nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2015‒09‒26
seventeen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. What Policies Increase Prosocial Behavior? An Experiment with Referees at the Journal of Public Economics By Chetty, Raj; Saez, Emmanuel; Sándor, László
  2. Revealed incomplete preferences under uncertainty By Cettolin E.; Riedl A.M.
  3. Facebook-to-Facebook: Online Communication and Economic Cooperation By Anna Lou Abatayo; John Lynham; Katerina Sherstyuk
  4. An empirical investigation into the propensity of reckless decision making within the high pressure environment of Deal or No Deal. By Whitle, Richard; Rae, Jonathan; Pyke, Chris
  5. Do individuals’ risk and time preferences predict entrepreneurial choice? By Cook, William; Whittle, Richard
  6. When proposers demand less without need – Ultimatum bargaining in the loss domain – By Stephan Schosser; Bodo Vogt
  7. Lucky Bias in Bribery Market: An Experimental Evidence from Drug Market Game By Thanee Chaiwat
  8. Should I double park or should I go? The effect of political ideology on collective action problems By Adam, Antonis; Drichoutis, Andreas C.; Georgoula, Maria; Kammas, Pantelis
  9. Resisting classical solutions: The creative mind of industrial designers and engineers. By Marine Agogué; Pascal Le Masson; Cédric Dalmasso; Olivier Houdé; Mathieu Cassotti
  10. The ABCs of financial education : experimental evidence on attitudes, behavior, and cognitive biases By Carpena,Fenella; Cole,Shawn A.; Shapiro,Jeremy; Zia,Bilal Husnain
  11. What automaton model captures decision making? A call for finding a behavioral taxonomy of complexity By Stephan Schosser; Bodo Vogt
  12. Dishonesty: From Parents to Children By Daniel Houser; John List; Marco Piovesan; Anya Samek; Joachim Winter
  13. Subliminal Influence on Generosity By Andersson, Ola; Miettinen, Topi; Hytönen, Kaisa; Johannesson, Magnus; Stephan, Ute
  14. Wallflowers: Experimental Evidence of an Aversion to Standing Out By Daniel Jones; Sera Linardi
  15. Waiting to Cooperate? Cooperation in one-stage and two-stage games By Todd Kaplan, Bradley Ruffle
  16. Strive to be First or Avoid Being Last: An Experiment on Relative Performance Incentives By Dutcher, E. Glenn; Balafoutas, Loukas; Lindner, Florian; Ryvkin, Dmitry; Sutter, Matthias
  17. Voluntary industry standards: An experimental investigation of a Greek gift By Schmid, Julia

  1. By: Chetty, Raj; Saez, Emmanuel; Sándor, László
    Abstract: We evaluate policies to increase prosocial behavior using a field experiment with 1,500 referees at the Journal of Public Economics. We randomly assign referees to four groups: a control group with a six week deadline to submit a referee report, a group with a four week deadline, a cash incentive group rewarded with $100 for meeting the four week deadline, and a social incentive group in which referees were told that their turnaround times would be publicly posted. We obtain four sets of results. First, shorter deadlines reduce the time referees take to submit reports substantially. Second, cash incentives significantly improve speed, especially in the week before the deadline. Cash payments do not crowd out intrinsic motivation: after the cash treatment ends, referees who received cash incentives are no slower than those in the 4 week deadline group. Third, social incentives have smaller but significant effects on review times and are especially effective among tenured professors, who are less sensitive to deadlines and cash incentives. Fourth, all the treatments have little or no effect on agreement rates, quality of reports, or review times at other journals. We conclude that small changes in journals’ policies could substantially expedite peer review at little cost. More generally, price incentives, nudges, and social pressure are effective and complementary methods of increasing prosocial behavior.
