nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2015‒02‒05
nine papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Contradictory behavioral biases result from the influence of past stimuli on perception By Ofri Raviv; Itay Lieder; Yonatan Loewenstein; Merav Ahissar
  2. Your loss is my gain: a recruitment experiment with framed incentives By Jonathan de Quidt
  3. Locus of control and its intergenerational implications for early childhood skill formation By Warn N. Lekfuangfu; Francesca Cornaglia; Nattavudh Powdthavee; Nele Warrinnier
  4. Making it personal: breach and private ordering in a contract farming experiment By Kunte, Sebastian; Wollni, Meike; Keser, Claudia
  5. Experimental Economics Meets Language Choice By Barañano Mentxaka, Ilaski; Kovarik, Jaromir; Uriarte Ayo, José Ramón
  6. Cooperation in Diverse Teams: The Role of Temporary Group Membership By Grund, Christian; Harbring, Christine; Thommes, Kirsten
  7. Because I'm worth it: a lab-field experiment on the spillover effects of incentives in health By Paul Dolan; Matteo M. Galizzi
  8. Offline social identity and online chat partner selection By Ellen Helsper
  9. Cognitive bubbles By Ciril Bosch-Rosa; Thomas Meissner; Antoni Bosch-Domènech

  1. By: Ofri Raviv; Itay Lieder; Yonatan Loewenstein; Merav Ahissar
    Abstract: Biases such as the preference of a particular response for no obvious reason, are an integral part of psychophysics. Such biases have been reported in the common two-alternative forced choice (2AFC) experiments, where participants are instructed to compare two consecutively presented stimuli. However, the principles underlying these biases are largely unknown and previous studies have typically used ad-hoc explanations to account for them. Here we consider human performance in the 2AFC tone frequency discrimination task, utilizing two standard protocols. In both protocols, each trial contains a reference stimulus. In one (Reference-Lower protocol), the frequency of the reference stimulus is always lower than that of the comparison stimulus whereas in the other (Reference protocol), the frequency of the reference stimulus is either lower or higher than that of the comparison stimulus. We find substantial interval biases. Namely, participants perform better when the reference is in a specific interval. Surprisingly, the biases in the two experiments are opposite: performance is better when the reference is in the first interval in the Reference protocol, but is better when the reference is second in the Reference-Lower protocol. This inconsistency refutes previous accounts of the interval bias, and is resolved when experiments statistics is considered. Viewing perception as incorporation of sensory input with prior knowledge accumulated during the experiment accounts for the seemingly contradictory biases both qualitatively and quantitatively. The success of this account implies that even simple discriminations reflect a combination of sensory limitations, memory limitations, and the ability to utilize stimuli statistics.
    Date: 2014–12
  2. By: Jonathan de Quidt
    Abstract: Empirically, labor contracts that financially penalize failure induce higher effort provision than economically identical contracts presented as paying a bonus for success, an effect attributed to loss aversion. This is puzzling, as penalties are infrequently used in practice. The most obvious explanation is selection: loss averse agents are unwilling to accept such contracts. I formalize this intuition, then run an experiment to test it. Surprisingly, I find that workers were 25 percent more likely to accept penalty contracts, with no evidence of adverse or advantageous selection. Consistent with the existing literature, penalty contracts also increased performance on the job by 0.2 standard deviations. I outline extensions to the basic theory that are consistent with the main results, but argue that more research is needed on the long-term effects of penalty contracts if we want to understand why firms seem unwilling to use them.
    Keywords: loss aversion; reference points; framing; selection; mechanical turk
    JEL: J1
    Date: 2014–04–02
  3. By: Warn N. Lekfuangfu; Francesca Cornaglia; Nattavudh Powdthavee; Nele Warrinnier
    Abstract: We propose a model in which parents have a subjective belief about the impact of their investment on the early skill formation of their children. This subjective belief is determined in part by locus of control (LOC), i.e., the extent to which individuals believe that their actions can influence future outcomes. Using a unique British cohort survey, we show that maternal LOC measured during the 1st trimester strongly predicts early and late child cognitive and noncognitive outcomes. Further, we utilize the variation in maternal LOC to improve the specification typically used in the estimation of parental investment effects on child development.
    Keywords: Locus of control; parental investment; human capital accumulation; early skill formation; ALSPAC
    JEL: I31 J01
    Date: 2014–08
  4. By: Kunte, Sebastian; Wollni, Meike; Keser, Claudia
    Abstract: Contracts may be subject to strategic default, particularly if public enforcement institutions are weak. In a lab experiment, we study behavior in a contract farming game without third-party enforcement but with an external spot market as outside option. Two players, farmer and company, may conclude a contract but also breach it by side-selling or arbitrary payment reductions. We examine if and how relational contracts and personal communication can support private-order enforcement. Moreover, we investigate whether company players offer price premiums to extend the contract’s self-enforcing range. We find mixed evidence for our private ordering hypothesis. Although contract breach can be reduced by relational contracts, direct bargaining communication does not additionally improve the outcome. Price premiums are offered if other enforcement mechanisms are absent, but turn out to be only an “allurement”. Most subjects are not willing to sacrifice short-term gains in favor of a well-functioning relationship that (as we show) would be beneficial for both contract parties in the long run.
