nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2015‒08‒07
sixteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. When best-replies are not in equilibrium: Understanding cooperative behaviour By Irenaeus Wolff
  2. Food waste: The role of date labels, package size, and product category By Wilson, Norbert L.W.; Rickard, Bradley J.; Saputo, Rachel; Ho, Shuay-Tsyr
  3. Inducing Hypothetical Bias Mitigation with Ten Commandments By Lim, Kar Ho; Grebitus, Carola; Hu, Wuyang; Nayga, Rodolfo M. Jr.
  4. Does meditation lead to more selfish or pro-social behaviors in a trust game? By Di Bartolomeo Giovanni; Stefano Papa
  5. Information Networks and Their Role in Threshold Public Goods Games: An Experimental Study By Kreitmair, Ursula W.; Banerjee, Simanti; Walker, James M.
  6. How Markets Alleviate the Excessive Choice Effect: A Field Experiment on Craft Beer Choice By Malone, Trey; Lusk, Jayson L.
  7. Was Sandmo Right? Experimental Evidence on Attitudes to Price Risk and Uncertainty By Lee, Yu Na; Bellemare, Marc F.; Just, David R.
  8. Mislabelling in Collective Labels: an experimental analysis By Bonroy, Olivier; Garapin, Alexis; Hamilton, Stephen F.; Souza Monteiro, Diogo M.
  9. Hiring and Escalation Bias in Subjective Performance Evaluations: A Laboratory Experiment By Andrej Angelowski; Jordi Brandts; Carles Solà
  10. Cognitive Biases in the Assimilation of Scientific Information on Global Warming and Genetically Modified Food By McFadden, Brandon R.; Lusk, Jayson
  11. Can the new label make a difference? Comparing consumer attention towards the current versus proposed Nutrition Facts panel. By Xie, Yi; Grebitus, Carola; Davis, George C.
  12. Negative Voters: Electoral Competition with Loss-Aversion By Lockwood, Ben; Rockey, James
  13. "Thou shalt not leech" Are digital pirates conditional cooperators? By Wojciech Hardy; Michal Krawczyk; Joanna Tyrowicz
  14. Informal low-cost methods for increasing enrollment of environmentally sensitive lands in farmland conservation programs: An experimental study By Banerjee, Simanti; Shortle, James S.
  15. How can environmental information align consumer behaviour with attitude? Evidence from a field experiment By Vlaeminck, Pieter; Jiang, Ting; Vranken, Liesbet
  16. Getting a Leg Up or Pulling it Down? Interpersonal Comparisons and Destructive Actions: Experimental Evidence from Bolivia By Zeballos, Eliana

  1. By: Irenaeus Wolff
    Abstract: In many social situations, human behaviour differs from the Nash-equilibrium under selfish payoff-maximisation. Numerous social-preference models have been proposed, virtually all of them relying on the Nash-equilibrium concept. This paper determines the Nash-equilibrium sets that result given experiment participants’ elicited preferences, and tests the various aspects of a ‘revealed-preference Nash-equilibrium’ by inducing common knowledge of preferences, using a publicgood situation as an example. The data show that in a three-player public-good situation, multiple equilibria should be expected relatively often (in a third of the cases). Second, most participants’ individual behaviour is in accordance with aspects of Nash equilibrium: most people best-respond to their beliefs, choose equilibrium actions, and consider beliefs that correspond to an equilibrium. However, many participants predict others’ behaviour poorly, which also entails that behaviour rarely is in equilibrium. This points to models like level-k as potential components for better social-preference theories. The experimental findings are obtained using experienced participants and robust to giving participants the option to look up the set of equilibria of their game, and to reducing the number of players to two.
