nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2015‒02‒22
sixteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Measuring Ambiguity Aversion: A Systematic Experimental Approach By Wilde, Christian; Krahnen, Jan Pieter; Ockenfels, Peter
  2. Teams Contribute More and Punish Less By Thum, Marcel; Auerswald, Heike; Schmidt, Carsten; Torsvik, Gaute
  3. Endogenous Social Identity and Group Choice By Mechtel, Mario; Hett, Florian; Kröll, Markus
  4. Competition for status creates superstars: An experiment on public good provision and network formation By Offerman, Theo; Schram, Arthur; Van Leeuwen, Boris
  5. The curse of knowledge increases self-selection into competition: Experimental evidence By Danz, David
  6. Identification of Altruism among Team Members: Empirical Evidence from the Classroom and Laboratory By Griffiths, Barry
  7. Gender Effects, Culture and Social Influence in the Dictator Game: An Italian Study By Niall O'Higgins; Arturo Palomba; Patrizia Sbriglia
  8. Unequal Incentives and Perceived Fairness in Groups By Gerald Eisenkopf
  9. Eliciting utility curvature and time preference By Cheung, Stephen L.
  10. Sharing as Risk Pooling in a Social Dilemma Experiment By Todd L. Cherry; E. Lance Howe; James J. Murphy
  11. Measuring Ambiguity Preferences By Schröder, David; Cavatorta, Elisa
  12. Risk taking for oneself and others: A structural model approach By Vieider, Ferdinand; Villegas-Palacio, Clara; Martinsson, Peter; Mejía, Milagros
  13. How Does Socio-Economic Status Shape a Child's Personality? By Schildberg-Hörisch, Hannah; Deckers, Thomas; Falk, Armin; Kosse, Fabian
  14. Debiasing on a roll: changing gambling behavior through experiential learning By Abel , Martin; Cole, Shawn; Zia, Bilal
  15. Behavioral economics and social exclusion : can interventions overcome prejudice ? By Hoff, Karla
  16. A model of cognitive and operational memory of organizations in changing worlds By Giovanni Dosi; Luigi Marengo; Evita Paraskevopoulou; Marco Valente

  1. By: Wilde, Christian; Krahnen, Jan Pieter; Ockenfels, Peter
    Abstract: This paper provides a systematic analysis of individual attitudes towards ambiguity, based on laboratory experiments. The design of the analysis allows to capture individual behavior across various levels of ambiguity, ranging from low to high. Attitudes towards risk and attitudes towards ambiguity are disentangled, providing pure measures of ambiguity aversion. Ambiguity aversion is captured in several ways, i.e. as a discount factor net of a risk premium, and as an estimated parameter in a generalized utility function. We find that ambiguity aversion varies across individuals, and with the level of ambiguity, being most prominent for intermediate levels. Around one third of subjects show no aversion, one third show maximum aversion, and one third show intermediate levels of ambiguity aversion, while there is almost no ambiguity seeking. While most theoretical work on ambiguity builds on maxmin expected utility, our results provide evidence that MEU does not adequately capture individual attitudes towards ambiguity for the majority of individuals. Instead, our results support models that allow for intermediate levels of ambiguity aversion. Moreover, we find risk aversion to be statistically unrelated to ambiguity aversion on average. Taken together, the results support the view that ambiguity is an important and distinct argument in decision making under uncertainty.
    JEL: D81 C91 D03
    Date: 2014
  2. By: Thum, Marcel; Auerswald, Heike; Schmidt, Carsten; Torsvik, Gaute
    Abstract: Many decisions in politics and business are made by teams rather than by single individuals. In contrast, economic models typically assume an individual rational decision maker. A rapidly growing body of (experimental) literature investigates team decisions in different settings. We study team decisions in a public goods contribution game with a costly punishment option and compare it to the behavior of individuals in a laboratory experiment. We also consider different team decision-making rules (unanimity, majority). We find that teams contribute significantly more and punish less than individuals, regardless of the team decision rule. Overall, teams yield higher payoffs than individuals.