    Date: 2014
  2. By: Cettolin E.; Riedl A.M. (GSBE)
    Abstract: The completeness axiom of choice has been questioned for long, and in response, theoretical models of decision making allowing for incomplete preferences have been developed. So far the theoretical accomplishments have however not been paired with empirical evidence on the actual existence of incomplete preferences. In this paper we provide empirical evidence in support of the existence of incomplete preferences due to multiple priors over an ambiguous event. We design experimental decision tasks where specific choice patterns are consistent with incomplete preferences under uncertainty but inconsistent with models assuming complete preferences. We find that approximately half of the subjects behave consistent with incomplete preferences due to multiple priors and that the observed behavioral pattern cannot be attributed to mistakes, probability weighting or regret aversion. In a robustness test we show that the observed behavior is robust to a prize variation in the ambiguous prospect and consistent with comparative statics predictions based on incomplete preferences under uncertainty.
    Keywords: Design of Experiments: Laboratory, Individual; Microeconomic Behavior: Underlying Principles; Criteria for Decision-Making under Risk and Uncertainty;
    JEL: C91 D01 D81
    Date: 2015
  3. By: Anna Lou Abatayo (University of Hawaii at Manoa); John Lynham (University of Hawaii at Manoa); Katerina Sherstyuk (University of Hawaii at Manoa)
    Abstract: Communication is often critical for economic cooperation and enhancement of trust. Traditionally, direct face-to-face communication has been found to be more effective than any form of indirect, mediated communication. We study whether this is still the case given that many people routinely use texting and online social media to conduct economic transactions. In out laboratory experiment, groups of participants communicate either (i) face-to-face, (ii) through the most popular online social network – Facebook, or (iii) using text messaging, before participating in a public goods or a trust game. While people talk significantly more under traditional face-to-face, discussion through Facebook and text messages prove as effective as face-to-face communication in enhancing cooperation and increasing trust. For all three media, discussions that focus on the game of use more positive emotion words are correlated with enhanced trust. It appears that young American adults are now just as adept at communicating and reducing social distance online as they are in person.
    Keywords: communication technology; laboratory experiments; public good games; trust games
    JEL: C91 C92 D03 D71
    Date: 2015–09
  4. By: Whitle, Richard; Rae, Jonathan; Pyke, Chris
    Abstract: This paper discusses human attitudes towards risk and the development of expected utility models, laying the foundations for the creation of prospect theory in 1979. It proceeds to analyse the decisions of contestants on the popular TV game show Deal or No Deal to attempt to observe any evidence of differing levels of risk aversion under losses and gains as predicted by prospect theory. The results reveal some evidence of decreased risk aversion in the domains of losses and gains, with contestants displaying behaviour consistent with the break-even and house-money effects. We conclude there may be enough evidence of variable reference points to warrant further investigation, and propose suggestions for further research
    Keywords: Decision making under uncertainty, behavioural economics, behavioural finance, biases & heuristics, Prospect Theory.
    JEL: C0 C10 C93
    Date: 2015
  5. By: Cook, William; Whittle, Richard
    Abstract: This study seeks to estimate whether individuals’ risk and time preferences are predictive of self employment status and entry. Prior Work: The low risk aversion of those who are self employed is well established in theory and empirical evidence, there is less evidence however on whether risk seeking in existing employees predicts future self employment entry and virtually no empirical research on the links between time preference and self employment. Approach: This study uses a quantitative approach by estimating a series of statistical models that estimate the relationship between an individuals’ risk and time preferences and whether they are (or subsequently become) self employed using a national longitudinal dataset. Results: We find that the self employed are more likely to have low risk aversion. When restricting our analysis to those who are initially employees we find that , low risk aversion combined with a preference for short term gains are most predictive of a transition into self employment. Implications and Value: This study informs the general question as to whether entrepreneurship is linked to personality traits with new evidence on the link between risk and time preference and self employment entry, in doing so it points towards attitudes toward risk and time preference that need to be encouraged if entrepreneurship is to be developed within countries and firms.