    Keywords: Public good, social dilemma, Nash-equilibrium, rational beliefs, conditional cooperation, social preferences
    Date: 2015
  2. By: Wilson, Norbert L.W.; Rickard, Bradley J.; Saputo, Rachel; Ho, Shuay-Tsyr
    Abstract: The presence of food waste, and ways to reduce food waste, has generated significant debate among industry stakeholders, policy makers, and consumer groups in the United States and elsewhere. Many have argued that the variety of date labels used by food manufacturers leads to confusion about food quality and food safety among consumers. Here we develop a laboratory experiment with treatments that expose subjects to different date labels (Sell by, Best by, Use by, and Fresh by) for six food products; we include both small and large-sized ready-to-eat cereal, salad greens, and yogurt. Our results show that, holding other observed factors constant, that date labels do influence subjects’ value of food waste. We find that subjects will waste food across all date labels, but that the value of waste is greatest in the “Use by” treatment, the date label suggestive of food safety, and lowest for the “Sell by” treatment. Two-way ANOVA tests provide evidence that subjects respond differentially to date labels by product. Pair-wise comparison indicate that the “Sell by” treatment generates a waste value that is different than other date labels. We see subjects have different values of waste depending on date label and product. The value of waste for cereal is more responsive to “Fresh by”; for salad, the value of waste is more responsive to all date labels except for “Fresh by”; for yogurt, subjects adjusted their value of waste the most to the “Sell by” treatment. Date labels influence food waste despite the limited information provided by the labels.
    Keywords: Consumer preferences, Date labels, Experimental economics, Food quality, Food safety, Public policy analysis, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, Institutional and Behavioral Economics, Q13, Q18,
    Date: 2015
  3. By: Lim, Kar Ho; Grebitus, Carola; Hu, Wuyang; Nayga, Rodolfo M. Jr.
    Abstract: While a number of hypothetical bias mitigation methods have been proposed, the problem remains as the literature continues to debate the effectiveness and practicality of the mitigation methods (Loomis, 2011). We propose an easy to implement methods to mitigate hypothetical bias in choice experiments. The method involve asking respondents to recall the Ten Commandments prior to willingness to pay elicitation. Our result shows that the proposed method exhibit sign of hypothetical bias mitigation.
    Keywords: Hypothetical bias, Ten Commandments, Honesty, Agribusiness, Agricultural and Food Policy, Institutional and Behavioral Economics, Marketing, C18, C90, D12,
    Date: 2015
  4. By: Di Bartolomeo Giovanni; Stefano Papa
    Date: 2015–05
  5. By: Kreitmair, Ursula W.; Banerjee, Simanti; Walker, James M.
    Abstract: In this study, we employ laboratory economic experiments to explore the role information networks play in the collective provision of threshold or provision point public goods. Threshold public goods are those for which a target or threshold level of funds must be raised to make provision possible or economically viable. Many public goods exhibit this characteristic as they may only be provided in discrete quantities. Thresholds or provision points are particularly relevant to environmental public goods, given non-linear ecological processes. In a broader context, the study of contribution behavior for threshold public goods also provides valuable insights into fundraising activities of both national and local profit and not-for-profit agencies, which typically involve provision points. On the basis of a 2x2 full factorial treatment design we test the following hypotheses: 1) Given LOW endowments, localized information will be less effective than full contribution information in meeting the provision point. 2) Given HIGH endowments local information will be as effective as full information to meet the threshold contribution level. 3) In cases where the threshold is met, group members are more likely to make identical contributions in the COMPLETE treatments than in the LOCAL treatments.
    Keywords: Experimental Economics, Behavioral Economics, Networks, Information, Environmental Economics and Policy, Institutional and Behavioral Economics, Public Economics,
    Date: 2015
  6. By: Malone, Trey; Lusk, Jayson L.
    Abstract: Research in psychology suggests that, somewhat paradoxically, providing consumers more choice can reduce the likelihood of making a purchase, producing the so-called excessive choice effect (ECE). To the extent the ECE exists, firms have an incentive to alleviate the effect through a variety of consumer-focused institutions that lower search costs. This study determines the effectiveness of three consumer-focused institutions on the excessive choice effect in a field experiment focused on beer sales in a restaurant. We manipulate the number of options on the menu (6 vs. 12) in addition to the use of search cost lowering consumer-focused institutions (a control, a menu, a menu with a special prominently displayed, a menu with local options prominently highlighted, and a menu with beer advocate scores). Although we find that consumers tend to be more likely to order beer when presented 6 rather than 12 options, the differences are often not significant depending which data are used and how it is analyzed. Highlighting specials or listing beer rankings have an effect on consumer choices, and have the potential to decrease the excessive choice effect. The experiment also suggests including a special is the most effective way to increase sales of a product category, but not the specific product itself.
