nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2016‒04‒04
fifteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. The hidden costs of nudging: Experimental evidence from reminders in fundraising By Mette Trier Damgaard; Christiana Gravert
  2. Cooperating over losses and competing over gains: a social dilemma experiment By Ispano, Alessandro; Schwardmann, Peter
  3. Creativity Under Fire: The Effects of Competition on Creative Production By Daniel P. Gross
  4. Designing Institutions for Social Dilemmas By Bettina Rockenbach; Irenaeus Wolff
  5. Labels as nudges? An experimental study of car eco-labels By Francesco Bogliacino; Cristiano Codagnone; Giuseppe Alessandro Veltri; Francisco Lupiáñez-Villanueva; George Gaskell; Andriy Ivchenko
  6. Bargaining under Time Pressure By Karagözoğlu, Emin; Kocher, Martin G.
  7. Why does real-time information reduce energy consumption? By John Lynam; Kohei Nitta; Tatsuyoshi Saijo; Nori Tarui
  8. Consumption and social integration: Empirical evidence for Chinese migrant workers By Huang, Xiaobing; Liu, Xiaolian
  9. Consistency of Risk Preference Measures and the Role of Ambiguity: An Artefactual Field Experiment from China By Pan He; Marcella Veronesi; Stefanie Engel
  10. The influences of social context on the measurement of distributional preferences By Matthias Greiff; Kurt A. Ackermann; Ryan O. Murphy
  11. Attention and Saliency on the Internet: Evidence from an Online Recommendation System By Christian Helmers; Pramila Krishnan; Manasa Patnam;
  12. Leisure and Learning - Activities and Their Effects on Child Skill Development By Peter Funk; Thorsten Kemper
  13. How does the Gender Difference in Willingness to Compete evolve with Experience? By Thomas Buser
  14. Matching donations without crowding out? Some theoretical considerations, a field, and a lab experiment By Adena, Maja; Huck, Steffen
  15. Preference purification and the inner rational agent: A critique of the conventional wisdom of behavioural welfare economics By Gerardo Infante; Guilhem Lecouteux; Robert Sugden

  1. By: Mette Trier Damgaard (Department of Economics and Business Economics, Aarhus University, Denmark); Christiana Gravert (University of Gothenbuerg, Sweden)
    Abstract: We document the hidden costs of one of the most policy-relevant nudges, reminders. Sending reminders, while proven effective in facilitating behavior change, may come at a cost for both senders and receivers. Using a large scale field experiment with a charity, we find that reminders increase donations, but they also substantially increase unsubscriptions from the mailing list. To understand this novel finding, we develop a dynamic model of donation and unsubscription behavior with limited attention which is tested in reduced-form using a second field experiment. We also estimate our model structurally to perform a welfare analysis, showing that reminders are welfare diminishing for the potential donors as non-givers incur welfare loss of $2.35 for every reminder. The net benefit of every reminder to the charity is $0.18. Our evaluation shows the need to evaluate nudges on their intended as well as unintended consequences.
    Keywords: Avoiding-the-ask, charitable giving, field experiment, inattention, nudge, reminders
    JEL: C93 D03 D64 H41
    Date: 2016–03–15
  2. By: Ispano, Alessandro; Schwardmann, Peter
    Abstract: Evidence from studies in international relations, the politics of reform, collective action and price competition suggests that economic agents in social dilemma situations cooperate more to avoid losses than in the pursuit of gains. To test whether the prospect of losses can induce cooperation, we let experimental subjects play the traveler’s dilemma in the gain and loss domain. Subjects cooperate substantially more over losses. Our experimental design allows us to show that this treatment effect is best explained by reference-dependent risk preferences and referencedependent strategic sophistication. We discuss policy implications and relate our findings to other experimental games played in the loss domain.