    Keywords: Risk Preference, Time Preference, Decision Making, Economics, Entrepreneurship
    JEL: C0 J0 M0
    Date: 2015
  6. By: Stephan Schosser (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Bodo Vogt (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: Subjects in the loss domain tend to split payoffs equally when bargaining. The ultimatum game offers an ideal mechanism through which economists can investigate whether equal splits are the consequence of proposer generosity or due to their anticipation that the responders will reject lower offers. This paper experimentally compares ultimatum bargaining in a loss domain with that under gains. The results reveal that, although responders do not expect more in the loss domain, proposers do make higher offers. As such, proposers reach agreements more often in the loss domain than they do in the gains domain, and responders receive higher payoffs.
    Keywords: Ultimatum bargaining, losses, equal split, experimental economics
    JEL: C72 C92 D74
    Date: 2015–07
  7. By: Thanee Chaiwat (Faculty of Economics, Chulalongkorn University)
    Abstract: Crime is a big problem in every society. In economic aspect, Becker (1974) proposed that the decision on criminal activities depends on the probability to be caught and the degree of penalty. An agent would evaluate his net return before make his decision. However individual may perceive the probability to be caught different from the real known value. This paper employed Tedeschi (2007)’s Drug Market Game to run class experiments of 156 economics students of Chulalongkorn University (Bangkok) and Walailuk University (Nakon Si Thammarat) to observe how individual perceived the probability to be caught. This game divided the subjects into 3 types of buyers, including the addict, the casual, and the curious and 2 types of sellers, including the big supplier and the small supplier. The experimental game started with free market situation, following decriminalization. The police would be inserted into the game with various amounts to vary the caught factor, so both buyers and sellers seem to have reacted rationally. Later, the game proposed the chance to negotiate bribe before being caught under some proportion of the group of police. The results showed that individuals think for themselves and believe that they would be lucky that they can bribe even they know the probability to be caught and the proportion of good police. So they have reacted as same as in the free market situation. This is because individuals have lucky bias for themselves, and create supply in bribery market. So policy implication should concern this lucky bias to restrict bribery supply and reduce crime effectively.
    Keywords: Bribery, Experimental Economics, Behavioral Economics, Law and Economics
    JEL: K42 C91 D03
  8. By: Adam, Antonis; Drichoutis, Andreas C.; Georgoula, Maria; Kammas, Pantelis
    Abstract: Collective action problems, such as double parking behavior, are pervasive in everyday life. This paper presents the results from a field survey that was carried out at one of the main and busiest streets of the city of Ioannina in Greece, in order to investigate the effect of political ideology on double parking behavior. We find that individuals placing themselves either on the extreme Left or the extreme Right on a [0-10] political spectrum, are characterized by increased propensity of double parking behavior. Taking into account that both the extreme Left and the extreme Right Greek parties are strongly in favor of state intervention, our empirical findings could be read as follows. Subjects that believe in the superiority of state intervention rely heavier on incentives and constraints provided by the law and therefore in the absence of an effective monitoring mechanism they fail to internalize the social cost of their actions. In contrast, subjects that are in favor of decentralized market solutions, take into account the social impact of their actions even in the absence of a strong monitoring state mechanism.
    Keywords: Collective Action; Political Ideology; Political Behavior
    JEL: C93 H23 H41
    Date: 2015–09–16
  9. By: Marine Agogué (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris); Pascal Le Masson (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris); Cédric Dalmasso (CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris); Olivier Houdé (Centre for Imaging Neurosciences and Applications to Pathologies (CI-NAPS), CNRS, Universities of Caen and Paris Descartes (Alliance for Higher Education and Research ‘‘Sorbonne Paris Cité’’), 75005 Paris, France, Institut Universitaire de France, 103, Boulevard Saint-Michel, 75005 Paris, France); Mathieu Cassotti (LaPsyDE - Laboratoire de Psychologie du Développement et de l'Education de l'enfant - UPD5 - Université Paris Descartes - Paris 5, CGS - Centre de Gestion Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris)
    Abstract: Industrial designers and engineers are 2 types of individuals who are typically contrasted with regard to their creative capabilities. Regarding idea-generation processes, studies have shown that individuals use existing elements to generate new ideas, which constrains their creative thinking and leads them to only focus on a narrow scope of solutions. This article explores how industrial designers and engineers behave when generating creative ideas and resisting fixation (i.e., their propensity to focus on a limited set of ideas). We used a creative task in which participants were asked to design a solution that would prevent a hen’s egg from breaking after being dropped from a height of 10 m. Our results show that engineers and industrial designers differ in their creative behaviors when they are asked to generate ideas in a creative task without any constraints. Industrial designers provide more answers and are less fixated than engineers. However, for both engineers and industrial designers, the introduction of an uncreative example reinforced the fixation effect and constrained participants’ fluency. Specifically, industrial designers who were exposed to an uncreative example behaved similarly to engineers who were not exposed to this type of example.