    Keywords: excessive choice, informal institutions, field experiment, craft beer, Institutional and Behavioral Economics, Marketing, C93 D03 D12 Q00 Q13,
    Date: 2015
  7. By: Lee, Yu Na; Bellemare, Marc F.; Just, David R.
    Abstract: In his seminal 1971 article, Sandmo showed that when faced with an uncertain output price, a risk-averse firm manager would hedge by producing less than he would have when faced with a certain output price. We take Sandmo’s prediction, among other things, to the lab. We study in turn the effects of price risk (i.e., uncertain prices whose distribution is known) and price ambiguity (i.e., uncertain prices whose distribution is not known, but whose range is known) while controlling for our subjects’ income risk preferences. Our experimental protocol closely mimics Sandmo’s theoretical model. For price risk, we use a two-stage randomization strategy aimed first at studying the effect of price uncertainty relative to price certainty, and then the effect of increases in price uncertainty conditional on there being price uncertainty. For price ambiguity, we use the same randomization strategy to study the effect of price ambiguity relative to price certainty while preventing our subjects from guessing the shape of the price distribution. For price risk, we find that, in stark contradiction to Sandmo’s theoretical result, the presence of price uncertainty causes subjects to produce more than they do under price certainty, but that increases in price uncertainty makes them decrease their production monotonically. For price ambiguity, results are mixed and depend on whether the portion of the experiment aimed at eliciting our subjects’ income risk aversion is played before or after the price uncertainty game. Lastly, we use our price risk data to study the problem structurally, in order to get at preference heterogeneity, and find that our structural results are consistent with our reduced-form results.
    Keywords: Risk and Uncertainty, Price Risk, Price Ambiguity, Experimental Economics, Institutional and Behavioral Economics, Risk and Uncertainty,
    Date: 2015–05–27
  8. By: Bonroy, Olivier; Garapin, Alexis; Hamilton, Stephen F.; Souza Monteiro, Diogo M.
    Keywords: label, public policy, collective action game, experimental economics, agricultural economics., Agribusiness, Agricultural and Food Policy, Industrial Organization, Research Methods/ Statistical Methods, Risk and Uncertainty, C72, C92, Q18,
    Date: 2015–05
  9. By: Andrej Angelowski; Jordi Brandts; Carles Solà
    Abstract: In many organizations the measurement of job performance can not rely on easily quantifiable information. In such cases, supervising managers often use subjective performance evaluations. We use laboratory experiments to study whether the way employees are assigned to a manager affects managers’ and co-employees’ subjective evaluations of employees. Employees can either be hired by the manager, explicitly not hired by him and nevertheless assigned to him or exogenously assigned to him. We present data from four different treatments. For all four treatments we find escalation bias by managers. Managers exhibit a positive bias towards those employees they have hired or a negative one towards those they have explicitly not hired. For three treatments we find that managers’ and employees’ biases are connected. Exogenously assigned employees are biased in favor of employees hired by the manager and against those explicitly not hired.
    Keywords: escalation bias, hiring, performance evaluations, experiments
    JEL: C92 D83 J63
    Date: 2015–07
  10. By: McFadden, Brandon R.; Lusk, Jayson
    Abstract: The ability of scientific knowledge to contribute to public debate about societal risks depends on how the public assimilates information resulting from the scientific community. Bayesian decision theory assumes that people update a belief by allocating weights to a prior belief and new information to form a posterior belief. The purpose of this study was to determine the effects of prior beliefs on assimilation of scientific information and test several hypotheses about the manner in which people process scientific information on genetically modified food and global warming. Results indicated that assimilation of information is dependent on prior beliefs and that the failure to update beliefs in a Bayesian fashion is a result of several factors including: misinterpreting information, illusionary correlations, selectively scrutinizing information, information-processing problems, knowledge, political affiliation, and cognitive function.