    Keywords: contract farming, private ordering, enforcement, contract breach, economic experiments, relational contracts, communication, price premiums, Industrial Organization, Institutional and Behavioral Economics, D02, L14, Q13,
    Date: 2014–09
  5. By: Barañano Mentxaka, Ilaski; Kovarik, Jaromir; Uriarte Ayo, José Ramón
    Abstract: Roughly one half of World's languages are in danger of extinction. The endangered languages, spoken by minorities, typically compete with powerful languages such as En- glish or Spanish. Consequently, the speakers of minority languages have to consider that not everybody can speak their language, converting the language choice into strategic,coordination-like situation. We show experimentally that the displacement of minority languages may be partially explained by the imperfect information about the linguistic type of the partner, leading to frequent failure to coordinate on the minority language even between two speakers who can and prefer to use it. The extent of miscoordination correlates with how minoritarian a language is and with the real-life linguistic condition of subjects: the more endangered a language the harder it is to coordinate on its use, and people on whom the language survival relies the most acquire behavioral strategies that lower its use. Our game-theoretical treatment of the issue provides a new perspective for linguistic policies.
    Keywords: bilingualism, coordination, experiments, language choice, minority languages, imperfect information, game theory
    JEL: C72 C91 D80
    Date: 2014–10–08
  6. By: Grund, Christian (RWTH Aachen University); Harbring, Christine (RWTH Aachen University); Thommes, Kirsten (RWTH Aachen University)
    Abstract: In organizations, some team members are assigned to a team for a predefined short period of time, e.g., as they have a temporary contract, while others are permanent members of the same team. In a laboratory experiment we analyze the cooperation levels resulting from diverse teams, where some team members remain with a team and others are switching teams. Our results reveal that teams consisting partly of members with temporary membership display a lower productivity compared to teams of permanent team members only. First, temporary team members cooperate less than permanent team members. Second, individual effort decisions increase with the number of team mates who are of the same type. This second effect holds for both temps and permanents. We argue that social identity is affected by team composition and the individuals' role in a team.
    Keywords: cooperation, economic experiment, public good, team
    JEL: C9 M5
    Date: 2015–01
  7. By: Paul Dolan; Matteo M. Galizzi
    Abstract: We conduct a controlled lab-field experiment to directly test the short-run spillover effects of one-off financial incentives in health. We consider how incentives affect effort in a physical activity task – and then how they spillover to subsequent eating behaviour. Compared to a control group, we find that low incentives increase effort and have little effect on eating behaviour. High incentives also induce more effort but lead to significantly more excess calories consumed. The key behavioural driver appears to be the level of satisfaction associated with the physical activity task, which ‘licensed’ highly paid subjects to indulge in more energy-dense food.
    Keywords: Incentives in health; spillover effects; licensing; hidden costs of incentives
    JEL: C91 C93 D0 I10
    Date: 2014–07
  8. By: Ellen Helsper
    Abstract: This study examines whether the impact of offline identities on computer-mediated communication is stable across different social contexts or whether it depends on which identity aspect is salient. Field experiments with 206 teenagers tested the influence of gendered, ethnic, youth and personalized identities on teenagers' chat behaviour and cognitions. The findings show that offline identity varies in its relation to Internet self-efficacy but not chat partner selection. Self-efficacy differed significantly between boys and girls when youth and gender identities were emphasized but not when stressing personal identity. Across conditions, teenagers were most likely to choose chat partners from similar ethnic and opposite sex backgrounds. This partly supports the Social Identification and Deindividuation framework and argues that offline identities impact online behaviour and self-perception but that this effect depends on which identity aspect is activated.
    Keywords: chat; computer-mediated communication; ethnicity; experiment; gender; internet self-efficacy; social identity
    JEL: L91 L96
    Date: 2014
  9. By: Ciril Bosch-Rosa; Thomas Meissner; Antoni Bosch-Domènech
    Abstract: Smith et al. (1988) reported large bubbles and crashes in experimental asset markets, a result that has been replicated by a large literature. Here we test whether the occurrence of bubbles depends on the experimental subjects' cognitive sophistication. In a two-part experiment, we first run a battery of tests to assess the subjects' cognitive sophistication and classify them into low or high levels of cognitive sophistication. We then invite them separately to two asset market experiments populated only by subjects with either low or high cognitive sophistication. We observe classic bubble- crash patterns in the sessions populated by subjects with low levels of cognitive sophistication. Yet, no bubbles or crashes are observed with our sophisticated subjects. This result lends strong support to the view that the usual bubbles and crashes in experimental asset markets are caused by subjects' confusion and, therefore, raises some doubts about the external validity of this type of experiments.
    Keywords: Asset Market Experiment, Bubbles, Cognitive Sophistication.
    JEL: C91 D12 D84 G11
    Date: 2015–01

This nep-cbe issue is ©2015 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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