    JEL: C72 C92 H41
    Date: 2014
  3. By: Mechtel, Mario; Hett, Florian; Kröll, Markus
    Abstract: This paper tests social identity theory with respect to individuals' self-identification behavior. We report results from a laboratory experiment in which subjects choose their group membership, which is interpreted as decision to identify with the respective group. Inducing a trade-off between monetary payoffs and different group identification choices we elicit the respective implicit valuations of identifying with different groups. The variation of these valuations is in line with the predictions from social identity theory: Subjects have a higher valuation for identifying with groups with a higher status and with groups to which they have a smaller social distance. Finally, we show that this behavior predicts individual out-group discrimination in allocation decisions, which has previously been shown to be associated with social identity. Overall our results provide strong support for the notion that individuals optimize behavior with respect to social identity.
    JEL: D01 D03 C90
    Date: 2014
  4. By: Offerman, Theo; Schram, Arthur; Van Leeuwen, Boris
    Abstract: We investigate a mechanism that facilitates the provision of public goods in a network formation game. We show how competition for status encourages a core player to realize efficiency gains for the entire group. In a laboratory experiment we systematically examine the effects of group size and status rents. The experimental results provide very clear support for a competition for status dynamic that predicts when, and if so which, repeated game equilibrium is reached. Two control treatments allow us to reject the possibility that the supergame effects we observe are driven by social motives.
    JEL: C91 D85 H41
    Date: 2014–12
  5. By: Danz, David
    Abstract: The psychology literature provides ample evidence that people have difficulties taking the perspective of less informed others. This paper presents a controlled experiment showing that this "curse of knowledge" can cause comparative overconfidence and overentry into competition. In a broader context, the results provide an explanation for the overconfidence of nascent entrepreneurs and the substantial rate of failure among new businesses.
    Keywords: curse of knowledge,hindsight bias,information projection,overconfidence,sorting,incentive schemes,competition,beliefs,experiments
    JEL: C91 D80 D82 D83 D84
    Date: 2014
  6. By: Griffiths, Barry
    Abstract: It is difficult to identify acts that are purely altruistic, and do not have some level of egoism or self-interest involved. By considering situations where team members seemingly have nothing to gain by the way they distribute points to others with regard to peer evaluation, and where their acts of giving are anonymous, can never be verified, and cannot guarantee reciprocity, we see that there is still significant evidence of altruism, which we then confirm using laboratory experiments.
    Keywords: Altruism, individual behavior, group behavior, laboratory experiments, reciprocity
    JEL: A13 C91 C92 D03 D63 D64 D71
    Date: 2010–05–07
  7. By: Niall O'Higgins; Arturo Palomba; Patrizia Sbriglia
    Abstract: There is little consensus on whether women are more generous than men, since some research results indicate a higher propensity to giving of female dictators, whilst some others indicate the opposite. Two explanations have been put forward. According to the first one, women are more generous than men and the conflicting results are due to the way preferences are elicited (Eckel and Grossman, 2002), since women are more sensitive to “social cues” and their preferences are more “malleable” (Croson and Gneezy, 2009). According to the second one, the institutional culture and the role women have in society are key elements in shaping gender differences in preferences. In fact, in matrilineal societies (Gong et al.; 2014; Gneezy et al.; 2009), women are self-oriented, more competitive and less generous than men, since they have an important role as economic decision makers in the family and the society. We test these alternative hypotheses running Dictators experiments in Italy, a western country with a matrilineal culture, introducing – at the same time- social influence in the design. We find more support to the hypothesis on the cultural role in shaping preferences, rather than the effects of social influence.
    Keywords: social influence, gender, experiments.
    JEL: C90 C91
  8. By: Gerald Eisenkopf (Department of Economics, University of Konstanz, Germany; National Institute for Health and Welfare (THL), P.O. Box 30, 00271 Helsinki, Finland)
    Abstract: In many groups heterogeneous incentives induce people to make unequal contributions to a common pool. This paper studies whether people consider the random assignment of such unequal incentives as unequal opportunities and demand more egalitarian distributions of the pool. The aggregate experimental results show that low contributors do not make such consideration if their incentive scheme provided opportunities for private gains in case of low contributions. When incentives induce lower contributions in order to avoid private losses, some people increase their claim but these increases are lower than in the case of unequal opportunities. Meanwhile high contributors reward low contributors if they do not follow incentives.
