nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2015‒02‒16
nineteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Destructive Behavior in a Fragile Public Good Game By Maximilian Hoyer; Nadège Bault; Ben Loerakker; Frans van Winden
  2. Cognitive Bubbles By Ciril Bosch-Rosa; Thomas Meissner; Antoni Bosch-Domènech;
  3. Intertemporal Consumption and Debt Aversion: An Experimental Study By Meissner, Thomas
  4. Smart or Selfish - When Smart Guys Finish Nice By Lohse, Johannes
  5. The predominant role of signal precision in experimental beauty contests By Adam Zylbersztejn
  6. Efficiency and Punishment in a Coordination Game: Voluntary Sanctions in the Minimum Effort Game By Fabrice Le Lec; Ondrej Rydval; Astrid Matthey
  7. The Dark Side of Competition for Status By Gary Charness; David Masclet; Marie Claire Villeval
  8. Timing of Kindness Evidence from a Field Experiment By Werner, Peter; Ockenfels, Axel; Sliwka, Dirk
  9. Detecting Heterogeneous Risk Attitudes with Mixed Gambles By Astebro , Thomas; Santos-Pinto , Luís
  10. The effects of language on children s intertemporal choices By Lergetporer, Philipp; Sutter, Matthias; Angerer, Silvia; Glätzle-Rützler, Daniela
  11. The ABC of Cooperation in Voluntary Contribution and Common Pool Extraction Games By Kölle, Felix; Gächter, Simon; Quercia, Simone
  12. Why are Economists so Different? Nature, Nurture and Gender Effects in a Simple Trust Game By Müller, Andrea; Haucap, Justus
  13. Fairness Concerns Revisited By Tahereh Rezaei Khavas; Stephanie Rosenkranz; Gustav Weitzel; Bastian Westbrock
  14. The Effect of Belief Elicitation Game Play By Hoffmann, Timo
  15. Preferences and Exposure to Shocks: Evidence from a Natural Experiment in Palestine By Cavatorta, Elisa; Groom, Ben
  16. Predictably angry: Facial cues provide a credible signal of destructive behavior By Noussair, Charles N.; Offerman, Theo; Suetens, Sigrid; Van de Ven, Jeroen; Van Leeuwen, Boris; Van Veelen, Matthijs
  17. How Does Aging Affect Financial Decision Making? By Keith Jacks Gamble; Patricia A. Boyle; Lei Yu; David A. Bennett
  18. When Identifying Contributors is Costly: An Experiment on Public Goods By Samek, Anya; Sheremeta, Roman
  19. The predominant role of signal precision in experimental beauty contests By Camille Cornand; Romain Baeriswyl

  1. By: Maximilian Hoyer (University of Amsterdam, Faculty of Economics and Business, CREED, Roeterstraat 11, 1018 WB Amsterdam, The Netherlands); Nadège Bault (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Ben Loerakker (University of Amsterdam, Faculty of Economics and Business, CREED, Roeterstraat 11, 1018 WB Amsterdam, The Netherlands); Frans van Winden (University of Amsterdam, Faculty of Economics and Business, CREED, Roeterstraat 11, 1018 WB Amsterdam, The Netherlands)
    Abstract: Socially destructive behavior in a public good environment - like damaging public goods - is an underexposed phenomenon in economics. In an experiment we investigate whether such behavior can be influenced by the very nature of an environment. To that purpose we use a Fragile Public Good (FPG) game which puts the opportunity for destructive behavior (taking) on a level playing field with constructive behavior (contributing). We find substantial evidence of destructive decisions, sometimes leading to sour relationships characterized by persistent hurtful behavior. While positive framing induces fewer destructive decisions, shifting the selfish Nash towards minimal taking doubles its share to more than 20%. Female subjects are found to be more inclined to use destructive decisions. Finally, subjects’ social value orientation turns out to be partly predictive of (at least initial) destructive choices.
    Keywords: public good, destructive behavior, spite, relationship, laboratory experiment
    JEL: C9 H4
    Date: 2014
  2. 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 rst 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: 2015–02
  3. By: Meissner, Thomas
    Abstract: This paper tests how subjects behave in an intertemporal consumption/saving experiment when borrowing is allowed and whether subjects treat debt differently than savings. Two treatments create environments where either saving or borrowing is required for optimal consumption. Since both treatments share the same optimal consumption levels, actual consumption choices can be directly compared across treatments. The experimental findings imply that deviations from optimal behavior are higher when subjects have to borrow than when they have to save in order to consume optimally, suggesting debt-aversion. Signifiant underconsumption is observed when subjects have to borrow in order to reach optimal consumption. Only weak evidence is found suggesting that subjects over-consume when saving is necessary for optimal consumption.
