nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2015‒05‒30
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Benevolent and Malevolent Ellsberg Games By Dominiak, Adam; Duersch, Peter
  2. Stress Reactions cannot explain the Gender Gap in Willingness to compete By Thomas Buser; Anna Dreber; Johanna Mollerstrom
  3. Your Loss Is My Gain: A Recruitment Experiment With Framed Incentives By Jonathan de Quidt
  4. Ever Failed, Try Again, Succeed Better: Results from a Randomized Educational Intervention on Grit By Sule Alan; Teodora Boneva; Seda Ertac
  5. A tale of paradigm clash: Simon, situated cognition and the interpretation of bounded rationality By Petracca, Enrico
  6. Parenthood and Risk Preferences By Katja Görlitz; Marcus Tamm
  7. Accounting learning preferences: the role of visualisation By Mouhcine Tallaki; Enrico Bracci; Monia Castellini
  8. Forecaster overconfidence and market survey performance By Deaves, Richard; Lei, Jin; Schröder, Michael
  9. Social, Demographic and Behavioral Determinants of Alcohol Consumption By Jakub Mikolasek
  10. Financing and advising with (over)confident entrepreneurs : an experimental investigation By Laurent Vilanova; Nadège Marchand; Walid Hichri

  1. By: Dominiak, Adam; Duersch, Peter
    Abstract: Traditionally, real experiments testing subjective expected utility theory take for granted that subjects view the Ellsberg task as a one-person decision problem. We challenge this view: Instead of seeing the Ellsberg task as a one-person decision problem, it can be perceived as a two-player game. One player chooses among the bets. The second player determines the distribution of balls in the Ellsberg urn. The Nash equilibrium predictions of this game depend on the payoff of the second player, with the game ranging from a zero-sum one to a coordination game. Meanwhile, the predictions by ambiguity aversion models remain unchanged. Both situations are implemented experimentally and yield different results, in line with the game-theoretic prediction. Additionally, the standard scenario (without explicit mention of how the distribution is determined) leads to results similar to the zero-sum game, suggesting that subjects view the standard Ellsberg experiment as a game against the experimenter.
    Keywords: Ellsberg task; experiment; zero-sum game; coordination game; ambiguity; uncertainty averse preferences
    Date: 2015–05–15
  2. By: Thomas Buser (University of Amsterdam, the Netherlands); Anna Dreber (Stockholm School of Economics, Sweden); Johanna Mollerstrom (George Mason University, United States)
    Abstract: Women are often less willing than men to compete, even in tasks where there is no gender gap in performance. Also, many people experience competitive contexts as stressful and previous research has documented that men and women sometimes react differently to acute stressors. We use two laboratory experiments to investigate whether factors related to stress can help explain the gender gap in competitiveness. Experiment 1 studies whether stress responses (measured with salivary cortisol and through self-assessment) to taking part in a mandatory competition predict individual willingness to participate in a voluntary competition. We find that while the mandatory competition does increase stress levels, there is no gender difference in this reaction. Cortisol response does not predict willingness to compete for men but is positively and significantly correlated with choosing to enter the voluntary competition for women. In Experiment 2 we exogenously induce stress using the cold-pressor task. We find no causal effect of stress on competitiveness for the sample as a whole and only tentative evidence of a positive effect for women. In summary, even though there are some gender differences in the relation between stress responses and the decision to enter a competition or not, these cannot explain the general gender gap in willingness to compete that is generally found in the literature and which we replicate.
    Keywords: gender; competitiveness; stress; cortisol; lab experiment
    JEL: C91 D03 J16 J24 J33
    Date: 2015–05–19
  3. 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: D03 J41 D86
    Date: 2014–04
  4. By: Sule Alan (University of Essex); Teodora Boneva (University of Cambridge); Seda Ertac (Koc University)
    Abstract: We show that grit, a non-cognitive skill that has been shown to be highly predictive of achievement, is malleable in the childhood period and can be fostered in the classroom environment. Our evidence comes from an evaluation of a randomized educational intervention implemented in elementary schools in Istanbul. Outcomes are measured via a novel incentivized real effort task and actual school grades on core subjects. We find that treated students are 1) more likely to choose to undertake a more challenging and more rewarding task against an easier but less rewarding alternative, 2) less likely to give up after failure, 3) more likely to exert effort to accumulate task-specific ability, and consequently, 4) more likely to succeed and collect higher payoffs. The intervention also has a significant impact on school grades: We find that treated students are about 3 percentage points more likely to receive top grades in core academic subjects.
