|
on Cognitive and Behavioural Economics |
|
Issue of 2015‒05‒02
twelve papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale “Amedeo Avogadro” |
| By: | James J. Murphy (University of Alaska Anchorage, Nankai University, Chapman University); Nomin Batmunkh (University of Alaska Anchorage); Ben Nilsson (University of Alaska Anchorage); Samantha Ray (University of Alaska Anchorage) |
| Abstract: | Shang and Croson (2009) found that providing information about the donation decisions of others can have a positive impact on individual donations to public radio. In this study, we attempted to replicate their results, however, we found no evidence of that social comparisons affected donation decisions. Most of our donors were renewing members, a group which Shang and Croson also found were not influenced by social information. |
| Keywords: | Charitable giving; field experiment; philanthropy; public goods; social information; social comparison |
| JEL: | D64 H41 C93 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:15-08&r=cbe |
| By: | Elni Garbi; Christos Genakos; Mario Pagliero |
| Abstract: | Tournaments are designed to enhance participants’ effort and productivity. However, ranking near the top may increase psychological pressure and reduce performance. We empirically study the impact of interim rank on performance using data from international diving tournaments. We find that competitors systematically underperform when ranked closer to the top, despite higher incentives to perform well. |
| Keywords: | Tournaments; incentives; choking under pressure |
| JEL: | J24 L83 M52 Z13 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:61700&r=cbe |
| By: | Bonini, Nicolao (University of Trento); Pighin, Stefania (University of Trento); Rettore, Enrico (University of Padova); Savadori, Lucia (University of Trento); Schena, Federico (University of Trento); Tonini, Sara (University of Trento); Tosi, Paolo (University of Trento) |
| Abstract: | Overconfidence is a well-established bias in which someone's subjective confidence in their own judgments is systematically greater than their objective accuracy. There is abundant anecdotal evidence that overconfident people increase their exposure to risk. In this paper, we test whether overconfident people underestimate the probability of incurring an avalanche accident. An avalanche accident is a typical "black swan" event because it has a low probability of occurring but has potential dramatic consequences. To test whether the overconfidence bias affects the decision of backcountry skiers to go on a ski trip under different levels of avalanche risk, we measured individual cognitive traits and then used a random effect logit model to measure their effects on the probability to take the tour, by controlling for other observable characteristics of the respondent. We show that 1) overconfidence is widespread even in our sample and 2) practitioners who are more prone to overestimate their knowledge are also more likely to take the risk associated with a ski trip exposed to avalanche danger. This suggests that overconfident people are more exposed to black swan events. |
| Keywords: | cognitive bias, risky decision, backcountry skiing, measurement errors, logit model |
| JEL: | D83 D84 C2 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9009&r=cbe |
| By: | Kirchler, Michael (University of Innsbruck); Huber, Jürgen (University of Innsbruck); Stefan, Matthias (University of Innsbruck); Sutter, Matthias (University of Cologne) |
| Abstract: | In an experiment with 739 subjects we study whether and how different interventions might have an influence on the degree of moral behavior when subjects make decisions that can generate negative externalities on uninvolved parties. Particularly, subjects can either take money for themselves or donate it to UNICEF for measles vaccines. By considering two fairly different institutional regimes – one with individual decision making, one with a double-auction market – we expose the different interventions to a kind of robustness check. We find that the threat of monetary punishment promotes moral behavior in both regimes. Getting subjects more involved with the traded good has no effect, though, in both regimes. Only the removal of anonymity, thus making subjects identifiable, has different effects across regimes, which we explain by different perceptions of responsibility. |
| Keywords: | morals, market design, experiment |
| JEL: | C91 C92 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8973&r=cbe |
| By: | Morone, Andrea; Nemore, Francesco |
