nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2016‒03‒17
thirteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Meritocratic matching can dissolve the efficiency-equality tradeoff: the case of voluntary contributions By Heinrich H. Nax; Stefano Balietti; Ryan O. Murphy; Dirk Helbing
  2. Teachers’ Perceptions of High-Stakes Testing By Adel Al-Bataineh; Jessica Gunn
  3. What makes Law to change Behavior? An experimental study By Romaniuc, Rustam
  4. The Making of Homo Honoratus: From Omission to Commission By Ivo Vlaev; John List; Michael Hallsworth; Robert Metcalfe
  5. How Does Socio-Economic Status Shape a Child's Personality? By Thomas Deckers; Armin Falk; Fabian Kosse; Hannah Hannah Schildberg-Horisch
  6. Doing Your Best When Stakes Are High? Theory and Experimental Evidence By Houy, Nicolas; Nicolaï, Jean-Philippe; Villeval, Marie Claire
  7. A behavioral study of “noise” in coordination games By Michael Mäs; Heinrich H. Nax
  8. Homo Moralis: Personal Characteristics, Institutions, and Moral Decision-Making By Deckers, Thomas; Falk, Armin; Kosse, Fabian; Szech, Nora
  9. Overcoming Coordination Failure in a Critical Mass Game: Strategic Motives and Action Disclosure By Aidas Masiliunas
  10. Fairness Versus Efficiency: How Procedural Fairness Concerns Affect Coordination By Kurz, Verena; Orland, Andreas; Posadzy, Kinga
  11. Small-world conservatives and rigid liberals : attitudes towards sharing in self-proclaimed left and right By Thomsson K.M.; Vostroknutov A.
  12. Eliciting Risk Preferences: Firefighting in the Field By Dasgupta, Utteeyo; Mani, Subha; Sharma, Smriti; Singhal, Saurabh
  13. Confidence, Fear and a Propensity to Gamble: The Puzzle of War and Economics in an Age of Catastrophe 1914-45 By Roger L. Ransom

  1. By: Heinrich H. Nax; Stefano Balietti; Ryan O. Murphy; Dirk Helbing
    Abstract: One of the fundamental tradeoffs underlying society is that between efficiency and equality. The challenge for institutional design is to strike the right balance between these two goals. Game-theoretic models of public-goods provision under ‘meritocratic matching’ succinctly capture this tradeoff: under zero meritocracy (society is randomly formed), theory predicts maximal inefficiency but perfect equality; higher levels of meritocracy (society matches contributors with contributors) are predicted to improve efficiency but come at the cost of growing inequality. We conduct an experiment to test this tradeoff behaviorally and make the astonishing finding that, notwithstanding theoretical predictions, higher levels of meritocracy increase both efficiency and equality, that is, meritocratic matching dissolves the tradeoff. Fairness considerations can explain the departures from theoretical predictions including the behavioral phenomena that lead to dissolution of the efficiency-equality tradeoff.
    Keywords: public-goods; meritocratic matching; efficiency; fairness; inequality
    JEL: C92 D02 D63 H41
    Date: 2015–05–08
  2. By: Adel Al-Bataineh (Illinois State University); Jessica Gunn (Illinois State University)
    Abstract: In recent years, the issue of high-stakes testing has been widely debated in the field of education. Studies have shown that high-stakes tests do little to promote learning in schools, yet there are still widely used. While many studies have examined how testing affects students, schools, and communities, little research has been done to determine how teachers perceive high-stakes tests. It is important for us to study not only how these tests impact our students, but how teachers feel about them as well. This study will use a structured survey to question elementary school educators from three Midwestern schools. The purpose of the study is to determine the viewpoints, opinions, and attitudes that teachers have regarding high-stakes tests. The results show that teachers feel there are some benefits to high-stakes testing, in that it allows students to be compared to their peers. The majority of teachers surveyed, however; felt the weakness of such testing outweighs the benefits. Teachers cite pressures from testing and feel that tests are not a valid way to assess what students know. Tests also shape curriculum in that more time is spent in tested subjects, while time spent in untested subjects is reduced or eliminated.
    Keywords: High-Stake Testing, Assessment, Teacher Perceptions
    JEL: I20 I29 I21
  3. By: Romaniuc, Rustam
    Abstract: The use of mild laws to affect people’s behavior is pervasive – from environmental regulation to tort law – but little is known about how the law changes human behavior and social outcomes when it uses non-deterrent monetary incentives. We find that when low monetary incentives are used in tandem with an indication of what one should do (i.e., a norm), then the effect on behavior is positive but transitory. The effect is long lasting when we use low monetary incentives in isolation. This suggests that the indication of what one should do makes salient the conflict between people’s normative expectations and what others effectively do. This undermines conditional cooperators’ own motivation to contribute to public goods. Finally, we compare the effects of mild laws with how mere messages indicating what is moral behavior affect contributions to the public good. Contrary to the existing experimental evidence, we find that messages fail to improve cooperation. We spotlight the conditions under which this is the case.