    Keywords: cooperation; traveler’s dilemma; social dilemma; loss domain; diminishing sensitivity; cognitive hierarchy
    JEL: C90 D01 D03 D81
    Date: 2016–03
  3. By: Daniel P. Gross (Harvard Business School, Strategy Unit)
    Abstract: Though fundamental to innovation and essential to many industries and occupations, the creative act has received limited attention as an economic behavior and has historically proven difficult to study. This paper studies the incentive effects of competition on individuals' creative production. Using a sample of commercial logo design competitions, and a novel, content-based measure of originality, I find that competition has an inverted-U effect on creativity: some competition is necessary to induce agents to produce radically novel, untested ideas over incrementally tweaking their earlier work, but heavy competition drives them to stop investing altogether. The results are consistent with economic theory and reconcile conflicting evidence from an extensive literature on the effects of competition on innovation, with implications for R&D policy, competition policy, and organizations in creative or research industries.
    Keywords: Creativity; Incentives; Tournaments; Competition; Radical vs. incremental innovation
    JEL: D81 D82 D83 L4 M52 M55 O31 O32
    Date: 2016–03
  4. By: Bettina Rockenbach; Irenaeus Wolff
    Abstract: Considerable experimental evidence has been collected on rules enhancing contributions in public goods dilemmas. These studies either confront subjects with pre-specified rules or have subjects choose between different rule environments. In this paper, we completely endogenize the institution design process by asking subjects to design and repeatedly improve rule sets for a public goods problem in order to investigate which rules social planners facing a social dilemma “invent†and how these rules develop over time. We make several noteworthy observations, in particular the strong and successful use of framing, the concealment of individual contribution information and the decreasing use of punishment.
    Keywords: Public good, strategy method, experiment, public choice
    Date: 2016
  5. By: Francesco Bogliacino; Cristiano Codagnone; Giuseppe Alessandro Veltri; Francisco Lupiáñez-Villanueva; George Gaskell; Andriy Ivchenko
    Abstract: This article presents the results of a laboratory experiment and an online multi-country experiment testing the effect of motor vehicle eco-labels on consumers. The laboratory study featured a discrete choice task and questions on comprehension, while the ten countries online experiment included measures of willingness to pay and comprehension. Labels focusing on fuel economy or running costs are better understood, and influence choice about money-related eco-friendly behaviour. We suggest that this effect comes through mental accounting of fuel economy. In the absence of a cost saving frame, we do not find a similar effect of information on CO2 emissions and eco-friendliness. Labels do not perform as well as promotional materials. Being embedded into a setting, which is designed to capture the attention, the latter are more effective. We found also that large and expensive cars tend to be undervalued once fuel economy is highlighted.
    Keywords: eco-label; nudge; willingness to pay; fuel economy; experiments
    JEL: C9 D3 Q56 Q58
    Date: 2016–03–16
  6. By: Karagözoğlu, Emin; Kocher, Martin G.
    Abstract: We experimentally investigate the effect of time pressure in a rich-context, unstructured bargaining game with earned status and competing reference points. Our results show that average opening proposals, concessions, and agreed shares are very similar across different levels of time pressure. Nevertheless, as predicted, time pressure systematically influenced agreements. In particular, the likelihood of bargainers reaching the explicit reference point outcome in agreements increases with time pressure, and the likelihood of reaching the implicit reference point (equal division) in agreements decreases with time pressure. Disagreement rates and the frequency of last-moment agreements are strongly affected: the disagreement rate rises dramatically with time pressure, and last-moment agreements are significantly more frequent. This effect is explained by a stronger connection between the tension in first proposals and the final bargaining outcome under time pressure than without time pressure.
    Keywords: Bargaining; Disagreements; Last-moment Agreements; Reference Points; Time Pressure.
    JEL: C71 C91 D74
    Date: 2015
  7. By: John Lynam (UHERO, University of Hawai‘i at Manoa); Kohei Nitta (University of Hawai‘i at Manoa, UHERO); Tatsuyoshi Saijo; Nori Tarui (UHERO, University of Hawai‘i at Manoa)
    Abstract: A number of studies have estimated how much energy conservation is achieved by providing households with real-time information on energy use via in-home displays. However, none of these studies tell us why real-time information changes energy-use behavior. We explore the causal mechanisms through which real-time information affects energy consumption by conducting a randomized-control trial with residential households. The experiment disentangles two competing mechanisms: (i) learning about the energy consumption of various activities, the “learning effect”, versus (ii) having a constant reminder of energy use, the “saliency effect”. We have two main results. First, we find a statistically significant treatment effect from receiving real-time information. Second, we find that learning plays a more prominent role than saliency in driving energy conservation. This finding supports the use of energy conservation programs that target consumer knowledge regarding energy use.