    Keywords: non-cognitive skills, grit, perseverance, field experiments, randomized interventions
    JEL: C91 C93 D03 I28
    Date: 2015
  5. By: Petracca, Enrico
    Abstract: The intellectual figure of Herbert A. Simon is well known for having introduced the influential notion of bounded rationality in economics. Less known, at least from the economists’ point of view, is the figure of Simon as eminent cognitive psychologist, co-founder of so-called cognitivism, a mainstream approach in cognitive psychology until the 80s of the last century. In fact, the two faces of Simon’s intellectual figure, as rationality scholar and as cognitive scientist, are not factorizable at all: according to Simon himself, cognitivism is bounded rationality and bounded rationality is cognitivism. This paper tries to answer a simple research question: has the notion of bounded rationality fully followed the development of cognitive psychology beyond cognitivism in the post-Simonian era? If not, why? To answer such questions, this paper focuses on a very specific historical episode. In 1993, on the pages of the journal Cognitive Science, Simon (with his colleague Alonso Vera) openly confronted the proponents of a new (paradigmatic) view of cognition called situated cognition, a firm challenger of cognitivism, which was going to inspire cognitive psychology from then on. This paper claims that this tough confrontation, typical of a paradigm shift, might have prevented rationality studies in economics from coming fully in touch with the new paradigm in cognitive psychology. A reconstruction of the differences between cognitivism and situated cognition as they emerged in the confrontation is seen here as fundamental in order to assess and explore this hypothesis.
    Keywords: Herbert A. Simon; bounded rationality; situated cognition theory; economics and cognitive psychology
    JEL: B31 B41 D03 D80
    Date: 2015
  6. By: Katja Görlitz; Marcus Tamm
    Abstract: This study analyzes how risk attitudes change when individuals become parents using longitudinal data for a large and representative sample of individuals. The results show that men and women experience a considerable increase in risk aversion which already starts as early as two years before becoming a parent, is largest shortly after giving birth and disappears when the child becomes older. These findings show that parenthood leads to considerable changes in individual risk attitudes over time. Thus, analyses using risk preferences as the explanatory variable for economic outcomes should be careful in interpreting the findings as causal effects.
    Keywords: Risk aversion, risk preferences, preference stability, parenthood, children, gender differences
    JEL: D1 D81 J13 J16
    Date: 2015
  7. By: Mouhcine Tallaki; Enrico Bracci; Monia Castellini
    Abstract: The accounting education environment is changing rapidly due to the increasing attention paid by public and private University and Institutions to the efficacy of course delivery and design. The learning preferences and attitudes of students represent an important starting point to develop an efficient and effective educational programme. Learning theories suggest that learning styles and preferences influence the effectiveness with which individuals learn. The success of educational programmes depends to some degree on students’ acceptance and ability to adapt their learning to the new technologies (Richardson et al , 2013). Learning preferences may include also the visualization as educational tools. In recent years the relevance of visualisation has increased, since it may support a clearer and more efficient representations of accounting information (Libby, 1981; Smith and Taffler. The visualization could stimulate and enhance the engagement of the student in the process of learning (Yalamova, 2010). But little is known about the pedagogical benefits of the use of visualization as defined by accounting literature. The paper tried to highly the gap between learning theory and the concept of visualization in accounting of both accounting students and academics. We present an Italian perspective on the role of visualisation, as learning preference, in accounting education, both in undergraduate and postgraduate courses. We used survey method, submitting Fleming’s questionnaire (Fleming & Baume, 2006) to determine the relevance of visualisation in learning accounting subject.
    Keywords: Accounting; Visualisation; Learning preferences; Vark; Italy
    JEL: A20 M40 M41
    Date: 2015–05–15
  8. By: Deaves, Richard; Lei, Jin; Schröder, Michael
    Abstract: We document using the ZEW panel of German stock market forecasters that weak forecasters tend to be overconfident in the sense that they provide extreme forecasts and their confidence intervals are less likely to contain eventual realizations. Moderate filters based on forecast accuracy over short rolling windows are somewhat successful in improving predictability. While poor performance can be due to various factors, a filter based on a prior tendency to provide extreme forecasts also improves predictability.
    Keywords: Overconfidence,Forecasting Performance,Stock Market
    JEL: G02 G17
    Date: 2015
  9. By: Jakub Mikolasek (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic)
    Date: 2015–05
  10. By: Laurent Vilanova (Université de Lyon, F-69007, France; Université Lyon 2, Coactis); Nadège Marchand (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon Saint-Etienne, Ecully, F-69130, France; Université Lyon 2, Lyon, F-69007, France); Walid Hichri (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon Saint-Etienne, Ecully, F-69130, France; Université Lyon 2, Lyon, F-69007, France)
    Abstract: We test in the laboratory how entrepreneurs’ skill perceptions influence the design of financing and advising contracts. Our theoretical framework proposes that selfconfident entrepreneurs prefer issuing debt whereas low self-confident ones prefer equity which induces strong investor assistance. The prevalence of overconfidence makes investors more reluctant to accept debt offers and constrains self-confident entrepreneurs to finance through mixed securities. Experimental results show that self-confident entrepreneurs issue more debt-like securities and receive less assistance. We also show that entrepreneurs learn not to offer pure debt and that initial ignorance of their own skills reinforces entrepreneurs’ ability to learn through risky choices.
    Keywords: Entrepreneurs, investment decision, learning, overconfidence, venture capital
    JEL: C72 C92 D83
    Date: 2015

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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