nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2015‒10‒17
nineteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Does legality matter? The case of tax avoidance and evasion By Blaufus, Kay; Braune, Matthias; Hundsdoerfer, Jochen; Jacob, Martin
  2. Does the field of study influence students' political attitudes? By Mira Fischer; Björn Kauder; Niklas Potrafke; Heinrich W. Ursprung
  3. An Experimental Evaluation of a Proactive Pastoral Care Initiative Within An Introductory University Course By Michael P. Cameron; Sialupapu Siameja
  4. Stress and Coping - An Economic Approach By Klaus Wälde
  5. To friends everything, to strangers the law? An experiment on contract enforcement and group identity By Marian Panganiban
  6. Financial Competence, Overconfidence, and Trusting Investments: Results from an Experiment By Bryan C. McCannon; Colleen Tokar Asaad; Mark Wilson
  7. The Perils of Peer Punishment: Evidence from a Common Pool Resource Experiment By de Melo Gioia; Piaggio Matías
  8. The causal effects of increased learning intensity on student achievement: Evidence from a natural experiment By Andrietti, Vincenzo
  9. Lying, spying, sabotaging: Procedures and consequences By Chlaß, Nadine; Riener, Gerhard
  10. HIV and Rational risky behaviors: a systematic review of published empirical literature (1990-2013) By Marlène Guillon; Josselin Thuilliez
  11. The Ontology of Schelling's "Theory of Interdependent Decisions" By Lauren Larrouy
  12. Truth-telling under Oath By Nicolas Jacquemet; Stéphane Luchini; Julie Rosaz; Jason F. Shogren
  13. Cheating and Incentives: Learning from a Policy Experiment By Cesar Martinelli; Susan W. Parker; Ana Cristina PeÌrez-Gea; Rodimiro Rodrigo
  14. Leadership and Motivation for Public Goods Contributions By Bryan C. McCannon
  15. Overbidding and heterogeneous behavior in contest experiments: A comment on the endowment effect By Subhasish M. Chowdhury; Peter G. Moffatt
  16. Behavioural, Financial, and Health & Medical Economics: A Connection By Chang, C-L.; McAleer, M.J.; Wong, W-K.
  17. Investment strategy and selection bias: An equilibrium perspective on overconfidence By Jehiel, Philippe
  18. More effort with less pay: On information avoidance, belief design and performance By Huck, Steffen; Szech, Nora; Wenner, Lukas M.
  19. Learning to trust flu shots: quasi-experimental evidence on the role of learning in influenza vaccination decisions from the 2009 influenza A/H1N1 (swine flu) pandemic By Maurer, J.;; Harris, K.M.;

  1. 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
  2. By: Mira Fischer (Department of Management, University of Köln, Germany); Björn Kauder (Center of Public Finance and POlitical Economy, Ifo, Germany); Niklas Potrafke (Center of Public Finance and POlitical Economy, Ifo, Germany); Heinrich W. Ursprung (Department of Economics, University of Konstanz, Germany)
    Abstract: We investigate whether the field of study influences university students’ political attitudes. To disentangle self-selection from learning effects, we first investigate whether the fields of study chosen by the incoming students correlate with their political attitudes. In a second step we explore how the political attitudes change as the students progress in their studies. Our results are based on a German pseudo-panel survey, the sample size of which exceeds that of comparable student surveys by an order of magnitude. We find systematic differences between the students’ political attitudes across eight fields of study. These differences can in most cases be attributed to self-selection. A notable exception is economics. Even though self-selection is also important, training in economics has an unambiguous influence on the political attitudes: by the time of graduation, economics students are about 6.2 percentage points more likely than they were as freshmen to agree with liberal-democratic policy positions.