    Keywords: energy efficiency; energy conservation; real-time information; experiment
    JEL: D03 D12 Q41 Q48
    Date: 2014–10
  8. By: Huang, Xiaobing; Liu, Xiaolian
    Abstract: This paper investigates the nexus between consumption and social integration of Chinese migrant workers using survey data with 869 samples from four Chinese provinces. The study suggests the following results: (1) Migrant workers are less integrated in terms of psychological integration and cultural integration, but they are strongly motivated to integrate into host societies; (2) An increase in consumption is associated with an increase in the social integration of migrant workers. This effect is stronger for new-generation migrant workers and weaker for high-income migrant workers; (3) Entertainment consumption plays the most important role in the social integration of migrant workers, whereas the effect of housing consumption on social integration is found to be negative; (4) Among all types of consumption behaviors, rational consumption is beneficial to the social integration of migrant workers, whereas impulsive consumption is harmful. The effects of economic consumption and conspicuous consumption are not significant.
    Keywords: consumption,consumption behavior,migrant workers,social integration
    JEL: F22 J15 D73 K42
    Date: 2016
  9. By: Pan He (ETH Zurich); Marcella Veronesi (Department of Economics (University of Verona)); Stefanie Engel (Institute for Environmental Decisions, ETH Zurich)
    Abstract: A variety of measures have been developed to elicit individual risk preferences. How these measures perform in the field, in particular in developing countries with non-student subjects, is still an open question. We implement an artefactual field experiment using a large sample of Chinese farmers to investigate (i) whether subjects behave in a consistent manner across incentivized experimental risk measures, (ii) whether non-incentivized survey measures can elicit actual risk preferences, and (iii) possible explanations for risk preference inconsistency across measures. We find that inconsistent risk preferences across survey and experimental measures may be explained by ambiguity preferences. In the survey, subjects seem to mix risk and ambiguity preferences.
    Keywords: risk preferences, ambiguity preferences, field experiments, socio-economic survey, China
    JEL: C93 D81 O1
    Date: 2016–03
  10. By: Matthias Greiff (University of Giessen); Kurt A. Ackermann (Fehr Advice & Partners); Ryan O. Murphy (University of Zürich)
    Abstract: A variety of different social contexts have been used when measuring distributional preferences. This could be problematic as different degrees of social interdependence may affect people’s distributional preferences, and this contextual variance may inadvertently muddle the measurement process and complicate comparisons between different strands of research. In the present study, we systematically measure distributional preferences embedded within different social contexts, as well as cooperative choices in a strategic setting. More specifically, we use a within-subjects design and compare the choices people make in resource allocation tasks with role certainty, role uncertainty, decomposed games, and matrix games. Results show that, at the aggregate level, role uncertainty and decomposed games both lead to higher degrees of prosociality when compared to role certainty. At the individual level, we observe considerable differences in behavior across the social contexts, indicating that the majority of people are sensitive to these different social settings but respond in different ways. We conclude with some recommendations for measuring distributional preferences as an individual difference and reiterate that social context is an inherent part of measurement methodology when considering social motivations.
    Keywords: Distributional Preferences, Social Preferences, Other Regarding Preferences, Social Value Orientation (SVO), Measurement Methods, Individual Differences
    JEL: C91 D03 D64
    Date: 2016
  11. By: Christian Helmers; Pramila Krishnan; Manasa Patnam;
    Abstract: Using high-frequency transaction-level data from an online retail store, we examine whether consumer choices on the internet are consistent with models of limited attention. We test whether consumers are more likely to buy products that receive a saliency shock when they are recommended by new products. To identify the saliency effect, we rely on i) the timing of new product arrivals, ii) the fact that new products are per se highly salient upon arrival, drawing more attention and iii) regional variation in the composition of recommendation sets. We find a sharp and robust 6% increase in theaggregate sales of existing products after they are recommended by a new product. To structurally disentangle the effect of saliency on a consumer’s consideration and choice decision, we use data on individual transactions to estimate a probabilistic choice set model. We find that the saliency effectis driven largely by an expansion of consumers’ consideration sets.