    Keywords: Bayesian updating, beliefs, climate change, biotechnology, Agricultural and Food Policy, Consumer/Household Economics, Environmental Economics and Policy, Food Consumption/Nutrition/Food Safety, Research and Development/Tech Change/Emerging Technologies, D83, Q16, Q54,
    Date: 2014
  11. By: Xie, Yi; Grebitus, Carola; Davis, George C.
    Abstract: Recently FDA proposed a new Nutrition Facts panel. In this study, we analyze whether the proposed changes to the Nutrition Facts panel have the potential to increase consumers’ attention. In doing so, we account for involvement and familiarity as determinants of attention. In order to measure attention we conducted a laboratory experiment using eye tracking with two treatments testing differences in consumer attention towards the current and the proposed Nutrition Facts panel. Our findings highlight empirical evidence regarding the separate and joint effect of involvement with the Nutrition Facts panel and product familiarity on consumers’ visual attention. Our results suggest that the proposed new format of the Nutrition Facts panel has a significant positive effect on consumers’ attention. The proposed label leads low-involvement or less-familiar consumers to attend longer to the Nutrition Facts panel. Our findings are important for policy makers and the food industry more generally in providing critical information regarding the outcomes of a revision of the Nutrition Facts panel.
    Keywords: Nutrition Facts panel, visual attention, eye-tracking, Food Consumption/Nutrition/Food Safety,
    Date: 2015–05
  12. By: Lockwood, Ben (Department of Economics University of Warwick,); Rockey, James (University of Leicester)
    Abstract: This paper studies how voter loss-aversion affects electoral competition in a Downsian setting. Assuming that the voters’ reference point is the status quo, we show that loss-aversion has a number of effects. First, for some values of the status quo, there is policy rigidity both parties choose platforms equal to the status quo, regardless of other parameters. Second, there is a moderation effect when there is policy rigidity, the equilibrium policy outcome is closer to the moderate voters’ ideal point than in the absence of loss-aversion. In a dynamic extension of the model, we consider how parties strategically manipulate the status quo to their advantage, and we find that this increases policy rigidity. Finally, we show that with loss-aversion, incumbents adjust less than challengers to changes in voter preferences. The underlying force is that the status quo works to the advantage of the incumbent. This prediction of asymmetric adjustment is new, and we test it using elections to US state legislatures. The results are as predicted: incumbent parties respond less to shocks in the preferences of the median voter. JEL classification: electoral competition ; loss-aversion ; incumbency advantage ; platform rigidity
    Keywords: D72 ; D81
    Date: 2015
  13. By: Wojciech Hardy (Faculty of Economic Sciences, University of Warsaw); Michal Krawczyk (Faculty of Economic Sciences, University of Warsaw); Joanna Tyrowicz (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland)
    Abstract: In this project we investigate willingness to share and download cultural content by implementing a novel "piracy game" modelled after standard public good games. Subjects' decisions have real consequence, as they are rewarded with individual "transfer" on a file-sharing service. We find that willingness to share depends positively on the sharing by others. Interestingly, however, this tendency does not seem to be associated with reciprocity or other-regarding social preferences. We employ several measures of sharing - from self-reporting to experimental - and incorporate to the analysis other factors which may explain the autonomous willingness to share, irrespective of the group effects. We find that conditional cooperation in content sharing is fairly prevalent, but unrelated to personality traits, attitude towards risk, attitude towards the other, marginal valuation, as well as socio-demographic characteristics.
    Keywords: digital piracy, Big Five, public goods, laboratory experiment
    JEL: C92 D63
    Date: 2015
  14. By: Banerjee, Simanti; Shortle, James S.
    Abstract: In this paper we study the role of informal low-cost interventions such as providing information about behavior of one’s peer group, as a mechanism to improve the performance of farmland conservation programs. We focus on a specific policy that has high ecological significance because of its emphasis on spatially coordinated land uses – the Agglomeration Bonus. Prior research has indicated that strategic uncertainty within the economic environment of the Agglomeration Bonus (resembling a coordination game with multiple payoff ranked Nash Equilibria) can lead to coordination failure and limited spatial coordination on the payoff efficient strategy (that corresponds to the land use with higher ecosystem benefits). High levels of strategic uncertainty can be a result of large community sizes where landowners’ actions are interdependent, limited information about others’ behavior and conservative payoffs that may make coordination riskier and less attractive. In this context, we consider a laboratory experiment in which we reduce participants’ strategic uncertainty by varying the amount of information available to them. In control sessions, groups of 12 individuals (arranged on a circular local network on which every individual has 2 strategic neighbors) participate in an Agglomeration Bonus game and receive payoffs and information about both their neighbors’ actions. In the treatment sessions, in addition to this information, subjects are also informed about the choices of all members of the group (including their own and their strategic neighbors’ actions). Additionally, we reduce the group size from 12 to 8 subjects to further decrease game strategic uncertainty. Our results indicate that more information in smaller groups significantly improves the likelihood of making the efficient choice. However, repeated interaction leads to a reduction in the likelihood of choosing the efficient action unless both neighbors make the same choice. Analysis of group level spatial patterns indicate no significant treatment effect with increase in instances of coordination failure over time. Thus our treatment implementation while successful in increasing the likelihood of efficient choices, does not ensure that these choices are by adjacent individuals which is necessary for environmental successes. Thus, informal mechanisms that involve providing information about one’s social peers is not expected to improve policy performance even if individuals interact with each other in smaller groups. Additional mechanisms are needed to maintain the positive effect of information and incentivize spatially contiguous efficient land use choices in the long run.