    JEL: C91 E21 D91
    Date: 2014
  4. By: Lohse, Johannes
    Abstract: In three different variants of an one-shot public good game I analyze the relationship between cooperation and cognitive abilities, assessed through the cognitive reflection test (CRT). In a between-subjects design, the baseline case is contrasted with two treatment conditions that allow to control for two potentially moderating factors: By employing a test for the presence of confusion, the first condition scrutinizes whether higher cognitive abilities are correlated with cooperation proper or simply grant a better understanding of the incentive structure. The second condition explores the proposition that the link between cognitive abilities and cooperation could depend on the complexity of the decision situation. To exogenously create a cognitively more demanding choice setting, subjects had to decide under time pressure. I find a strong and positive relationship between CRT-scores and cooperation, that is not driven by confusion. Time pressure has a strongly moderating effect on this relationship.
    Keywords: Cooperation; Cognitive Abilities; Confusion; Public Goods; Dual Process Theories.
    Date: 2014–12–02
  5. By: Adam Zylbersztejn (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)
    Abstract: Several experiments show that feedback transmission mechanisms mitigate opportunistic behavior in social dilemmas. The source of this effect, especially in a repeated interaction, nonetheless remains obscure. This study provides a novel empirical testbed for channels by which feedback may affect behavior in a repeated public goods game. One is related to strategic signaling. The other involves aversion to others’ expressed disapproval. The presence of feedback is found to foster pro-social behavior. The data favour the non-monetary sanctioning explanation rather than the signaling hypothesis.
    Keywords: Public goods game, Voluntary Contribution Mechanism, Feedback, Signaling, Non-monetary sanctioning
    JEL: C72 D83
    Date: 2014
  6. By: Fabrice Le Lec; Ondrej Rydval; Astrid Matthey
    Abstract: Using a laboratory experiment, we examine whether voluntary monetary sanctions induce subjects to coordinate more efficiently in a repeated minimum effort coordination game. While most groups first experience inefficient coordination in a baseline treatment, the efficiency increases substantially once ex post sanctioning opportunities are introduced, that is, when one can assign costly punishment points to other group members in order to reduce their payoffs. We compare the effect of this voluntary punishment possibility with the effect of ex post costless communication: in contrast to the punishment treatment, the latter only temporarily increases efficiency and fails to do so permanently. This suggests that decentralized sanctions can play an important role as a coordination device in Pareto-ranked coordination settings, such as teamwork in firms and other organizational contexts.
    Keywords: coordination; minimum effort; order-statistic game; punishment; sanction; weakest link;
    JEL: C72 C91 D01 D03
    Date: 2014–12
  7. By: Gary Charness (Department of Economics, University of California, Santa Barbara, 2127 North Hall, Santa Barbara, CA 93106-9210); David Masclet (CREM, CNRS, University of Rennes, 7 place Hoche, 35000 Rennes, France, and CIRANO, Montreal, Canada); Marie Claire Villeval (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)
    Abstract: Unethical behavior within organizations is not rare. We investigate experimentally the role of status-seeking behavior in sabotage and cheating activities aiming at improving one’s performance ranking in a flat-wage environment. We find that average effort is higher when individuals are informed about their relative performance. However, ranking feedback also favors disreputable behavior. Some individuals do not hesitate to incur a cost to improve their rank by sabotaging others’ work or by increasing artificially their own performance. Introducing sabotage opportunities has a strong detrimental effect on performance. Therefore, ranking incentives should be used with care. Inducing group identity discourages sabotage among peers but increases in-group rivalry.
    Keywords: Status, ranking, feedback, sabotage, doping, competitive preferences, experiment
    JEL: C91 C92 M54 D63 J28 J31
    Date: 2014
  8. By: Werner, Peter; Ockenfels, Axel; Sliwka, Dirk
    Abstract: We conduct a field experiment in a naturally occurring labor environment and track whether the performance of workers responds to unexpected wage increases. Specifically, we investigate how the timing of wage increases affects efforts. We find that workers performance is about 11% higher for the same total wage when their wage is increased in two steps as opposed to a single increase at the outset. Moreover, workers are more honest and are more willing to do voluntary extra work after surprising wage increases compared to a baseline condition without increases.
