game
    JEL: C71 C91 D03 D64
    Date: 2014–12–05
  13. By: Esther Blanco; Tobias Haller; James M. Walker
    Abstract: We examine behavior in one-shot appropriation games with deterministic and probabilistic degradation externalities, where the marginal net benefit from appropriation is endogenous, dependent on individuals' expectations of group appropriation. The experimental design involves a menu of games where the magnitude of a loss parameter associated with probabilistic degradation varies across games. On average, as the loss parameter increases we observe a significant reduction in group appropriation. There is, however, considerable heterogeneity in behavior. First, subjects who are more pessimistic (optimistic) about group appropriation significantly increase (decrease) appropriation as the loss parameter increases. Second, relative to subjects with more optimistic expectations regarding group appropriation, the appropriation of subjects who are more pessimistic is more closely tied to changes in expected marginal benefits.
    Keywords: Social dilemma, Laboratory experiment, Endogenous externality, Strategic uncertainty
    JEL: D70 D81 H41 C90
    Date: 2014–12
  14. By: Marco Mantovani
    Abstract: The paper tests experimentally for limited foresight in sequential games. We develop a general out-of-equilibrium framework of strategic thinking based on limited foresight. It assumes the players take decisions focusing on close-by nodes, following backward induction – what we call limited backward induction (LBI). The main prediction of the model is tested in the context of a modified Game of 21. In line with the theoretical hypotheses, our results show most players think strategically only on close-by nodes without reasoning backwards from the end of the game. A small fraction of subjects play close to equilibrium, while few others try to exploit the limited foresight of their opponent. The results provide strong support for LBI, and cannot be accounted for using the most popular models of strategic thinking, let alone equilibrium analysis.
    Keywords: Behavioral game theory, sequential games, strategic thinking, level-k, limited foresight.
    JEL: D03 C72 C91
    Date: 2015–01
  15. By: Peter H. Kriss; Roberto A. Weber; Erte Xiao
    Abstract: Prior research demonstrates a willingness to incur costs to punish norm violators. But, how strong are the motives underlying such acts? Will people rely on "excuses" to avoid acting on costly punishment intentions, as with other costly pro-social acts? In a laboratory experiment, we find that third parties punish reluctantly: they state a preference to punish, but avoid the opportunity when doing so does not reveal this as their preference. In contrast, second parties - those directly wronged - are resolute punishers: they actively seek out the opportunity to punish. Our findings highlight important differences in motives underlying second- and third-party punishment.
    Keywords: Experiment, third-party punishment, second-party punishment, fairness
    JEL: C72 C92 D64
    Date: 2015–01
  16. By: Matteo M. Galizzi; Daniel Navarro Martinez
    Abstract: We present a lab-field experiment designed to assess systematically the external validity of social preferences elicited in a variety of experimental games. We do this by comparing behavior in the different games with a number of behaviors elicited in the field and with self-reported behaviors exhibited in the past, using the same sample of participants. Our results show that the experimental social-preference games do a poor job in explaining both social behaviors in the field and social behaviors from the past.
    Keywords: Social preferences, experimental games, external validity, field behavior.
    JEL: C92 C93 D03
    Date: 2015–01

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