nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2016‒01‒29
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. To Switch or Not to Switch Payment Scheme? Determinants and Effects in a Bargaining Game By Arianna Galliera; Noemi Pace
  2. Sleep Restriction and Time-of-Day Impacts On Simple Social Interaction (Moderate Sleep Restriction Increases Greed, Reduces Trust and Trustworthiness) By David L. Dickinson; Todd McElroy
  3. What is really behavioral in behavioral health policy? And does it work? By Matteo M. Galizzi
  4. Who Should I Share Risk with? Gifts can tell : Theory and Evidence from Rural China By Wang, Ruixin
  5. Student preconceptions and learning economic reasoning By Isabel Busom Piquer; Cristina López-Mayán Navarrete
  6. The Many Faces of Human Sociality: Uncovering the Distribution and Stability of Social Preferences By Adrian Bruhin; Ernst Fehr; Daniel Schunk
  7. Reason-based choice and context-dependence: An explanatory framework By Franz Dietrich; Christian List
  8. Does Confidence Predict Out-of-Domain Effort? By Prokudina, Elena; Renneboog, Luc; Tobler, Philippe
  9. Food Desert and Weight Outcome: Disentangling Confounding Mechanisms By Zeng, Di; Thomsen, Michael R.; Nayga, Rodolfo M. Jr.
  10. How do risk attitudes affect measured confidence? By Zahra Murad; Chris Starmer; Martin Sefton

  1. By: Arianna Galliera (Department of Economics, University Of Venice Cà Foscari); Noemi Pace (Department of Economics, University Of Milan, Bicocca)
    Abstract: The incentive scheme selected in a laboratory experiment might trigger different type of behavior in participants. This paper is an attempt to screen the strategies adopted by agents in a bargaining game when buyer and seller have partly conflicting interests and are asymmetrically informed. We allow participants to choose the incentive scheme through which they will be paid at the end of the experiment controlling for past experience and individual characteristics. It is well known that payment method is highly correlated to the risk preferences shown by individuals, but little research is devoted to the analysis of the behavior induced by Random Lottery Incentive scheme (RLI for short) and Cumulative Scheme payment (CS for short) both on individual and social results. This paper aims to fill the gap.
    Keywords: bargaining, experiment, gender, payment scheme.
    JEL: C78 C91 D82 J16 J33
    Date: 2015
  2. By: David L. Dickinson; Todd McElroy
    Abstract: Key Words: Simple bargaining games are the foundation of more complex social interactions necessary for healthy relationships and well-functioning societies. Neuroscience research has shown that high-level deliberative thinking processes are necessary for social-decision making—it seems cognitively less demanding to be greedy or to mistrust. In this paper, our focus is on how commonly-experienced adverse sleep states, which are known to harm deliberative thinking, impact outcomes in the classic simple bargaining games (ultimatum, dictator, and trust games). Specifically, we experimentally manipulate sleep states of 184 young-adult subjects who took part in a 3 week experimental protocol. Subjects were administered each game twice: once after a full week of sleep restriction and once after a full week of well-rested sleep levels. Subjects were also randomly assigned to early morning (7:30 am) or later evening (10:00 pm) sessions to manipulate the optimality of the time-of-day of the decisions. We find a robust result of increased greed, reduced trust, and reduced trustworthiness following sleep restriction, after controlling for demographics and session indicators. We find no significant direct impact of circadian timing on decisions for these tasks. However, the mediating variable for these sleep manipulation effects is subjective sleepiness, and both sleep restriction and suboptimal circadian timing significantly increase self-reported sleepiness. These results are consistent with the hypothesis that increased sleepiness reduces the relative input of deliberate thinking in social interactions.
    Date: 2016
  3. By: Matteo M. Galizzi
    Abstract: Across health systems, there is increasing interest in applying behavioral economics insights to health policy challenges. Policy decision makers have recently discussed a range of diverse health policy interventions that are commonly brought together under a behavioral umbrella. These include randomized controlled trials, comparison portals, information labels, financial incentives, sin taxes, and nudges. A taxonomy is proposed to classify such behavioral interventions. In the context of risky health behavior, each cluster of policies is then scrutinized under two respects: (i) What are its genuinely behavioral insights? (ii) What evidence exists on its practical effectiveness? The discussion highlights the main challenges in drawing a clear mapping between how much each policy is behaviorally inspired and its effectiveness.
    Keywords: behavioral economics; behavioral policy; nudges; health behavior
    JEL: C90 I10 I18
    Date: 2014–03
  4. By: Wang, Ruixin (Tilburg University, Center For Economic Research)
    Abstract: This paper studies how gift exchange may help to overcome limited commitment problem in risk sharing. When efficient contract enforcement is lacking, people rely on friends (or relatives) to share risk since emotional or moral cost of defaulting between friends can help to prevent moral hazard. The problem is how to distinguish between friends and non-friends? Gift expense serves as a signal of friendship since giving a gift is less costly for a friend than a non-friend due to altruism. The model re-evaluates the role of gift exchange in developing economies, and helps to rationalize the large amount of gift exchange in China (10% of living expenditure). As a signal, gift exchange improves the efficiency in risk sharing and facilitates favor exchange, but I also demonstrate that the welfare gains due to this improvement may be offset by increased inequality. By using a unique data set containing detailed records about gift exchange in rural China, the empirical study suggests gift expenses, as a signal, significantly increase the probability of risk sharing. I also show further empirical evidence to the theory by testing more model predictions.
