nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2015‒12‒08
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale “Amedeo Avogadro”

  1. Selective Recognition: How to Recognize Donors to Increase Charitable Giving By Anya Samek; Roman M. Sheremeta
  2. It’s No Spring Break in Cancun: The Effects of Exposure to Violence on Risk Preferences, Pro-Social Behavior, and Mental Health By Muhammad Nasir; Marc Rockmore; Chih Ming Tan
  3. Economics of paternalism: the hidden costs of self-commanding strategies By Christophe Salvat
  4. Challenging Conformity: A Case for Diversity By Kets, Willemien; Sandroni, Alvaro
  5. Does Confidence Predict Out-of-Domain Effort? By Prokudina, Elena; Renneboog, Luc; Tobler, Philippe
  6. Cognitive Reflection Test: Whom, how, when By Pablo Brañas-Garza; Praveen Kujal; Balint Lenkei
  7. The Double-Channeled Effects of Experience on Individual Investment Decisions: Experimental Evidence By Peiran Jiao
  8. Status and the Demand for Visible Goods: Experimental Evidence on Conspicuous Consumption By Clingingsmith, David; Sheremeta, Roman
  9. Reducing prejudice through actual and imagined contact: A field experiment with Malawian shopkeepers and Chinese immigrants By Gu, Jun; Mueller, Annika; Nielsen, Ingrid; Shachat, Jason; Smyth, Russell
  10. BMI is not related to altruism, fairness, trust or reciprocity: Experimental evidence from the field and the lab By Brañas-Garza, Pablo; Espín, Antonio M.; Lenkei, Balint

