nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2016‒04‒16
eleven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Framing and Minimum Levels in Public Good Provision By Martinsson, Peter; Medhin, Haileselassie; Persson, Emil
  2. In Gov We Trust, Voluntary compliance in networked investment games By Natalia BORZINO; Enrique FATAS; Emmanuel PETERLE
  3. Overconfidence, Incentives and Digit Ratio By Neyse, Levent; Bosworth, Steven; Ring, Patrick; Schmidt, Ulrich
  4. Subjective Belief Distributions and the Characterization of Economic Literacy By Di Girolamo, Amalia; Harrison, Glenn; Lau, Morten; Swarthout, J. Todd
  5. Categorization and Coordination By Vessela Daskalova; Nicolaas J. Vriend; ;
  6. Clever Enough to Tell the Truth By Ruffle, Bradley; Tobol, Yossi
  7. Morals and markets: The case of ultimatum bargaining By Sandro Casal; Francesco Fallucchi; Simone Quercia
  8. Environmental Incentives: Nudge or Tax? By Benjamin Ouvrard; Sandrine Spaeter
  9. Public Goods and Minimum Provision Levels: Does the institutional formation affect cooperation? By Martinsson, Peter; Persson, Emil
  10. Social Norms and Information Diffusion in Water-saving Programs: Evidence from a Randomized Field Experiment in Colombia By Jaime Torres, Mónica Marcela; Carlsson, Fredrik
  11. Tackling Food Waste through a sharing economy approach: an experimental analysis By Morone, Piergiuseppe; Falcone, Pasquale Marcello; Imbert, Enrica; Morone, Marcello; Morone, Andrea

  1. By: Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Medhin, Haileselassie (Department of Economics, School of Business, Economics and Law, Göteborg University); Persson, Emil (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Using a laboratory experiment in the field, we examine how the choice architecture of framing a social dilemma – give to or take from a public good – interacts with a policy intervention that enforces a minimum contribution level to the public good. We find that cooperation is significantly higher in the give frame than in the take frame in our standard public goods experiment. When a minimum contribution level is introduced, contributions are significantly higher in the take frame since contributions are crowded out in the give frame but crowded in in the take frame. Our results therefore stress the importance of choosing the frame when making policy recommendations.
    Keywords: Choice architecture; Framing; Public goods; Minimum level; Experiment; Ethiopia.
    JEL: C91 H41
    Date: 2016–04
  2. By: Natalia BORZINO (University of East Anglia); Enrique FATAS (University of East Anglia); Emmanuel PETERLE (CRESE EA3190 Univ. Bourgogne Franche-Comté)
    Abstract: We conduct a controlled laboratory experiment to investigate trust and trustworthiness in a networked investment game in which two senders interact with a receiver. We investigate to what extent senders and receivers comply with an exogenous and non-binding recommendation. We also manipulate the level of information available to senders regarding receiver’s behavior in the network. We compare a baseline treatment in which senders are only informed about the actions and outcomes of their own investment games to two information treatments. In the reputation treatment, senders receive ex ante information regarding the average amount returned by the receiver in the previous period. In the transparency treatment, each sender receives ex post additional information regarding the returning decision of the receiver to the other sender in the network. Across all treatments and for both senders and receivers, the non-binding rule has a significant and positive impact on individual decisions. Providing senders with additional information regarding receiver’s behavior affects trust at the individual level, but leads to mixed results at the aggregate level. Our findings suggest that reputation building, as well as allowing for social comparison could be efficient ways for receivers to improve trust within networks.
    Keywords: Experimental economics, Taxation, Trust, Information, Investment game.
    JEL: C72 C91 D03 H26
    Date: 2016–04
  3. By: Neyse, Levent; Bosworth, Steven; Ring, Patrick; Schmidt, Ulrich
    Abstract: This paper contributes to a better understanding of the biological underpinnings of overconfidence by analyzing performance predictions in the Cognitive Reflection Test with and without monetary incentives. In line with the existing literature we find that the participants are too optimistic about their performance on average; incentives lead to higher performance; and males score higher than females on this particular task. The novelty of this paper is an analysis of the relation between participants’ performance prediction accuracy and their second to fourth digit ratio. It has been reported that the digit ratio is a negatively correlated bio-marker of prenatal testosterone exposure. In the unincentivized treatment, we find that males with low digit ratios, on average, are significantly more overconfident about their performance. In the incentivized treatment, however, we observe that males with low digit ratios, on average, are less overconfident about their performance. These effects are not observed in females. We discuss how these findings fit into the literature on testosterone and decision making and how they might help to explain seemingly opposing evidence.