    Keywords: Fixation,Engineer,Industril designer
    Date: 2015–08–31
  10. By: Carpena,Fenella; Cole,Shawn A.; Shapiro,Jeremy; Zia,Bilal Husnain
    Abstract: This paper uses a large scale field experiment in India to study attitudinal, behavioral, and cognitive constraints that stymie the link between financial education and financial outcomes. The study complements financial education with (i) participant classroom motivation with pay for performance on a knowledge test, (ii) intensity of treatment with personalized financial counseling, and (iii) behavioral nudges with financial goal setting. The analysis finds no impact of pay for performance but significant effects of both counseling and goal setting on real financial outcomes. These results identify important complements to financial education that can bridge the gap between financial knowledge and financial behavior change.
    Keywords: Access to Finance,Curriculum&Instruction,Financial Literacy,Effective Schools and Teachers,Access&Equity in Basic Education
    Date: 2015–09–15
  11. By: Stephan Schosser (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Bodo Vogt (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: When investigating bounded rationality, economists favor finite-state automatons - for example the Mealy machine - and state complexity as a model for human decision making over other concepts. Finite-state automatons are a machine model, which are especially suited for (repetitions of) decision problems with limited strategy sets. In this paper, we argue that finite-state automatons do not suffice to capture human decision making when it comes to problems with infinite strategy sets, such as choice rules. To proof our arguments, we apply the concept of Turing machines to choice rules and show that rational choice has minimal complexity if choices are rationalizable, while complexity of rational choice dramatically increases if choices are no longer rationalizable. We conclude that modeling human behavior using space and time complexity best captures human behavior and suggest to introduce a behavioral taxonomy of complexity describing adequate boundaries for human capabilities.
    Date: 2015–07
  12. By: Daniel Houser (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); John List (Department of Economics, University of Chicago); Marco Piovesan (Department of Economics, University of Copenhagen); Anya Samek (Center for Economic and Social Research, University of Southern California); Joachim Winter (Department of Economics, University of Munich)
    Abstract: Acts of dishonesty permeate life. Understanding their origins, and what mechanisms help to attenuate such acts is an underexplored area of research. This study takes an economics approach to explore the propensity of individuals to act dishonestly across different contexts. We conduct an experiment that includes both parents and their young children as subjects, exploring the roles of moral cost and scrutiny on dishonest behavior. We find that the highest level of dishonesty occurs in settings where the parent acts alone and the dishonest act benefits the child. In this spirit, there is also an interesting, quite different, effect of children on parents’ behavior: parents act more honestly under the scrutiny of daughters than under the scrutiny of sons. This finding sheds new light on the origins of the widely documented gender differences in cheating behavior observed among adults, where a typical result is that females are more honest than males. Length: 48
    Keywords: cheating, dishonesty, ethical judgment, social utility, field experiment
    JEL: C91 D63
    Date: 2015–09
  13. By: Andersson, Ola (Research Institute of Industrial Economics (IFN)); Miettinen, Topi (Hanken School of Economics); Hytönen, Kaisa (Aalto University); Johannesson, Magnus (Stockholm School of Economics); Stephan, Ute (Aston Business School)
    Abstract: We experimentally prime subjects subliminally prior to charity donation decisions by showing words that have connotations to prosocial values for a very short duration of time (17ms). Our main finding is that, compared to a baseline condition, the prosocial prime increases donations with about 10–17 percent among subjects with strong prosocial preferences. A similar effect is also found in our data when interacting the prime with the personality characteristic of BigFive agreeableness. We also contribute with providing an arguably better method for testing for "sublimity". The method reveals that some subjects are capable of recognizing some of the prime words, and the results are overall weaker when we control for this capacity.