    Keywords: Agglomeration Bonus, Ecosystem Services, Information, Local Networks, Spatial Coordination, Strategic Uncertainty, Environmental Economics and Policy, Institutional and Behavioral Economics, Land Economics/Use, Q57, Q24, D83, D85, C72, C91, C92,
    Date: 2015
  15. By: Vlaeminck, Pieter; Jiang, Ting; Vranken, Liesbet
    Abstract: Using an incentive compatible field experiment, we investigate whether consumer attitudes translate into more corresponding environmentally friendly behaviour when one of the substantial barriers towards environmental food sustainability, i.e. low effectiveness of information provision, is removed. We develop multi-criteria environmental information cards and test their effectiveness in delivering and communicating information through an on-line choice experiment. The environmental information card that was found to be most effective in communicating information is then used in an experimental market and appears to have the potential to effectively steer consumers towards more environmentally friendly food purchases. When consumers shop in the experimental market with the most effective environmental information card installed, switching behaviour towards more environmentally friendly food products is observed. In addition, effective environmental information cards have the ability to increase the overall environmental friendliness of consumers’ food baskets. These findings highlight the potential for policy makers to enlarge the environmentally friendly consumer segment through the provision of easy-to-interpret and standardized environmental information.
    Keywords: Food Experimental Economics, Field Experiment, Environmental Information Provision, Consumer Behaviour, Agricultural and Food Policy, Environmental Economics and Policy, Institutional and Behavioral Economics, C93, D12, Q18, Q56, Q57,
    Date: 2014
  16. By: Zeballos, Eliana
    Abstract: Accumulating research has shown that individuals’ welfare is affected not only by the absolute amount of resources at their command but also, by their relative position vis-a-vis others. Individuals' concerns about their relative positions may influence individuals’ choices and affect their behavior. For example, upward interpersonal comparisons may spur individuals to reduce consumption gaps by increasing effort or investment to "catch-up" or by "pulling-down" others through destructive actions. "Pulling down" other more successful individuals may have both direct and indirect detrimental effects on productivity and efficiency. On one hand, welfare is reduced directly as the other’s output is destroyed and one’s resources are consumed. In addition, the threat of destructive actions may lead to lower levels of effort and investment. In order to empirically examine how interpersonal comparisons affect effort levels, the prevalence of destructive actions, and how the threat of destructive actions affect effort levels; I designed a set of behavioral games that build on the two-stage "money burning" game. I introduce a simple effort task in the first stage. Specifically, earnings depend on the number of beans individuals separate from a container full of beans and rice. The experimental games were carried out in Bolivia among 285 dairy farmers. I find that when destructive actions are not allowed, positional concerns matter for the bottom half of the earnings distribution. When rankings were revealed to the participants, those below the group mean earnings increased their effort by 7.5%. When I allow for destructive actions, 55% of people are willing to forego higher own-consumption in order to "destroy" others’ output; 58% were victims to destructive action and lost on average 34% of their earnings. There is an asymmetry in direction of destruction, 98.3% of the highest earners suffered some destruction, while only 23.7% of the lowest earners were victims to destruction actions. Finally, the threat of destructive actions reduced highest earners’ effort by 6%.
    Keywords: Interpersonal comparisons Destructive behavior Envy, Institutional and Behavioral Economics, International Development, D01 D03 D63,
    Date: 2015–07

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.