    Keywords: Indoctrination, Nature versus nurture, Field of study, Political socialization, Political attitudes, Economics
    JEL: A13 A22 D72 Z13
    Date: 2015–09–28
  3. By: Michael P. Cameron (University of Waikato); Sialupapu Siameja (University of Waikato)
    Abstract: Improving student retention and academic performance is a key objective for higher education institutions, and finding effective interventions for assisting with at-risk students is therefore important. In this paper we evaluate a proactive pastoral care intervention that was trialled in an introductory economics course. We first identified students at high risk of failure, and then randomised these students into two treatment groups and a control group. The first treatment group received an email with information about academic support, while the second treatment group received the email as well as a personal telephone call to follow up. In evaluating the impact of the intervention trial, we found that the first intervention did not significantly improve student outcomes, but the second intervention did improve outcomes in one of the two semesters evaluated. However, the statistically insignificant results were positive and statistical insignificance may be due to a lack of statistical power. Overall, the initiative was a qualified success. It is both simple and cost-effective, and should be considered for wider implementation and further evaluation.
    Keywords: academic performance; pastoral care; student retention; randomised-controlled trial; New Zealand
    JEL: A22 I21
    Date: 2015–09–13
  4. By: Klaus Wälde (Johannes Gutenberg University Mainz)
    Abstract: Stress is ubiquitous in society. In our model, stressors translate into subjective stress via an appraisal process. Stress reduces instantaneous utility of an individual directly and via a cognitive load argument. Coping can be functional and under the control of the individual or more automatic with dysfunctional features. We predict the occurrence and frequency of uncontrolled coping emotional outbursts as a function of an individuals personality and environment. Outbursts cannot always be avoided. Delaying emotional outbursts articially can lead to even more outbursts. Looking at the e/ect of psychotherapy shows that expecting little and being emotional can help maximizing well-being.
    Keywords: Stress, coping, personality, controlled vs. automatic reaction, emotional outbursts, optimal stopping problem
    JEL: D03 D91 I12
  5. By: Marian Panganiban (Max Planck Institute for Research on Collective Goods, Bonn, and Friedrich-Schiller-Universität, Jena)
    Abstract: Although the role of formal and informal institutions in promoting economic growth and sustaining exchange relations is now well established, explaining and differentiating how informal and formal rules affect individual behavior remain a challenge. This study aims to distill the essential characteristics of formal and informal institutions and disentangle their effects on trust and performance in exchange relations through a laboratory experiment. Formal institutions are modeled as third-party contract enforcement while informal institutions are represented as shared group identity. Results show that trust choices increase as contract enforcement increases but are not affected by shared group identity. However, performance is more likely to occur in interactions with in-group members than out-group members.
    Keywords: institutions, exchange relations, contract enforcement, group identity, laboratory experiments
    JEL: C72 C91 D03 D81
    Date: 2015–10–09
  6. By: Bryan C. McCannon (West Virginia University, Department of Economics); Colleen Tokar Asaad (Baldwin-Wallace University); Mark Wilson (St. Bonaventure University)
    Abstract: Financial transactions sometimes occur in an environment where third-party enforcement is lacking. Behavioral explanations typically allude to the social preferences, where an individual’s utility is directly affected by another’s outcome, as the driver of the trusting investments and reciprocal returns. We hypothesize that, in part, these decisions are determined by an individual’s financial literacy. Experimental evidence is coupled with an innovative financial literacy assessment, which measures general competence, numeracy skills, and overconfidence in one’s knowledge. Results indicate that overconfidence is a significant determinant of behavior. Specifically, overconfident individuals make larger contributions in the investment game. We also document that there is an escalated effect in overconfident individuals who are also exhibit risk loving preferences.
    Keywords: experiment, financial literacy, investment, overconfidence, social preferences, risk preferences
    JEL: G02 C91 D03
    Date: 2015–08
  7. By: de Melo Gioia; Piaggio Matías
    Abstract: We provide experimental evidence on the effects of social disapproval by peers among communities of Uruguayan small-scale fishers exploiting a common pool resource (CPR). We combined this treatment with an in-group (groups from a single community) / mixed group (groups composed of fishers from different communities) treatment. We find that mixed groups, unlike in-groups, reduce their exploitation of the resource in response to the threat of punishment. Both in in-groups and mixed groups there is substantial antisocial punishment, which leads to increased extraction of the CPR by those who are unfairly punished. These findings indicate that effective peer punishment requires coordination to prevent antisocial targeting and to clarify the social signal conveyed by punishment.