    Keywords: Charity; Subliminal; Priming; Universalism; Values; Personality
    JEL: C91 D01 D03
    Date: 2015–09–18
  14. By: Daniel Jones; Sera Linardi
    Abstract: An extensive literature on reputation signaling in prosocial settings has focused on an intrinsic desire for positive reputation. In our paper, we provide experimental evidence that some individuals are averse to both positive and negative reputation and will therefore respond to visibility by signaling that they are an "average altruism type" relative to their audience. We formalize our hypotheses about "wallflower" behavior in a theoretical model. Our experimental results show that instead of uniformly increasing contributions, visibility draws contributions towards the middle of others' contributions. As a result, visibility is associated with higher levels of giving only when in scenarios where others are giving a large amount. We also observe heterogeneity in reputation concerns wallflower behavior is particularly strong for women and can be observed in several different settings.
    Date: 2014
  15. By: Todd Kaplan, Bradley Ruffle (Wilfrid Laurier University)
    Abstract: Cooperation between two players often requires exactly one to take the available action, while the other acquiesces. If the decisions whether to pursue the action are made simultaneously, then neither or both may acquiesce leading to an inefficient outcome. However, inefficiency may be avoided if players move sequentially. We test experimentally whether two-stage versions of this entry-exit game enhance cooperation. In one version, players may wait in the first stage to see what their paired player did and then coordinate in the second stage. In another version, sequential decision-making is imposed by assigning one player to move in stage one and the other player in stage two. Although there are fewer cooperative decisions in the two-stage treatments, we show that subjects coordinate better on efficient cooperation and on avoiding both acquiescing. Consequently they achieve higher profits. Yet, the least cooperative pairs do worse in the two-stage games than their single-stage counterparts. They use the second stage not to facilitate coordination but to disguise their uncooperative play or to punish their opponents.
    Keywords: experimental economics, cooperation, efficiency, two-stage games, turn-taking.
    JEL: C90 Z13
    Date: 2015–09–16
  16. By: Dutcher, E. Glenn (University of Central Missouri); Balafoutas, Loukas (University of Innsbruck); Lindner, Florian (University of Innsbruck); Ryvkin, Dmitry (Florida State University); Sutter, Matthias (University of Cologne)
    Abstract: We utilize a laboratory experiment to compare effort provision under optimal tournament contracts with different distributions of prizes which motivate agents to compete to be first, avoid being last, or both. We find that the combined tournament contract incorporating both incentives at the top and at the bottom induces the highest effort, especially in larger groups. Avoiding being last produces the lowest variance of effort and is more effective at motivating employees compared to competing for the top.
    Keywords: tournament, winner, loser, contract, experiment, learning
    JEL: M52 J33 J24 D24 C90
    Date: 2015–09
  17. By: Schmid, Julia
    Abstract: One reason for firms to voluntarily increase their environmental or social production standards is to prevent consumers from lobbying for stricter mandatory standards. In this sense, voluntary overcompliance serves as a Greek gift, as consumers might be worse off in the end. Strategically, a Greek gift deteriorates the consumer's incentive for lobbying and, as such, might be unkind. In many experiments it was shown that unkind actions which decrease the other's payoff are punished by negative reciprocal behavior. This paper experimentally investigates whether negative reciprocity can also be observed if unkind behavior is not directed at payoffs but rather at a deterioration of strategic incentives.
    Keywords: experiments,voluntary agreements,overcompliance,learning,reciprocity
    JEL: C72 C92 D83
    Date: 2015

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