    Date: 2015–12
  4. By: Ivo Vlaev; John List; Michael Hallsworth; Robert Metcalfe
    Abstract: Framing remains one of the pillars of behavioral economics. While framing effects have been found to be quite important in the lab, what is less clear is how well evidence drawn from naturally-occurring settings conforms to received laboratory insights. We use debt obligation to the UK government as a case study to explore the 'omission bias' present in decision making with large stakes. Using a natural field experiment that generates nearly 40,000 observations, we find that repayment rates are roughly doubled when the act is reframed as one of commission rather than omission. We estimate that this reframing of the perceived nature of the action generated over $1.3 million of new yield. We find evidence that this behavior may result from a deliberate 'omission strategy', rather than a behavioral bias, as is often assumed in the literature. Our natural field experiment highlights that behavioral economics is much more than a series of empirical exercises to quench the intellectual curiosity of academics.
    Date: 2015
  5. By: Thomas Deckers (University of Bonn); Armin Falk (Universität Bonn); Fabian Kosse (University of Bonn); Hannah Hannah Schildberg-Horisch (University of Bonn)
    Abstract: We show that socio-economic status (SES) is a powerful predictor of many facets of a child's personality. The facets of personality we investigate encompass time preferences, risk preferences, and altruism, as well as crystallized and fluid IQ. We measure a family's SES by the mother's and father's average years of education and household income. Our results show that children from families with higher SES are more patient, tend to be more altruistic and less likely to be risk seeking, and score higher on IQ tests. We also discuss potential pathways through which SES could affect the formation of a child's personality by documenting that many dimensions of a child's environment differ systematically by SES: parenting style, quantity and quality of time parents spend with their children, the mother's IQ and economic preferences, a child's initial conditions at birth, and family structure. Finally, we use panel data to show that the relationship between SES and personality is fairly stable over time at age 7 to 10. Personality profiles that vary systematically with SES might offer an explanation for social immobility.
    Keywords: personality, human capital, risk preferences, time preference, altruism, experiments with children, origins of preferences, social immobility, socioeconomic status
    JEL: C90 D64 D90 D81 J13 J24 J62
    Date: 2016–02
  6. By: Houy, Nicolas (University of Lyon 2); Nicolaï, Jean-Philippe (ETH Zurich); Villeval, Marie Claire (CNRS, GATE)
    Abstract: Achieving an ambitious goal frequently requires succeeding in a sequence of intermediary tasks, some being critical for the final outcome, and others not. Individuals are not always able to provide a level of effort sufficient to guarantee success in all the intermediary tasks. The ability to manage effort throughout the sequence of tasks is therefore critical. In this paper we propose a criterion that defines the importance of a task and that identifies how an individual should optimally allocate a limited stock of exhaustible efforts over tasks. We test this importance criterion in a laboratory experiment that reproduces the main features of a tennis match. We show that our importance criterion is able to predict the individuals' performance and it outperforms the Morris importance criterion that defines the importance of a point in terms of its impact on the probability to achieve the final outcome. We also find no evidence of choking under pressure and stress, as proxied by electrophysiological measures.
    Keywords: critical ability, choking under pressure, Morris-importance, Skin Conductance Responses, experiment
    JEL: C72 C92 D81
    Date: 2016–02
  7. By: Michael Mäs; Heinrich H. Nax
    Abstract: ‘Noise’ in this study, in the sense of evolutionary game theory, refers to deviations from prevailing behavioral rules. Analyzing data from a laboratory experiment on coordination in networks, we tested ‘what kind of noise’ is supported by behavioral evidence. This empirical analysis complements a growing theoretical literature on ‘how noise matters’ for equilibrium selection. We find that the vast majority of decisions (96%96%) constitute myopic best responses, but deviations continue to occur with probabilities that are sensitive to their costs, that is, less frequent when implying larger payoff losses relative to the myopic best response. In addition, deviation rates vary with patterns of realized payoffs that are related to trial-and-error behavior. While there is little evidence that deviations are clustered in time or space, there is evidence of individual heterogeneity.
    Keywords: behavioral game theory; discrete choice; evolution; learning; logit response; stochastic stability; trial-and-error
    JEL: C73 C91 C92
    Date: 2016–03
  8. By: Deckers, Thomas (University of Bonn); Falk, Armin (University of Bonn); Kosse, Fabian (University of Bonn); Szech, Nora (Karlsruhe Institute of Technology)
    Abstract: This paper studies how individual characteristics, institutions, and their interaction influence moral decisions. We validate a moral paradigm focusing on the willingness to accept harming third parties. Consequences of moral decisions are real. We explore how moral behavior varies with individual characteristics and how these characteristics interact with market institutions compared to situations of individual decision-making. Intelligence, female gender, and the existence of siblings positively influence moral decisions, in individual and in market environments. Yet in markets, most personalities tend to follow overall much lower moral standards. Only fluid intelligence specifically counteracts moral-eroding effects of markets.