| Abstract: | A basic principle in public finance is tax incidence equivalence (well known as Liability Side Equivalence Principle, LES). This principle holds that the burden of a unit tax on buyers and sellers is independent of who actually pays the tax. Moreover, economic theory assumes an individual behaviour model in which subjects act as if they have to fully optimize changes in tax policies by correctly processing information in their possession. However, a wide empirical literature focused on some psychological issues that have as yet not been considered theoretically. It is easy to assume that the introduction of tax-inclusive prices and tax-exclusive prices could lead to price misperception. This means that individuals could not perceive the exact burden of a tax when it is not salient (as it could be in the case of tax-exclusive prices). We conduct a laboratory experiment that attempts to answer two relevant questions: (1) Do subjects’ behaviour change with a less salient tax? (2) Is tax incidence independent of the responsibility to pay a more or less salient tax? Based on the results of Mann-Whitney U tests, concerning the first question we conclude that, in accordance to the theory of tax incidence, subjects’ behaviour is not affected by salience. On the other hand, concerning the second question, contrary to theoretical predictions, we report evidence of stark differences in average trading prices for LSE principle analysis. Most notably, we observe that tax-on-seller treatment prices are systematically higher, thus revealing a plausible tax-shifting phenomenon. |
| Keywords: | Tax incidence; Tax salience; Liability Side Equivalence; choice behaviour; laboratory |
| JEL: | C91 H2 H21 H30 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:63814&r=cbe |
| By: | Aghion, Philippe (Harvard University); Fehr, Ernst (University of Zurich); Holden, Richard (University of New South Wales); Wilkening, Tom (University of Melbourne) |
| Abstract: | In this paper we conduct a laboratory experiment to test the extent to which Moore and Repullo's subgame perfect implementation mechanism induces truth-telling in practice, both in a setting with perfect information and in a setting where buyers and sellers face a small amount of uncertainty regarding the good's value. We find that Moore-Repullo mechanisms fail to implement truth-telling in a substantial number of cases even under perfect information about the valuation of the good. This failure to implement truth-telling is due to beliefs about the irrationality of one's trading partner. Therefore, although the mechanism should – in theory – provide incentives for truth-telling, many buyers in fact believe that they can increase their expected monetary payoff by lying. The deviations from truth-telling become significantly more frequent and more persistent when agents face small amounts of uncertainty regarding the good's value. Our results thus suggest that both beliefs about irrational play and small amounts of uncertainty about valuations may constitute important reasons for the absence of Moore-Repullo mechanisms in practice. |
| Keywords: | implementation theory, incomplete contracts, experiments |
| JEL: | D23 D71 D86 C92 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8971&r=cbe |
| By: | Sugata Marjit (Centre for Studies in Social Sciences, Calcutta); Sattwik Santra (Centre for Studies in Social Sciences, Calcutta); Koushik Kumar Hati (Centre for Studies in Social Sciences, Calcutta) |
| Abstract: | We consider a situation where the relatively ‘poor’ are concerned about their relative income status with respect to a relevant reference group. Such a concern is explicitly introduced in a utility function to study the consumption behavior of the poor. We point towards a possible conflict between income based and nutrition- based measure of poverty. Changes in income distribution generate non-homothetic outcome for an “otherwise homothetic†preference structure and may convert an “otherwise normal†good into an inferior good. |
| Keywords: | Status,Consumption pattern,Inequality,Poverty |
| JEL: | C13 D01 D12 O40 |
| Date: | 2015–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:543&r=cbe |
| By: | Fricke, Hans (University of St. Gallen); Grogger, Jeff (University of Chicago); Steinmayr, Andreas (Harris School, University of Chicago) |
| Abstract: | This study investigates how being exposed to a field of study influences students' major choices. We exploit a natural experiment at a Swiss university where all first-year students face largely the same curriculum before they choose a major. An important component of the first-year curriculum that varies between students involves a multi-term research paper in business, economics, or law. Due to oversubscription of business, the university assigns the field of the paper in a standardized way that is unrelated to student characteristics. We find that being assigned to write in economics raises the probability of majoring in economics by 2.7 percentage points, which amounts to 18 percent of the share of students who major in economics. |
| Keywords: | higher education, law, economics, major choice, gender differences |
| JEL: | I20 I23 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9003&r=cbe |
| By: | Filippin, A.; Crosetto, P. |