  1. By: Anya Samek (Center for Economic and Social Research, University of Southern California); Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and Economic Science Institute, Chapman University)
    Abstract: Recognizing donors by revealing their identities is important for increasing charitable giving. We conducted a field experiment to examine how different recognition methods impact giving, and found that all forms of recognition that we examined had a positive impact on increasing donations, whereby recognizing only highest donors (positive recognition) and recognizing only lowest donors (negative recognition) had the most pronounced effect. We argue that selective recognition (both positive and negative) creates tournament-like incentives. Recognizing the highest donors activates the desire to seek a positive prize of prestige, thus increasing the proportion of donors who contribute large amounts. Recognizing the lowest donors activates the desire to avoid a negative prize of shame, thus decreasing the proportion of donors who do not contribute or contribute very little. Therefore, selective recognition is an effective tool that can be used in the field by charities to increase donations.
    Keywords: charity donations, recognition, information, experiments
    JEL: C93 D64
    Date: 2015
  2. By: Muhammad Nasir (Department of Economics, Clark University, USA); Marc Rockmore (Department of Economics, Clark University, USA); Chih Ming Tan (Department of Economics, University of North Dakota, USA; The Rimini Centre for Economic Analysis, Italy)
    Abstract: Exposure to violence has been found to affect behavioral parameters, mental health and social interactions. The literature focuses on large scale political violence. The effects of high levels of criminal violence – a common phenomenon in Latin America and the Caribbean – are largely unknown. We examine drug violence in Mexico and, I particular, the effects of exposure to high municipal levels of homicides on risk aversion, mental health and pro-social behavior. Using a nonlinear difference-in-differences (DID) model and data from the 2005-06 and 2009-12 waves of the Mexican Family Life Survey, we find that the surge in violence in Mexico after 2006 significantly increased risk aversion and reduced trust in civic institutions while simultaneously strengthening kinship relationships. Although the deterioration of mental health due to violence exposure has been hypothesized to explain changes in risk aversion, we find no such effect. This suggests that the literature may be potentially missing out on other relevant channels.
    Date: 2015–11
  3. By: Christophe Salvat (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - Université Jean Monnet - Saint-Etienne - Institut d'Études Politiques [IEP] - Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper proposes an economic assessment of paternalism by comparing different alternative responses to dynamically inconsistent behaviors consecutive to hyperbolic discounting. Two main types of action are possible, self-commanding strategies and paternalism. The first category includes personal rules and pre-commitment. The second can be subcategorized between coercive and non-coercive forms of paternalism, which are respectively associated (although it is debatable) with legal paternalism and with ‘nudges’. Despite being self-inflicted, self-commanding strategies are actually not cost free and can result in a dramatic cutback of people’s freedom of choice. Likewise, legal paternalism can, on occasion, be less harmful than personal rules or precommitment; similarly, nudges can be more invasive and less effective than their proponents want us to believe. The aim of this paper is not to propose any standardized form of response to irrational behavior (whatever that may mean) but to argue, on the contrary, that every case should be individually appraised. Individual situations can be remedied by self-commanding strategies or by paternalistic policies, either in isolation or in combination.
    Keywords: libertarian paternalism,paternalism,personal rules,self-confidence
    Date: 2015–11–17
  4. By: Kets, Willemien; Sandroni, Alvaro
    Abstract: Why do diverse groups outperform homogeneous groups in some settings, but not in others? We show that while diverse groups experience more frictions than homogeneous ones, they are also less conformist. Homogeneous groups minimize the risk of miscoordination, but they may get stuck in an inefficient equilibrium. Diverse groups may fail to coordinate, but if they do, they tend to attain efficiency. This fundamental tradeoff determines how the optimal level of diversity varies with social and economic factors. When it is vitally important to avoid miscoordination, homogeneous groups are optimal. However, when it is critical to implement new and efficient practices, diverse groups perform better.
    Keywords: Diversity, conformity, coordination, introspection, Theory of Mind
    JEL: C72 D20 D80
    Date: 2015–11–15
  5. By: Prokudina, Elena (Tilburg University, Center For Economic Research); Renneboog, Luc (Tilburg University, Center For Economic Research); Tobler, Philippe (Tilburg University, Center For Economic Research)
    Abstract: Predicting worker’s effort is important in many different areas, but is often difficult. Using a laboratory experiment, we test the hypothesis that confidence, i.e. the person-specific beliefs about her abilities, can be used as a generic proxy to predict future effort provision. We measure confidence in the domain of financial knowledge in three different ways (self-assessed knowledge, probability-based confidence, and incentive-compatible confidence) and find a positive relation with actual effort provision in an unrelated domain. Additional analysis shows that the findings are independent of a person’s traits such as gender, age, and nationality.
    Keywords: real-effor task; financial literacy; overconfidence
    JEL: G11 J22
    Date: 2015
  6. By: Pablo Brañas-Garza (Middlesex University London); Praveen Kujal (Middlesex University London); Balint Lenkei (Middlesex University London)
    Abstract: We report the results of a meta-study of 118 Cognitive Reflection Test studies comprising of 44,558 participants across 21 countries. There is a negative correlation between being female and the overall, and individual, correct answers to CRT questions. Taking the test at the end of an experiment negatively impacts performance. Monetary incentives do not impact performance. Overall students perform better compared to non-student samples. Exposure to CRT over the years may impact outcomes, however, the effect is driven by online studies. We obtain mixed evidence on whether the sequence of questions matters. Finally, we find that computerized tests marginally improve results.
    Keywords: CRT, Experiments, Gender, Incentives, Glucose and Cognition
    Date: 2015
  7. By: Peiran Jiao
    Abstract: Abstract: Investors in the financial markets typically have access to both descriptive information of assets, from brochures, financial analysts, reports, etc., and own experience.However, little is known about the role of experience in investment decisions. This paper investigates this issue by experimentally testing the effects of experience in aninvestment task with choice feedback and varying levels of descriptive information. We document the double-channeled effects of experience: when elicited beliefs were controlledfor, participants significantly relied on experience regardless of the descriptions, behaving consistently with the law of effect; additionally, beliefs were also distorted by experience, in that participants were more optimistic about assets from which they gained, and pessimistic about previously unowned assets. In a calibration exercise, reinforcement learning significantly added predictive power to expected utility models.
    Keywords: Description, Experience, Investment Decision, Belief Distortion.
    JEL: C91 D03 D83 G11
    Date: 2015–11–18
  8. By: Clingingsmith, David; Sheremeta, Roman
    Abstract: Some economists argue that consumption of publicly visible goods is driven by social status. Making a causal inference about this claim is difficult with observational data. We conduct an experiment in which we vary both whether a purchase of a physical product is publicly visible or kept private and whether the income used for purchase is linked to social status or randomly assigned. Making consumption choices visible leads to a large increase in demand when income is linked to status, but not otherwise. We investigate the characteristics that mediate this effect and estimate its impact on welfare.
    Keywords: status, conspicuous consumption, experiment
    JEL: C91 D03
    Date: 2015–12–04
  9. By: Gu, Jun; Mueller, Annika; Nielsen, Ingrid; Shachat, Jason; Smyth, Russell
    Abstract: We examine the ability of intergroup contact to ameliorate the effect of in-group bias on economic outcomes. Specifically, we employ randomized experiments to test whether actual and imagined contact is effective in reducing prejudice between indigenous Malawian shopkeepers (in-group), and their Chinese immigrant counterparts (out-group), and test the stability of these changes over time. We find differing results with actual contact. Local Malawians´ attitude towards Chinese migrants did not improve, but their willingness to spend time did. In contrast, actual contact spurred improvement in the Chinese migrants´ attitude toward local Malawians, but did not increase their willingness to spend time with them. These effects persisted over a time period of at least ten days. Imagined contact had no impact on Malawians´ attitude or behavioral intention with respect to Chinese migrants
    Keywords: Chinese migrants in Africa,actual contact,imagined contact,prejudice,field experiment
    JEL: C93 J15
    Date: 2015
  10. By: Brañas-Garza, Pablo; Espín, Antonio M.; Lenkei, Balint
    Abstract: Over the past few decades obesity has become one of the largest public policy concerns among the adult population in the developed world. Obesity and overweight are hypothesized to affect individuals’ sociability through a number of channels, including discrimination and low self-esteem. However, whether these effects translate into differential behavioural patterns in social interactions remains unknown. In two large-scale economic experiments, we explore the relationship between Body Mass Index (BMI) and social behaviour, using three paradigmatic economic games: the dictator, ultimatum, and trust games. Our first experiment employs a representative sample of a Spanish city's population (N=753), while the second employs a sample of university students from the same city (N=618). Measures of altruism, fairness/equality, trust and reciprocity are obtained from participants’ experimental decisions. Using a variety of regression specifications and control variables, our results suggest that BMI does not exert an effect on any of these social preferences. Some implications of these findings are discussed.
    Keywords: BMI; ultimatum game; dictator game; trust game; economic experiments; obesity; social preferences
    JEL: I12
    Date: 2015

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