    Keywords: Distributive Justice, Unequal Incentives, Experiment, Entitlements
    JEL: C78 C91 D03 D31 M52
    Date: 2015–01–29
  9. By: Cheung, Stephen L.
    Abstract: In both standard and behavioral theory, as well as experimental procedures to elicit time preference, it is commonly assumed that a single utility function is used to evaluate payoffs both under risk and over time. I introduce a novel experimental design to examine this assumption, by transposing the well-known Holt-Laury risk preference experiment from state-payoff space into time-dated payoff space. I find that the curvature of utility elicited directly from choices over time is significantly concave, but far closer to linear than utility elicited under risk. As a result, the effect of correcting discount rates for this curvature is modest.
    Keywords: Risk preference, time preference, measurement of utility, discounted utility, choice list.
    Date: 2015–01
  10. By: Todd L. Cherry (Appalachian State University, CICERO Center for International Climate and Environmental Research); E. Lance Howe (University of Alaska Anchorage); James J. Murphy (University of Alaska Anchorage, Nankai University, Chapman University)
    Abstract: In rural economies with missing or incomplete markets, idiosyncratic risk is frequently pooled through informal networks. Idiosyncratic shocks, however, are not limited to private goods but can also restrict an individual from partaking in or benefiting from a collective activity. In these situations, a group must decide whether to provide insurance to the affected member. In this paper, we describe results of a laboratory experiment designed to test whether a simple sharing institution can sustain risk pooling in a social dilemma with idiosyncratic risk. We test whether risk can be pooled without a commitment device and, separately, whether effective risk pooling induces greater cooperation in the social dilemma. We find that even in the absence of a commitment device or reputational considerations, subjects voluntarily pool risk thereby reducing variance in individual earnings. In spite of effective risk pooling, however, cooperation in the social dilemma is unaffected.
    Keywords: collective action; experimental economics; idiosyncratic risk; income smoothing; insurance; lab experiment; public goods; risk pooling; resource sharing; social dilemma; social-ecological systems; team production
    JEL: C92 D81 O13 Q20
    Date: 2015
  11. By: Schröder, David; Cavatorta, Elisa
    Abstract: Ambiguity aversion has shown to be economically relevant and has been proposed as an explanation for many phenomena in economics and fi nance. While the literature has suggested a large variety of elicitation methods to measure ambiguity preferences, their consistency and reliability it is rarely evaluated. This is the fi rst study that systematically analyses the consistency of individual ambiguity preferences elicited using a variety of incentivized tasks, non-incentivized thought experiments and survey questions. We fi nd a high degree of aggregate consistency across elicitation methods, but large discrepancies in degrees of individual consistency in pair-wise tasks comparisons. Finally, the study identi es a set of non-incentivized tasks that predict ambiguity attitudes elicited experimentally which may serve as a viable alternative when running laboratory experiments is unfeasible.
    JEL: C91 C81 D01
    Date: 2014
  12. By: Vieider, Ferdinand; Villegas-Palacio, Clara; Martinsson, Peter; Mejía, Milagros
    Abstract: We examine situations in which a decision maker decides for another person as well as herself under conditions of payoff equality, and compare such decisions under responsibility to individual decisions. Estimating a structural model we find that responsibility leaves utility curvature unaffected, but accentuates the subjective distortion of very small and very large probabilities for both gains and losses. This results in an accentuation of prospect theory's four-fold pattern of risk preferences under responsibility. In addition, we also find that responsibility reduces loss aversion according to some common definitions of the latter. These results serve to reconcile some of the still largely contradictory findings in the literature on decisions for oneself and others under payoff equality.