    JEL: C93 D64 M52
    Date: 2014
  9. By: Astebro , Thomas; Santos-Pinto , Luís
    Abstract: The authors propose a task for eliciting attitudes towards risk that is close to real world risky decisions which typically involve gains and losses. The task consists of accepting or rejecting gambles that provide a gain with probability p and a loss with probability 1 p. The authors employ finite mixture models to uncover heterogeneity in risk preferences and find that (i) behavior is heterogeneous, with slightly less than one half of the subjects behaving as expected utility maximizers, (ii) for the others, reference-dependent models perform better than those where subjects derive utility from final outcomes, (iii) models with sign dependent decision weights perform better than those without, and (iv) there is no evidence for loss aversion. The procedure is sufficiently simple so that it can be easily used in field or lab experiments where risk elicitation is not the main experiment.
    Keywords: Individual risk taking behavior; latent heterogeneity; finite mixture models; reference-dependence; loss aversion
    JEL: C91 D81
    Date: 2014–03–28
  10. By: Lergetporer, Philipp; Sutter, Matthias; Angerer, Silvia; Glätzle-Rützler, Daniela
    Abstract: The ability of children to control the desire for immediate gratification is very important to achieve long-term beneficial goals (such as higher education or better health conditions). We show that the language children speak is significantly related to their ability to wait in a simple, incentivized experiment. We are thus providing controlled evidence for a recently developed linguistic-savings hypothesis, stating that languages which grammatically separate the future and the present (like English or Italian) induce less future-oriented behavior than languages in which speakers can refer to the future by using present tense (like German). In our unique experiment, we let practically all primary school children, aged 6 to 11 years, in a bilingual city in Northern Italy make intertemporal choices. We find that German-speaking children are about 46% more likely than Italian-speaking children to wait for a larger reward in the future. Controlling for several factors, including IQ or family background, the difference between German- and Italian-speaking children remains highly significant. Furthermore we provide survey evidence that this effect is unlikely to be driven by difference in cultural attitudes towards patience. Interestingly, language is not related to another important domain of economic decision making, risk taking, which is often associated with intertemporal preferences. Controlling for risk taking, the relation between language and patience persists.
    JEL: C91 D90 D03
    Date: 2014
  11. By: Kölle, Felix; Gächter, Simon; Quercia, Simone
    Abstract: We study the nature of cooperation in the provision of public goods (a "Give" game) and the appropriation of a common resource (a "Take" game). We introduce the "abc-framework" to analyze how cooperative attitudes and beliefs determine cooperation. Our experimental results establish that Give and Take dilemmas are different games even under equivalent incentives. We find striking differences in attitudes: people are substantially less likely to cooperate conditionally in Take than Give. Our experiments and simulations show that attitudes and beliefs, rather than "framing effects", can explain the variation of cooperation observed in the literature. Our results also suggest that cooperation is harder in commons problems than in the provision of public goods.
    JEL: C92 H41 D03
    Date: 2014
  12. By: Müller, Andrea; Haucap, Justus
    Abstract: We analyze the behavior of 577 economics and law students in a simple binary trust experiment in class-room. While economists are both significantly less trusting and less trustworthy than law students, this difference is largely due to heterogeneity between female law and economics students. While female law and economics students are already different in nature (during the first term of study), the gap between them also widens more drastically over the course of their study compared to their male counterparts. This finding is rather critical as the detailed composition of students is typically neglected in most experiments.
    JEL: A12 A22 C91
    Date: 2014
  13. By: Tahereh Rezaei Khavas; Stephanie Rosenkranz; Gustav Weitzel; Bastian Westbrock
    Abstract: Experimental economics has provided evidence for fairness concerns, but their relative strength and even their stability is still under debate. We reconcile the seemingly inconsistent results by presenting a theory of marginal fairness concerns. The key assumption is that fairness concerns are stable across various decision situations, but individuals care only marginally about other individuals’ payoffs. This produces inequitable outcomes when the decision situation is ’unfair’ but equitable outcomes when the structure itself is ’fair’. An experimental horse race with competing theories of pure selfishness, pure fairness, and power-/need-based norms, applied across a range of (a)symmetric and (in)transitive experimental decision settings, supports our theory: 80% of the subjects in our experiment appear to be at most marginally fairness concerned.