    Keywords: Social disapproval; Social preferences; Common pool resource.
    JEL: D03 O12 C93
    Date: 2015–06
  8. By: Andrietti, Vincenzo
    Abstract: I exploit a unique educational policy - implemented in most German states between 2001 and 2007 - that reduced high school duration by one year while keeping its curriculum unaltered to investigate how the resulting increase in learning intensity affected student achievement. Using 2000-2009 PISA data and a difference-in-differences approach, I find robust evidence that the reform significantly improved the reading, mathematics, and science literacy skills acquired by academic-track high school students upon treatment. A more direct estimate of the effects of the increased learning intensity - as measured by the cumulative weekly number of instructional hours delivered in high school grades - corroborates the latter finding. Furthermore, there is some evidence that the effects of the reform differ by gender and grade retention. Finally, I find no evidence of a significant average effect of the reform on high school grade retention, although I do find that the latter increased significantly for boys and for students with a migration background.
    Keywords: G8,Learning intensity,Instructional hours,Student achievement,Academic-track high school,Difference-in-Differences
    JEL: I21 I28 D04
    Date: 2015–06–01
  9. By: Chlaß, Nadine; Riener, Gerhard
    Abstract: We study individuals who can choose how to compete with an opponent for one nonzero payoff. They can either nudge themselves into a fair set of rules where they have the same information and actions as their opponent, or into unfair rules where they spy, sabotage or fabricate their opponent's action. In an experiment, we observe significant altruism under rules which allow for fabrication and sabotage, but not under rules which allow for spying. We provide direct evidence that this altruism emanates from an ethical concern about the rules of the game. How individuals deal with this concern - whether they nudge themselves into fabrication-free, spying-free, or sabotage-free rules, or whether they assume the power to fabricate or sabotage to compensate their opponent by giving all payoff away - varies along with individuals' attitudes towards power.
    Keywords: moral judgement,psychological games,institutional design,lying aversion,sabotage aversion,spying aversion,unfair competition
    JEL: D02 D03 D63 D64
    Date: 2015
  10. By: Marlène Guillon (Paris School of Economics); Josselin Thuilliez (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: Risky health behaviors have the negative effect – negative externality – of the individual being able to spread the disease to others. They thus represent a threat for the society and a tragedy for public health. The objective of this study is to inquire into the nature, extent and strength of the evidence for such risky behaviors for HIV/AIDS from an economic perspective. We aim at investigating the concept of risk or prevalence-elasticity of health behaviors in the case of HIV. We did an exhaustive review of published articles in French and English indexed in the databases PubMed, ScienceDirect and Jstor between 1 January 1990 to 31 December 2013. We searched for publications empirically investigating the risk or prevalence-elasticity of behaviors in the case of HIV/AIDS and performed a bibliometric and descriptive analysis of the dataset. Of the 12,545 articles that were screened, 189 (1.5%) full-text publications studied the risk-elasticity of health behaviors that are related to HIV/AIDS. Of these 189 articles, 167 (88.4%) were quantitative studies that empirically estimated the risk-elasticity, and 22 (11.6%) were qualitative studies. We found that 55.7% of the quantitative studies included at least a correlation between HIV risk and health behaviors that supports the concept of risk or prevalence-elasticity. Moreover, we identified articles that address the reverse causality problem between HIV risk and health behaviors, by using indirect HIV risk measures, to demonstrate the existence of a responsiveness of risk/preventive behaviors to HIV risk. Finally, an in-depth analysis showed seven out of ten articles using an objective measure of risk for HIV/AIDS gave strong support to prevalence-elasticity. However, only one of the ten articles established a direct measure of prevalence-elasticity while appropriately dealing with the reverse causation problem between objective HIV risk and preventive/risk behaviors. These results stress out the need to carefully monitor programs of risk behaviors' surveillance in the context of HIV becoming chronic, especially in sub-Saharan Africa where large scale HIV treatment policies are being implemented. More evidence is needed on the strength of rational risky behaviors to maximize the public health and economic impact of large scale HIV treatment or preventive policies. With this purpose, epidemiological surveillance programs could be paired with specific behavioral surveillance programs to better inform policy makers
    Keywords: HIV; Economic epidemiology; Prevalence-elasticity
    JEL: I10 I11
    Date: 2015–08
  11. By: Lauren Larrouy (University of Nice Sophia Antipolis, France; GREDEG CNRS)
    Abstract: The present paper offers a methodological contribution on Schelling's insight into game theory drawing both on his proposition for a "reorientation of game theory" and his dynamic models of residential segregation. It aims to show how these respective works exhibit coherence in Schelling's thinking. It is often claimed that Schelling criticizes standard game theory without proposing any conceptual solution. To the contrary, I assert that the methodological constraints Schelling identifies in standard game theory support the proposition of a new type of modeling in the dynamic models of residential segregation: the first agent based modeling. I argue that the agent-based models provide a theoretic ground to formalize the methodological innovations proposed in his “reorientation of game theory.” To understand such a claim I stress the social ontology underlined in Schelling's conception of a "theory of interdependent decisions."
