nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2016‒02‒23
eleven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Heaven Game By Aurora García-Gallego; Nikolaos Georgantzís; Ainhoa Jaramillo-Gutiérrez
  2. The Efficiency of Crackdowns: A Lab-in-the-Field Experiment in Public Transportations By Zhixin Dai; Fabio Galeotti; Marie Claire Villeval
  3. Beliefs About People’s Prosociality Eliciting predictions in dictator games By András Molnár; Christophe Heintz
  4. Income inequality and risk taking By Schmidt, Ulrich; Neyse, Levent; Aleknonyte, Milda
  5. 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
  6. Indirect Higher Order Beliefs and Cooperation By WU, JIABIN
  7. Reciprocity evolving: partner choice and communication in a repeated prisoner’s dilemma By Strømland, Eirik; Tjøtta, Sigve; Torsvik, Gaute
  8. Loss Aversion and Competition in Vickrey Auctions: Money Ain't No Good By Rosato, Antonio; Tymula, Agnieszka
  9. Small cash rewards for big losers : experimental insights into the fight against the obesity epidemic By Augurzky,Boris; Bauer,Thomas K.; Reichert,Arndt Rudiger; Schmidt,Christoph M.; Tauchmann,Harald
  10. Overconfident investors, predictable returns, and excessive trading By Hirshleifer, David; Daniel, Kent
  11. Utilitarian Moral Judgments Are Cognitively Too Demanding By Da Silva, Sergio; Matsushita, Raul; De Sousa, Maicon

  1. By: Aurora García-Gallego (LEE-Ec. Dpt., U. Jaume I (Spain)); Nikolaos Georgantzís (Agriculture Policy and Development, University of Reading (UK) &LEE & Economics Dept., Universitat Jaume I, Castellón (Spain)); Ainhoa Jaramillo-Gutiérrez (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: We present an experiment on the Heaven game, a generalization of the dictator game. The heavendictator player chooses between increasing, decreasing and maintaining the earnings of the passive player, without incurring any cost or profit. Thus, we avoid the experimenter demand effect. Based on the psychological literature on music as mood inductor and on the effects of mood on helping behavior, we also study the effect of exposure to different types of music on the heaven-dictator choices. We find that the overwhelming majority of subjects choose to increase their partners’ earnings and no general effect of music over the heaven-dictator choices, except for classical music that seems to foster helping-indifference behavior.
    Keywords: experimental economics, behavioural economics, other-regarding preferences, musicinduced mood, dictator game
    JEL: C72 C91
    Date: 2015–12–07
  2. By: Zhixin Dai (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Fabio Galeotti (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Marie Claire Villeval (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)
    Abstract: The concentration of high frequency controls in a limited period of time (“crackdowns”) constitutes an important feature of many law-enforcement policies around the world. In this paper, we offer a comprehensive investigation on the relative efficiency and effectiveness of various crackdown policies using a lab-in-the-field experiment with real passengers of a public transport service. We introduce a novel game, the daily public transportation game, where subjects have to decide, over many periods, whether to buy or not a ticket knowing that there might be a control. Our results show that (a) concentrated crackdowns are less effective and efficient than random controls; (b) prolonged crackdowns reduce fare-dodging during the period of intense monitoring but induces a burst of fraud as soon as they are withdrawn; (c) pre-announced controls induces more fraud in the periods without control. Overall, we also observe that real fare-dodgers fraud more in the experiment than non-faredodgers.
    Keywords: Crackdowns, fraud, risk, monitoring, transportation, field experiment
    JEL: C91 D83 K42
    Date: 2016
  3. By: András Molnár; Christophe Heintz
    Abstract: One of the most pervasive economic decisions that people have to take is whether to enter an economic interaction. A rational decision process takes into account the probability that the partner will act in a favorable way, making the interaction or the cooperative activity beneficial. Do people actually decide upon such predictions? If yes, are these predictions accurate? We describe a novel experimental method for eliciting participants' implicit beliefs about their partners' prosociality: In a modified dictator game, receivers are offered to forgo what the dictator shall transfer and take a sure amount instead. We then infer receivers' subjective probabilities that the dictator makes a prosocial decision. Our results show that people do form prior beliefs about others' actions based on others' incentives, and that they decide whether to enter an interaction based on these beliefs. People know that others have prosocial as well as selfish preferences, yet the prior beliefs about others' prosocial choices is biased: First, participants underestimate others' prosociality. Second, their predictions about others' choice correlate with their own choice, reflecting a consensus effect. We also find a systematic difference between implicit and explicit predictions of others' choices: Implicit beliefs reflect more trust towards others than explicit statements.
    Date: 2016–01–21
  4. By: Schmidt, Ulrich; Neyse, Levent; Aleknonyte, Milda
    Abstract: Standard economic theory assumes that individual risk taking decisions are independent from the social context. Recent experimental evidence however shows that the income of peers has a systematic impact on observed degrees of risk aversion. In particular, subjects strive for balance in the sense that they take higher risks if this gives them the chance to break even with their peers. The present paper is, to the best of our knowledge, the first systematic analysis of income inequality and risk taking. We perform a real effort field experiment where inequality is introduced to different wage rates. After the effort phase subjects can invest (part of) their salary into a risky asset. Besides the above mentioned possibility of higher risk taking of low-wage individuals to break even with high-wage individuals, risk taking can be influenced by an income effect consistent with e.g. decreasing absolute risk aversion and a house money effect of high- wage individuals. Our results show that the dominant impact of inequality on risk taking is what can be termed a social house money effect: high-wage individuals take higher risks than low- wage individuals only if they are aware of the inequality in wages.
