nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2015‒08‒30
four papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Saving Face and Group Identity By Tor Eriksson; Lei Mao; Marie Claire Villeval
  2. Does legality matter? The case of tax avoidance and evasion By Blaufus, Kay; Braune, Matthias; Hundsdoerfer, Jochen; Jacob, Martin
  3. Disentangling two causes of biased probability judgment: Cognitive skills and perception of randomness By Duttle, Kai
  4. When Incentives Backfire: Spillover Effects in Food Choice By Angelucci, Manuela; Prina, Silvia; Royer, Heather; Samek, Anya

  1. By: Tor Eriksson (Department of economics - University of Aarhus); Lei Mao (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS, Central University of Finance and Economics); Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS)
    Abstract: Are people willing to sacrifice resources to save one's and others' face? In a laboratory experiment, we study whether individuals forego resources to avoid the public exposure of the least performer in their group. We show that a majority of individuals are willing to pay to preserve not only their self-but also other group members' image. This behavior is frequent even in the absence of group identity. When group identity is more salient, individuals help regardless of whether the least performer is an in-group or an out-group. This suggests that saving others' face is a strong social norm.
    Date: 2015
  2. By: Blaufus, Kay; Braune, Matthias; Hundsdoerfer, Jochen; Jacob, Martin
    Abstract: Previous research argues that law expresses social values and could, therefore, influence individual behavior independently of enforcement and penalization. Using three laboratory experiments on tax avoidance and evasion, we study how legality affects individuals' decisions. We find that, without any risk of negative financial consequences, the qualification of tax minimization as illegal versus legal reduces tax minimization considerably. Legislators can thus, in principle, affect subjects' decisions by defining the borderline between legality and illegality. However, once we introduce potential negative financial consequences, legality does not affect tax minimization. Only if we use moral priming to increase subjects' moral cost do we again find a legality effect on tax minimization. Overall, this demonstrates the limitations of the expressive function of law. Legality appears to be an important determinant of behavior only if we consider activities with no or low risk of negative financial consequences or if subjects are morally primed.
    Keywords: Expressive Law,Legality,Moral Appeals,Tax Avoidance,Tax Evasion,Real Effort Experiment
    JEL: M41 M48 H20 H30 Z18
    Date: 2015
  3. By: Duttle, Kai
    Abstract: This experimental study investigates the interaction of two influential factors of biased probability judgments. Results provide new insights on the preconditions for an application of either the gambler's fallacy or its exact opponent, the hot hand fallacy. The first factor is cognitive ability, measured in a cognitive reflection test. The second one is the level of perceived randomness in the observed outcomes. Probability judgments are found to vary significantly across salience of randomness treatments as well as across subgroups with high or low cognitive abilities. Like in previous research, subjects with higher cognitive skills are more likely to engage the gambler's fallacy, yet only if perception of sequential randomness is low. In a setting where randomness is very salient the exact opposite can be observed. Similarly surprising insights are revealed when controlling for cognitive abilities in the analysis of salience treatments. Past results are only confirmed for a subgroup with lower cognitive skills, while their peers' beliefs are completely opposite.
    Abstract: Diese experimentelle Studie untersucht die Interaktion zweier Einflussfaktoren auf fehlerhafte Wahrscheinlichkeitsschätzungen. Die Ergebnisse geben Einblick in die Voraussetzungen für eine Verhaltensanwendung der sogenannten Gambler's Fallacy einerseits, oder aber dem genauen Gegenstück, der Hot Hand Fallacy. Der erste Faktor ist die kognitive Fähigkeit, welche in einem Cognitive Reflection Test gemessen wird. Der zweite ist das Ausmaß der wahrgenommenen Zufälligkeit in den beobachteten Ausgängen. Wahrscheinlichkeitsschätzungen variieren signifikant sowohl über die Zufallswahrnehmungs-Treatments als auch über Gruppen mit guten respektive schlechteren kognitiven Fähigkeiten. Wie in früheren Studien wenden Teilnehmer mit hohen kognitiven Fähigkeiten eher die Gambler's Fallacy an, jedoch ausschließlich bei geringer Wahrnehmung sequentieller Zufälligkeit. Ist diese jedoch sehr offensichtlich, kann das genau gegenteilige Verhalten beobachtet werden. Ähnlich überraschende Ergebnisse bringt eine Analyse der Auswirkungen von Variationen in der Zufallswahrnehmung bei gleichzeitiger Kontrolle des Einflusses kognitiver Fähigkeiten. Ergebnisse bisheriger Forschung können lediglich für eine Gruppe mit schlechteren Fähigkeiten repliziert werden. Die Schätzungen der Teilnehmer mit besseren Fähigkeiten sind komplett gegensätzlich.
    Keywords: law of small numbers,gambler's fallacy,hot hand effect,cognitive reflection test
    JEL: C91 D84 J24
    Date: 2015
  4. By: Angelucci, Manuela (University of Michigan); Prina, Silvia (Case Western Reserve University); Royer, Heather (University of California, Santa Barbara); Samek, Anya (University of Southern California)
    Abstract: How do peers influence the impact of incentives? Despite much work on incentives, little is known about the spillover effects of incentives. We investigate two mechanisms by which these effects can occur: through peers' actions and peers' incentives. In a field experiment on snack choice (grapes versus cookies), we randomize who receives incentives, the fraction of peers incentivized, and whether or not it can be observed that peers' choices are incentivized among over 1,500 children in the school lunchroom. Incentives increase the likelihood of initially choosing grapes. However, peer spillover effects can be large enough to undo these positive effects.
    Keywords: food choice, incentives, spillovers, field experiment
    JEL: C93 I1 J13
    Date: 2015–08

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