    Keywords: Schelling, ontology, game theory, residential segregation, agent-based models
    JEL: B41 B52 C72 D74 D81
    Date: 2015–03
  12. By: Nicolas Jacquemet (Paris School of Economics and BETA - Université de Lorraine); Stéphane Luchini (GREQAM-CNRS - Université de Marseille); Julie Rosaz (LAMETA - Université de Montpellier 1); Jason F. Shogren (Department of Economics and Finance - University of Wyoming)
    Abstract: A growing experimental literature has explored how monetary incentives affect truth-telling and lying behavior. We extend this literature to consider how to non-monetary incentives–a loaded environment and commitment through a truth-telling oath–affect truth-telling and lying behavior. For a loaded environment, we revise the standard lying experiment by making it explicit and clear to the person that “a lie is a lie”. We then combine the lying experiment with a solemn oath procedure, by which subjects commit themselves to tell the truth before entering the laboratory. Both non-monetary incentive devices affect a person's willingness to tell the truth: subjects lie slightly less frequently in the loaded environment, and drastically less after they signed the solemn oath. Interestingly, the loaded environment and oath have distinct effects–the oath changes the incentive to lie only when truthfulness is made meaningful through the loaded environment
    Keywords: Deception; lies; truth-telling oath; experiments
    JEL: C92 D03 D63
    Date: 2015–07
  13. By: Cesar Martinelli (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Susan W. Parker (Center for Research and Teaching in Economics, Centro de Investigación y Docencia Económicas (CIDE)); Ana Cristina PeÌrez-Gea (Instituto Tecnológico Autónomo de México (ITAM)); Rodimiro Rodrigo (SecretariÌa de Hacienda y CreÌdito PuÌblico, MeÌxico)
    Abstract: We use a database generated by a policy intervention that incentivized learning as measured by standardized exams to investigate empirically the relationship between cheating by students and cash incentives to students and teachers. We adapt methods from the education measurement literature to calculate the extent of cheating, and show that cheating is more prevalent under treatments that provide monetary incentives to students (versus no incentives, or incentives only to teachers), both in the sense of a larger number of cheating students per classroom and in the sense of more cheating relations per classroom. We also provide evidence of learning to cheat, with both the number of cheating students per classroom and the average number of cheating relations increasing over the years under treatments that provide monetary incentives to students.
    Date: 2015–10
  14. By: Bryan C. McCannon (West Virginia University, Department of Economics)
    Abstract: Results from a leader-follower public goods game are presented. An individual, when randomlyselected to make a contribution knowing that others will observe the selection, gives more than one does in the simultaneous-move public goods game. Followers adopt a quasi-matching strategy where they systematically donate less than the leader, but contribute more when the leader does and contribute less when the leader free rides. The net result is increased provision of a public good when contributions are sequential. The results highlight that psychological preferences, rather than solely social preferences, can explain behavior.