    Keywords: gift exchange; risk sharing; emotinal collateral; signaling
    JEL: O16 O17 L14 D03
    Date: 2016
  5. By: Isabel Busom Piquer (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona); Cristina López-Mayán Navarrete (Department of Economics, Universitat Autonoma de Barcelona)
    Abstract: Economic views held by the general public tend to differ significantly from those of economic experts. To what extent would these differences fade away if people were exposed to economic instruction? In this paper we identify first-year college students’ initial preconceptions about economic issues, explore some cognitive biases behind them, verify their persistence, and test whether beliefs are correlated to course performance. We conduct a survey at the beginning and the end of the semester on a sample of students taking an economic principles course. We find evidence of preconception persistence, inconsistencies and self-serving bias. Most students do not incorporate the newly learned tools into their thinking process, even if they perform well. Many economics senior students have some beliefs that are contradicted in a principles course. Instruction in economics could be more efficient if it explicitly addressed students’ preconceptions and biases, a path already taken in other disciplines.
    Keywords: Economic education; student beliefs; cognitive bias; psychology; teaching of economics
    JEL: A12 A20 Y8
    Date: 2015–12
  6. By: Adrian Bruhin (University of Lausanne); Ernst Fehr (University of Zurich); Daniel Schunk (Johannes Gutenberg University of Mainz)
    Abstract: There is vast heterogeneity in the human willingness to weigh others’ interests in decision making. This heterogeneity concerns the motivational intricacies as well as the strength of other-regarding behaviors, and raises the question how one can parsimoniously model and characterize heterogeneity across several dimensions of social preferences while still being able to predict behavior over time and across situations. We tackle this task with an experiment and a structural model of preferences that allows us to simultaneously estimate outcome-based and reciprocity-based social preferences. We find that non-selfish preferences are the rule rather than the exception. Neither at the level of the representative agent nor when we allow for several preference types do purely selfish types emerge. Instead, three temporally stable and qualitatively different other-regarding types emerge endogenously, i.e., without pre-specifying assumptions about the characteristics of types. When ahead, all three types value others’ payoffs significantly more than when behind. The first type, which we denote as strongly altruistic type, is characterized by a relatively large weight on others’ payoffs – even when behind – and moderate levels of reciprocity. The second type, denoted as moderately altruistic type, also puts positive weight on others’ payoff, yet at a considerable lower level, and displays no positive reciprocity while the third type is behindness averse, i.e., puts a large negative weight on others’ payoffs when behind and behaves selfishly otherwise. We also find that there is an unambiguous and temporally stable assignment of individuals to types. Moreover, the three-type model substantially improves the (out-of-sample) predictions of individuals’ behavior across additional games while the information contained in subject-specific parameter estimates leads to no or only minor additional predictive power. This suggests that a parsimonious model with three types captures the bulk of the predictive power contained in the preference estimates.
    Keywords: Social Preferences, Heterogeneity, Stability, Finite Mixture Models
    JEL: C49 C91 D03
    Date: 2016–01–04
  7. By: Franz Dietrich (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Christian List (LSE - London School of Economics)
    Abstract: We introduce a "reason-based" framework for explaining and predicting individual choices. The key idea is that a decision-maker focuses on some but not all properties of the options and chooses an option whose "motivationally salient" properties he/she most prefers. Reason-based explanations can capture two kinds of context-dependent choice: (i) the motivationally salient properties may vary across choice contexts, and (ii) they may include "context-related" properties, not just "intrinsic" properties of the options. Our framework allows us to explain boundedly rational and sophisticated choice behaviour. Since properties can be recombined in new ways, it also offers resources for predicting choices in unobserved contexts.
    Keywords: Rational choice,reasons,context-dependence,bounded and sophisticated rationality,prediction of choice
    Date: 2016
  8. 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-effort task; financial literacy; overconfidence
    JEL: G11 J22
    Date: 2015
  9. By: Zeng, Di; Thomsen, Michael R.; Nayga, Rodolfo M. Jr.
    Abstract: Food deserts are increasingly considered as a potential cause of overweight and obesity, yet existing literature is largely inconclusive in part due to the infeasibility of sorting out multiple confounding mechanisms from a purely empirical perspective. This article investigates the hypothesized causality in a rational-choice framework, where the individual chooses how much to patronize a distant supermarket and/or a nearby convenience store, broadly defined, and the weight outcome depends on this choice. Results suggest that neither limited supermarket access nor low income, the key features of food deserts, would determine the weight outcome, which is also affected by individual preferences as well as time and monetary costs associated with grocery shopping. Parametric conditions under which varying effects on weight occur are further derived to elicit policy implications
    Keywords: Food deserts, food choice, weight, food environment, obesity, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, D13, I12, Q18,
    Date: 2015
  10. By: Zahra Murad (School of Economics, University of Nottingham & Surrey Business School, University of Surrey); Chris Starmer (Department of Economics, University of Amsterdam); Martin Sefton (School of Economics, University of Nottingham)
    Abstract: We examine the relationship between confidence in own absolute performance and risk attitudes using two confidence elicitation procedures: self-reported (non-incentivised) confidence and an incentivised procedure that elicits the certainty equivalent of a bet based on performance. The former procedure reproduces the "hard-easy effect" (underconfidence in easy tasks and overconfidence in hard tasks) found in a large number of studies using non-incentivised self-reports. The latter procedure produces general underconfidence, which is significantly reduced, but not eliminated when we filter out the effects of risk attitudes. Finally, we find that self-reported confidence correlates significantly with features of individual risk attitudes including parameters of individual probability weighting.
    Keywords: Overconfidence, Underconfidence, Experiment, Risk Preferences
    Date: 2015

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