    Keywords: fairness, lab experiment, local public goods game, heterogeneous influence stracture
    Date: 2014–09
  14. By: Hoffmann, Timo
    Abstract: The assumptions that subjects hold beliefs and that the chosen actions are not altered by a proper elicitation of these beliefs are widely used in economics. In this paper I experimentally test whether the second assumption is correct. Especially controlling for different game properties, I nd that in dominance solvable two-player normal-form games belief elicitation results in a signi cant increase of equilibrium play. Therefore the elicitation of beliefs can affect the choices made by subjects and lead to more equilibrium actions being chosen. Surprisingly one major reason for this effect is the decreased play of own dominated actions. The results indicate that belief elicitation induces subjects to think harder about the presented decision situation, which results in a better understanding of the given situation and consequently in a modi cation of their beliefs. Therefore, in certain decision situations, belief elicitation affects the decisions made by subjects.
    JEL: C72 C91 D83
    Date: 2014
  15. By: Cavatorta, Elisa; Groom, Ben
    Abstract: We use a series of field experiments in the Palestinian Territories to explore the impact of exposure to shocks on risk, time and ambiguity preferences. We exploit the historical episode of the construction of the separation wall between the State of Israel and the West Bank as an exogenous shock to test changes in fundamental preferences. We find that the wall affects preferences: people in isolated communities are significantly more risk-tolerant and ambiguity-averse than people who never experienced the wall. While we find insignificant differences in discount rates and loss-aversion, our results show patterns of time-varying discount rates and heterogeneity across socio-economic groups. We test alternative mechanisms linking shocks to changes in behaviour. Our evidence suggests that observed differences in risk and ambiguity are not the result of changes in subjective beliefs, learning or emotional reactions, but they are consistent with the hypothesis of a preference shift. This study suggests that large adverse shocks may have long-lasting consequences on individual decision-making with potential effects on savings, investments and consumption patterns.
    JEL: C93 O12 D81
    Date: 2014
  16. By: Noussair, Charles N.; Offerman, Theo; Suetens, Sigrid; Van de Ven, Jeroen; Van Leeuwen, Boris; Van Veelen, Matthijs
    Abstract: Evolutionary explanations of anger as a commitment device hinge on two key assumptions. The first is that it is observable ex-ante whether someone will get angry when feeling badly treated. The second is that anger is associated with destructive behavior. We test the validity of these assumptions by studying whether observers are able to detect who rejected a low offer in an ultimatum game. We collected photos and videos of responders in an ultimatum game before they were informed about the game that they would be playing. We showed pairs of photos or videos, consisting of one responder who rejected a low offer and one responder who accepted a low offer, to an independent group of observers. We find support for the two assumptions. Observers do better than chance at detecting who rejected the low offer, especially for rejecters who get angry at low offers.
    Keywords: anger, commitment, ultimatum game, laboratory experiment
    Date: 2014–11
  17. By: Keith Jacks Gamble; Patricia A. Boyle; Lei Yu; David A. Bennett
    Abstract: The brief’s key findings are: *With the shift from traditional pensions to 401(k) plans, the welfare of retirees depends increasingly on their ability to make sound financial decisions. *Using a dataset that follows a group of older individuals in the Chicago area, the analysis examines how aging affects financial decision making. *Participants who suffer cognitive decline experience a reduction in their financial literacy but no change in their confidence in managing their money. *Perhaps not surprisingly then, while they are more likely to get help with financial decisions, more than half retain primary responsibility for managing their money.
  18. By: Samek, Anya; Sheremeta, Roman
    Abstract: Studies show that identifying contributors increases contributions to public goods. In practice, viewing identifiable information is costly, which may discourage people from accessing it. We design a public goods experiment in which participants can pay to view information about identities and contributions of group members. We compare this to a treatment in which there is no identifiable information, and a treatment in which all contributors are identified. Our main findings are that: (1) contributions in the treatment with costly information are as high as those in the treatment with free information, (2) participants rarely choose to view the information, and (3) being a high contributor is correlated with choosing to view information about others.
    Keywords: public-goods, information, recognition, laboratory experiment
    JEL: C72 C91 H41
    Date: 2015–02–02
  19. By: Camille Cornand (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Romain Baeriswyl (Swiss National Bank, Boersenstrasse 15, 8022 Zurich, Switzerland;)
    Abstract: The weight assigned to public information in Keynesian beauty contest depends on the signal precision and on the degree of strategic complementarities. This experimental study shows that the response of subjects to changes in the signal precision and in the degree of strategic complementarities is qualitatively consistent with theoretical predictions, though quantitatively weaker. The weaker subjects’ response to changes in the signal precision, however, mainly drives the weight observed in the experiment, making strategic complementarities and overreaction an issue of second order.
    Keywords: heterogeneous information, beauty contest, experiment, public information
    JEL: C92 D82 D84 E58
    Date: 2014

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