    Keywords: experiment, leadership, psychological game theory, public goods, social preferences
    Date: 2015–06
  15. By: Subhasish M. Chowdhury (University of East Anglia); Peter G. Moffatt (University of East Anglia)
    Abstract: We revisit the meta-analysis of Sheremeta (2013) on overbidding in contest experiments and focus on the effect of endowment on overbidding. Whereas Sheremeta (2013) assumes that there is a monotonic relationship between endowment and overbidding in his meta-analysis, Baik et al. (2014) find an inverted-U shaped relationship in the analysis of a single experiment. We use the same data as in Sheremeta (2013), but employ a different econometric model which leads to support for the inverted-U shaped relationship. Following Baik et al. (2014) we explain the result in terms of a wealth effect.
    Keywords: experiments, contests, overbidding, endowment, meta-analysis
    JEL: C72 C91
    Date: 2015–10–09
  16. By: Chang, C-L.; McAleer, M.J.; Wong, W-K.
    Abstract: This Opinion article briefly reviews some of the literature in behavioural and financial economics that are related to health & medical economics. We then discuss some of the research on behavioural and financial economics that could be extended to health & medical economics beyond the existing areas in theory, statistics and econometrics.
    Keywords: Behavioural economics, Financial economics, Health & medical economics, Theory, Statistics, Econometrics
    JEL: G0 I11 O16 P34
    Date: 2015–09–01
  17. By: Jehiel, Philippe
    Abstract: Prospective investors of new projects consider the returns of implemented projects with similar (observed) attributes and invest if the empirical mean return exceeds the cost. The steady states of such economies result in suboptimal investment decisions due to the selection bias in the sampling procedure. Assuming higher attributes are associated with higher returns, there is systematic overinvestment as compared with the Bayesian benchmark, thereby illustrating that selection bias may explain entrepreneurial overconfidence. Various extensions are considered to illustrate the negative externality that rational investors exert on other investors, the effect of correlation between the attributes considered by various investors, and how trading may be affected by the sampling procedure.
    Keywords: investment strategy; overconfidence; selection bias
    JEL: C70 D82 D83 D84
    Date: 2015–10
  18. By: Huck, Steffen; Szech, Nora; Wenner, Lukas M.
    Abstract: In a tedious real effort task, subjects know that their piece rate is either low or ten times higher. When subjects are informed about their piece rate realization, they adapt their performance. One third of subjects nevertheless forego this instrumental information when given the choice - and perform stunningly well. Agents who are uninformed regarding their piece rate tend to outperform all others, even those who know that their piece rate is high. This also holds for enforced instead of self-selected information avoidance. All our findings can be captured by a model of optimally distorted expectations following Brunnermeier and Parker (2005).
    Keywords: Optimal Expectations,Belief Desing,Performance,Real Effort Task,Coarse Incentive Structures,Workplace Incentives
    JEL: D83 D84 J31 M52
    Date: 2015
  19. By: Maurer, J.;; Harris, K.M.;
    Abstract: This paper studies consumer learning in influenza vaccination decisions, i.e., potential causal effects of past experiences of being vaccinated on current use of influenza vaccine. Existing structural models of demand usually identify consumer learning parametrically based on functional form assumptions within dynamic forward-looking Bayesian demand models. To the best of our knowledge, we are the first to explore the potential role of consumer learning in pharmaceutical demand within a reduced form instrumental variable framework. The emergence of a new virus strain (influenza A H1N1/09) during the 2009 influenza pandemic resulted in the use of two different influenza vaccines each recommended for distinct population subgroups. We used these exogenous inputs to vaccination decisions to construct instrumental variables for the effect of past influenza vaccination experiences on the demand model for pandemic vaccine. We find large causal effects of seasonal vaccination on pandemic vaccination with changes in perceived vaccination safety being an important pathway. Our results suggest aimportant role of learning in vaccination decisions. Our findings further highlight that expanding uptake of seasonal vaccination is an important component of pandemic preparedness.
    Keywords: pharmaceutical demand; influenza vaccination; consumer learning; preventive care use; pandemic preparedness; instrumental variable estimation;
    JEL: I10 I11 I18
    Date: 2015–09

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