| Abstract: | Evidence of Illusion of Control – the fact that people believe to have control over pure chance events – is a recurrent finding in experimental psychology. Results in economics find instead little to no support. In this paper we test whether this dissonant result across disciplines is due to the fact that economists have implemented only one form of illusory control. We identify and separately tests in an incentive-compatible design two types of control: a) over the resolution of uncertainty, as usually done in the economics literature, and b) over the choice of the lottery, as sometimes done in the psychology literature but without monetary payoffs. Results show no evidence of illusion of control, neither on choices nor on beliefs about the likelihood of winning, thus supporting the hypotheses that incentives crowd out illusion of control. |
| Keywords: | ILLUSION OF CONTROL;EXPERIMENT;RISK ELICITATION;HYPOTHETICAL BIAS |
| JEL: | B49 C91 D81 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:2015-06&r=cbe |
| By: | Crosetto, P.; Filippin, A. |
| Abstract: | It has been shown that subjects tend to follow others’ behavior even when the external signals are uninformative. In this paper we go one step further, showing that conformism occurs even when the choices of others are not even presented to the subjects, but just indirectly perceived. We use the “Click” version of the Bomb Risk Elicitation Task, in which subjects can infer the behavior of others only from the mass of clicks heard. This signal is payoff-irrelevant and largely uninformative about the actual choices of the other participants. Moreover, it is never mentioned in the instructions and therefore it must be spontaneously (and possibly unconsciously) perceived in order to be used. We control the exposure of subjects to clicks by implementing treatments with and without earmuffs. Moreover, we test whether the introduction of a minimal form of commonality, i.e., facing a common rather than individual resolution of uncertainty, makes conformism more likely to emerge. We find strong evidence of conformist behavior even in such an adverse environment. Simply hearing the others clicking affects subjects’ behavior. Introducing a common random draw results in a further dramatic shift of the average choices, in particular by women. |
| Keywords: | CONFORMISM;RISK ATTITUDE;EXPERIMENT |
| JEL: | C81 C91 D81 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:2015-07&r=cbe |
| By: | Anna Conte (University of Westminster); Marco Scarsini; Oktay Sürücü (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | We experimentally explore the effects of time pressure on decision making. Under different time allowance conditions, subjects are presented with a queueing situation and asked to join one of two queues that differ in length, server speed, and entry fee. The results can be grouped under two main categories. The first one concerns the factors driving customers' decisions in a queueing system. Only a proportion of subjects behave rationally and use the relevant information efficiently. The rest of the subjects seem to adopt a rule of thumb that ignores the information on server speed and follows the shorter queue. The second category is related to the effects of time pressure on decision performance. A significant proportion of the population is not affected by time limitations and shows a consistent behavior throughout the treatments. On the other hand, the majority of subjects' performance is impaired by time limitations. More importantly, this impairment is not due to the stringency of the limitation but mainly due to the fact that being exposed to a time limitation, even to a loose one, brings along stress and panic, and causes subjects to use time inefficiently. |
| Keywords: | Time pressure, queues with entry fee, join the shortest queue, experimentation, decision times |
| JEL: | C91 L00 C33 C35 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:bie:wpaper:538&r=cbe |
| By: | James J. Murphy (Department of Economics, University of Alaska Anchorage; Institute of State Economy, Nankai University; Economic Science Institute, Chapman University); Nomin Batmunkh (Department of Economics, University of Alaska Anchorage); Benjamin Nilsson (Department of Economics, University of Alaska Anchorage); Samantha Ray (Department of Economics, University of Alaska Anchorage) |
| Abstract: | Shang and Croson (2009) found that providing information about the donation decisions of others can have a positive impact on individual donations to public radio. In this study, we attempted to replicate their results, however, we found no evidence of that social comparisons affected donation decisions. Most of our donors were renewing members, a group which Shang and Croson also found were not influenced by social information. |
| Keywords: | Charitable giving; field experiment; philanthropy; public goods; social information; social comparison |
| JEL: | D64 H41 C93 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:ala:wpaper:2015-02&r=cbe |