    Keywords: homo moralis, moral personality, real moral task, markets and personality, trade and morals
    JEL: D02 D03 J10
    Date: 2016–02
  9. By: Aidas Masiliunas (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: We study whether coordination failure is more often overcome if players can easily disclose their actions. In an experiment subjects first choose their action and then choose whether to disclose this action to other group members, and disclosure costs are varied between treatments. We find that no group overcomes coordination failure when action disclosure costs are high, but half of the groups do so when the costs are low. Simulations with a belief learning model can predict which groups will overcome coordination failure, but only if it is assumed that players are either farsighted, risk-seeking or pro-social. To distinguish between these explanations we collected additional data on individual preferences and the degree of farsightedness. We find that in the low cost treatment players classified as more farsighted more often deviate from an inefficient convention and disclose this action, while the effect of risk and social preferences is not significant.
    Keywords: lock-in, coordination failure, learning, strategic teaching, information, collective action, critical mass
    JEL: C72 C92 D83
    Date: 2016–02–11
  10. By: Kurz, Verena (University of Gothenburg, Department of Economics, Sweden); Orland, Andreas (University of Potsdam, Department of Economics, Germany); Posadzy, Kinga (Division of Economics, Department of Management and Engineering, Linköping University)
    Abstract: What happens if a mechanism that aims at improving coordination treats some individuals unfairly? We investigate in a laboratory experiment whether procedural fairness concerns affect how well individuals are able to solve a coordination problem in a two-player Volunteer’s Dilemma. Subjects receive external action recommendations that can help them avoid miscoordination if followed by both players. One of the players receives a disadvantageous recommendation to volunteer while the other player receives a recommendation not to volunteer that gives her a payoff advantage if both players follow the recommendations they have received. We manipulate the fairness of the recommendation procedure by varying the probabilities of receiving a disadvantageous recommendation between players. We find that the recommendations improve overall efficiency regardless of their consequences for payoff division. However, there are behavioral asymmetries depending on the recommendation received by a player: advantageous recommendations are followed less frequently than disadvantageous recommendations in case of actions that guarantee a low payoff. While there is no difference in acceptance of different recommendation procedures, beliefs about others’ actions are more pessimistic in the treatment with a procedure inducing unequal expected payoffs. Our data shows that beliefs about others’ behavior are correlated with one’s own behavior, however this is the case only when following recommendations is a strategy that involves payoff-uncertainty.
    Keywords: Coordination; Correlated equilibrium; Recommendations; Procedural fairness; Volunteer’s Dilemma; Experiment
    JEL: C72 C91 D63 D83
    Date: 2016–03–01
  11. By: Thomsson K.M.; Vostroknutov A. (GSBE)
    Abstract: We experimentally explore the way political preferences shape giving behavior. We find no difference in average giving between the Left and the Right in a Dictator game environment. However, we find the reasons for giving to be different. Right-leaning individuals give according to a norm-dependent utility that takes into account the beliefs of the receiver. The behavior of left-leaning individuals is not shaped by such an interaction between norms and beliefs. We conclude that right-wingers choose in accordance with a small world view, where giving is shaped by social interaction, while left-wingers appear rigid in their reaction to social context.
    Keywords: Design of Experiments: Laboratory, Individual; Design of Experiments: Laboratory, Group Behavior; Behavioral Economics: Underlying Principles; Altruism; Philanthropy;
    JEL: C91 C92 D03 D64
    Date: 2016
  12. By: Dasgupta, Utteeyo; Mani, Subha; Sharma, Smriti; Singhal, Saurabh
    Abstract: Field constraints often necessitate choosing an elicitation task that is intuitive, easy to explain, and simple to implement. Given that subject behavior often differs dramatically across tasks when eliciting risk preferences, caution needs to be exercised in choosing one risk elicitation task over another in the face of field constraints. We compare behavior in the simple most investment game (Gneezy and Potters 1997) and the ordered lottery choice game (Eckel and Grossman 2002) to evaluate whether the simpler task allows us to elicit attitudes consistent with those elicited from the ordered lottery task. Using a sample of over 2000 Indian undergraduate students, we find risk attitudes to be fairly stable across the two tasks. Our results further indicate that the consistency of risk attitudes across the tasks depends on gender of the subject, quantitative skills, father’s education level, and dispositional factors such as locus of control and Big Five personality traits.
    Keywords: Risk preferences, Experiment Design, Elicitation Methods, Personality Traits, India
    JEL: C81 C91 D81
    Date: 2016–02
  13. By: Roger L. Ransom (Department of Economics, University of California Riverside)
    Date: 2016–02

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.
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