    Keywords: Risk,Inequality,Real Effort,Field Experiment,Social Comparison
    JEL: D81 C93 D63 J31
    Date: 2015
  5. By: Muhammad Nasir (Department of Economics, Clark University); Marc Rockmore (Department of Economics, Clark University); Chih Ming Tan (Department of Economics, Clark University)
    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, in 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.
    Keywords: violence, risk aversion, social capital, trust, mental health, depression, nonlinear difference-in-differences, Mexico
    JEL: A12 D03 D81 O12
    Date: 2016–01
  6. By: WU, JIABIN
    Abstract: This paper experimentally examines why communication may matter for inducing cooperation in strategic interactions involving intermediaries. We consider a three-player centipede game in which the first and the third players do not interact sequentially, but only through the second player. We posit that the third player's decision to cooperate depends on his indirect higher order belief, that is, his belief about what the first player believes the second player would choose. The evidence demonstrates that communication between the first and the third player can effectively induce cooperation from the third player through shaping his indirect higher order belief.
    Keywords: indirect higher order beliefs, communication, psychological game theory, guilt aversion, sequential reciprocity, social preferences, behavioral economics, experimental economics
    JEL: C72 C9 C91 D03 D83
    Date: 2016–02–18
  7. By: Strømland, Eirik (Department of Economics, University of Bergen); Tjøtta, Sigve (Department of Economics, University of Bergen); Torsvik, Gaute (Department of Economics, University of Oslo)
    Abstract: Through what mechanisms do individuals enforce cooperation? In this paper, we show experimentally that partner choice by mutual consent improves cooperation compared to random matching of subjects. We find that partner choice is used to establish lasting reciprocal partnerships and thus that partner choice may be a force in the evolution of reciprocal cooperation. There is no additional impact on cooperation by allowing for both chat and partner choice. Our findings suggest that partner choice will improve cooperation in settings where ongoing group communication is infeasible, but not when there are opportunities to use large-scale communication to enforce cooperation.
    Keywords: Cooperation; Partner Choice; Communication; Reciprocity; Prisoner’s Dilemma
    JEL: C91 C92
    Date: 2016–02–15
  8. By: Rosato, Antonio; Tymula, Agnieszka
    Abstract: We present results from an experiment with a within-subject design aimed at testing a unique prediction of expectations-based reference-dependent preferences and loss aversion in private-value second-price (Vickrey) auctions. If bidders have expectationsbased reference-dependent preferences, the total number of participants in an auction should affect bids in auctions for real objects but not in auctions with induced monetary values. Our findings are consistent with expectations-based reference-dependent preferences and loss aversion. In real-object auctions, subjects' bids are affected by the number of competitors and, on average, they decline with the intensity of competition. In induced-value auctions, instead, bids are unaffected by the intensity of competition. We also successfully replicate an experiment from Sprenger (2015) aimed at distinguishing expectations-based loss aversion from models of Disappointment Aversion. This provides additional evidence that our findings in the auction experiments are due to expectations-based loss aversion.
    Keywords: Auctions; Reference-Dependent Preferences; Loss Aversion; Expectations
    JEL: C91 C92 D03 D44 D81 D84
    Date: 2016–02–08
  9. By: Augurzky,Boris; Bauer,Thomas K.; Reichert,Arndt Rudiger; Schmidt,Christoph M.; Tauchmann,Harald
    Abstract: This paper examines the sustainability of weight loss achieved through cash rewards and, for the first time, the potential of monetary incentives to prevent weight cycling. In a three period randomized controlled trial, about 700 obese persons were assigned to two treatment groups, which were promised different cash rewards contingent on the achievement of an individually assigned target weight, and to a control group. Successful participants were subsequently allocated to two treatment groups offered different monetary incentives for maintaining the previously achieved target weight and to a control group. This is the first experiment of this kind that finds sustainable effects of weight loss rewards on the body weight of the obese even 18 months after the rewards were removed. Additional incentives to maintain an achieved body weight improve the sustainability of weight loss only while are in place.
    Keywords: Science Education,Disease Control&Prevention,Health Monitoring&Evaluation,Engineering,Scientific Research&Science Parks
    Date: 2015–06–26
  10. By: Hirshleifer, David; Daniel, Kent
    Abstract: Individuals and asset managers trade aggressively, resulting in high volume in asset markets, even when such trading results in high risk and low net returns. Asset prices display patterns of predictability that are difficult to reconcile with rational expectations–based theories of price formation. This paper discusses how investor overconfidence can explain these and other stylized facts. We review the evidence from psychology and securities markets bearing upon overconfidence effects, and present a set of overconfidence-based models that are consistent with this evidence.
    Keywords: investor overconfidence, aggressive trading, return predictability, trading volume, return momentum, return reversal
    JEL: D03 D1 D14 D84 G1 G11 G12 G14
    Date: 2015–10–20
  11. By: Da Silva, Sergio; Matsushita, Raul; De Sousa, Maicon
    Abstract: We evaluate utilitarian judgments under the dual-system approach of the mind. In the study, participants respond to a cognitive reflection test and five (sacrificial and greater good) dilemmas that pit utilitarian and non-utilitarian options against each other. There is judgment reversal across the dilemmas, a result that casts doubt in considering utilitarianism as a stable, ethical standard to evaluate the quality of moral judgments. In all the dilemmas, participants find the utilitarian judgment too demanding in terms of cognitive currency because it requires non-automatic, deliberative thinking. In turn, their moral intuitions related to the automatic mind are frame dependent, and thus can be either utilitarian or non-utilitarian. This suggests that automatic moral judgments are about descriptions, not about substance.
    Keywords: Cognitive Reflection, Utilitarianism, Moral Judgments
    JEL: B41
    Date: 2016

This nep-cbe issue is ©2016 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.