    Keywords: risk preferences,responsibility,social preferences
    JEL: C93 D03 D80 O12
    Date: 2015
  13. By: Schildberg-Hörisch, Hannah; Deckers, Thomas; Falk, Armin; Kosse, Fabian
    Abstract: We show that parental socioeconomic status (SES) is a powerful predictor of many facets of a child's personality. The facets of personality we investigate encompass time preferences, risk preferences, and altruism that are important noncognitive skills, as well as crystallized, fluid, and overall IQ that represent cognitive skills. We measure parental SES by the mother's and father's average years of education and household income. Our results show that children from families with higher SES are more patient, less likely to be risk-seeking, and score higher on IQ tests. About 20 to 40% of this relationship can be explained by dimensions of a child's environment that are shown to di ffer by parental SES: quantity and quality of time parents spend with their children, parenting style, the mother's IQ and economic preferences, a child's initial conditions at birth, and family structure. Personality profiles that vary systematically with parental SES off er an explanation for social immobility.
    JEL: J24 J13 C91
    Date: 2014
  14. By: Abel , Martin; Cole, Shawn; Zia, Bilal
    Abstract: This paper tests experiential learning as a debiasing tool against gambling and lottery behavior in South Africa. The study implemented a simple, interactive dice game that simulates worsening winning odds of rolling sixes as more dice are added to the game. The analysis exploits two levels of exogenous variation, first from random assignment into the debiasing game, and second from the number of rolls it takes to obtain the sixes. Treated individuals who needed above-median number of rolls to obtain simultaneous sixes are significantly less likely than the control group to gamble or play the lottery in the following year. The converse is true for individuals who needed below-median number of rolls, suggesting a perverse treatment effect among this group. The analysis also finds suggestive evidence that the debiasing affected the sensitivity to varying winning odds. Changes in entertainment utility or risk preferences cannot explain these findings, rather the results are consistent with changes in risk beliefs.
    Keywords: Financial Literacy,Educational Sciences,Knowledge for Development,Access&Equity in Basic Education,Economic Theory&Research
    Date: 2015–02–01
  15. By: Hoff, Karla
    Abstract: Behavioral economics recognizes that mental models -- intuitive sets of ideas about how things work -- can bias an individual's perceptions of himself and the world. By representing an ascriptive category of people as unworthy, a mental model can foster unjust social exclusion of, for example, a race, gender, caste, or class. Since the representation is a social construction, shouldn't society be able to control it? But how? This paper considers three interventions that have had some success in developing countries: (1) Group deliberation in Senegal challenged the traditional mental model of female genital cutting and contributed to the abandonment of the practice; (2) political reservations for women and low castes in India improved the way men perceived women, the way parents perceived their daughters, and the way women perceived themselves, but have not generally had positive effects on the low castes; and (3) reductions in the salience of identity closed performance gaps between dominant and stigmatized groups in experiments in India and China. Spoiled collective identities need to be changed or made less prominent in order to overcome social exclusion.
    Keywords: Educational Sciences,Primary Education,Anthropology,Knowledge for Development,Tertiary Education
    Date: 2015–02–01
  16. By: Giovanni Dosi; Luigi Marengo; Evita Paraskevopoulou; Marco Valente
    Abstract: This work analyzes and models the nature and dynamics of organizational memory, as such an essential ingredient of organizational capabilities. There are two sides to it, namely a cognitive side, involving the beliefs and interpretative frameworks by which the organization categorizes the states of the world and its own internal states, and an operational one, including routines and procedures that store the knowledge of how to do things. We formalize both types of memory by means of evolving systems of condition-action rules and investigate their performance in different environments characterized by varying degrees of complexity and non-stationarity. Broadly speaking, in simple and stable environments memory does not matter, provided it satisfies some minimal requirements. In more complex and gradually changing ones more memory is better. However there is some critical level of environmental instability above which forgetfulness is evolutionary superior from the point of view of long term performance. Moreover, above some (modest) complexity threshold stable and robust cognitive categorizations and routinized behavior emerge.
    Keywords: organizational memory, routines, cognitive categories, condition-action rules
    Date: 2015–04–02

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