    Keywords: Limited attention, advertising, online markets.
    JEL: D22 M30 K11 O34
    Date: 2015–11–10
  12. By: Peter Funk; Thorsten Kemper
    Abstract: This paper studies how variations in leisure time allocation help explain the variations in school children's cognitive skills. We use representative data on the time use of American children from the Child Development Supplement (CDS) to the Panel Study of Income Dynamics (PSID). Our findings suggest that 1) including time use data significantly contributes to explaining the variation in math and reading test scores; 2) in a relative ranking of the effect of raising the time spent on a given activity on the math test score music is placed at the top, followed by learning, reading, sports, watching television, attending school and sleep (in descending order). For the reading test score music ranks first again and reading second, before learning, school, television, sports and sleep; 3) when comparing the effect of child activities with that of parental investments on test scores in the PSID data, it turns out that activities have no less explanatory power than investments, proxied by an established investment measure, with higher explanatory power for the production of math skills.
    Keywords: Child development, leisure time activities
    JEL: D13 I21 J13 J24
    Date: 2016–02–08
  13. By: Thomas Buser (University of Amsterdam, the Netherlands)
    Abstract: I study how gender differences in willingness to compete evolve over time in response to experience. Participants in a lab experiment perform the same real-effort task over several rounds. In each round, they have to choose between piece-rate remuneration and a winner-takes-all competition. At the end of each round, those who compete get feedback on the competition outcome. The main result is that women are much more likely than men to stop competing after a loss, which leads to the appearance of a significant gender gap in competitiveness even among those who are initially willing to compete. This gender effect is also present for high performers. In an additional experiment, I show that giving feedback to non-competers might further increase the gender gap in willingness to compete as men who initially choose not to compete react more strongly to positive feedback compared to women.
    Keywords: competitiveness; gender; feedback; career decisions; laboratory experiment
    JEL: C91 D03 J01 J16
    Date: 2016–03–14
  14. By: Adena, Maja; Huck, Steffen
    Abstract: Is there a way of matching donations that avoids crowding out? We introduce a novel matching method where the matched amount is allocated to a different project, present some simple theoretical considerations that predict reduced crowding out or more crowding in (depending on the degree of substitutability between the two projects) and present evidence from a large-scale natural field experiment and a laboratory experiment. Similar to findings in the literature, conventional matching for the same project results in partial crowding out in the field experiment and, as predicted, crowding out is reduced under the novel matching scheme. The lab experiment provides more fine-tuned evidence for the change in crowding and yields further support for the theory: the novel matching method works best when the two projects are complements rather than substitutes.
    Keywords: Charitable giving,Matched fundraising,Natural field experiment
    JEL: C93 D64 D12
    Date: 2016
  15. By: Gerardo Infante (University of East Anglia); Guilhem Lecouteux (Ecole Polytechnique); Robert Sugden (University of East Anglia)
    Abstract: Neoclassical economics assumes that individuals have stable and context-independent preferences, and uses preference-satisfaction as a normative criterion. By calling this assumption into question, behavioural findings cause fundamental problems for normative economics. A common response to these problems is to treat deviations from conventional rational-choice theory as mistakes, and to try to reconstruct the preferences that individuals would have acted on, had they reasoned correctly. We argue that this preference purification approach implicitly uses a dualistic model of the human being, in which an inner rational agent is trapped in an outer psychological shell. This model is psychologically and philosophically problematic.
    Keywords: preference purification, inner rational agent, behavioural welfare economics, libertarian paternalism, context-dependent preferences
    JEL: B41 D03 D60
    Date: 2016–02

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