    Keywords: Behavioural genetics,Personality,Sexual dimorphism
    Date: 2016
  4. By: Di Girolamo, Amalia (University of Birmingham); Harrison, Glenn (Georgia State University, CEAR); Lau, Morten (Copenhagen Business School); Swarthout, J. Todd (Georgia State University)
    Abstract: We characterize the literacy of an individual in a domain by their elicited subjective belief distribution over the possible responses to a question posed in that domain. By eliciting the distribution, rather than just the answers to true/false or multiple choice questions, we can directly measure the confidence that an individual has about their knowledge of some fact. We consider literacy across several financial and economic domains. We find considerable demographic heterogeneity in the degree of literacy. We also measure the degree of consistency within a sample about their knowledge, even when that knowledge is imperfect.
    Keywords: subjective beliefs, economic literacy
    JEL: C91 D03 D83
    Date: 2016–03
  5. By: Vessela Daskalova; Nicolaas J. Vriend; ;
    Abstract: The use of coarse categories is prevalent in various situations and has been linked to biased economic outcomes, ranging from discrimination against minorities to empirical anomalies in financial markets. In this paper we study economic rationales for categorizing coarsely. We think of the way one categorizes one's past experiences as a model of the world that is used to make predictions about unobservable attributes in new situations. We first show that coarse categorization may be optimal for making predictions in stochastic environments in which an individual has a limited number of past experiences. Building on this result, and this is a key new insight from our paper, we show formally that cases in which people have a motive to coordinate their predictions with others may provide an economic rationale for categorizing coarsely. Our analysis explains the intuition behind this rationale.
    Keywords: categorization, prediction, decision-making, coordination, learning.
    JEL: D83 C72
    Date: 2014–06–30
  6. By: Ruffle, Bradley (Wilfrid Laurier University); Tobol, Yossi (Jerusalem College of Technology (JTC))
    Abstract: We conduct a field experiment on 427 Israeli soldiers who each rolled a six-sided die in private and reported the outcome. For every point reported, the soldier received an additional half-hour early release from the army base on Thursday afternoon. We find that the higher a soldier's military entrance score, the more honest he is on average. We replicate this finding on a sample of 156 civilians paid in cash for their die reports. Furthermore, the civilian experiments reveal that two measures of cognitive ability predict honesty, whereas general self-report honesty questions and a consistency check among them are of no value. We provide a rationale for the relationship between cognitive ability and honesty and discuss its generalizability.
    Keywords: honesty, cognitive ability, soldiers, high non-monetary stakes
    JEL: C93 M51
    Date: 2016–03
  7. By: Sandro Casal (University of Milan); Francesco Fallucchi (University of East Anglia); Simone Quercia (University of Bonn)
    Abstract: We conduct an experiment to investigate the acceptable boundaries of immoral behavior in barganing situations. We find that subjects are willing to punish at their own cost only an extremely immoral action of their counterpart that affects a third party. However, the possibility to nullify the negative effects of the immoral action and to restore the ex-ante situation for the third party increases the willingness to punish.
    Keywords: mini ultimatum game, morals
    JEL: C72 C91 D6
    Date: 2016–04
  8. By: Benjamin Ouvrard; Sandrine Spaeter
    Abstract: We consider a model where individuals can voluntarily contribute to improve the quality of the environment. They di er with regard to their confidence in the announcement made by the regulator about the risk of pollution, modelized in a RDEU model, and to their environmental sensitivity. We compare the efficiency of a tax in increasing individual contributions with the advantages of a nudge based on the announcement of the social optimum to each individual. Under some conditions, a nudge performs better than a tax, in particular, because the individual reaction depends directly on sensitivity, while only indirectly with a tax. Moreover, a nudge does not require information about private contributions, contrary to a tax based on the contributions that are not provided compared to the social optimum. Lastly, its implementation is much cheaper. Yet, some drawbacks are discussed and simulations illustrate our results.
    Keywords: incentives; nudge; environmental sensitivity; probability distorsion; tax.
    JEL: Q50 D8
    Date: 2016
  9. By: Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Persson, Emil (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We investigate the role of institutional formation on the implementation of a binding minimum contribution level in a linear public goods game. Groups either face the minimum level exogenously imposed by a central authority or are allowed to decide for themselves by means of a group vote whether or not a minimum level should be implemented. We find a binding minimum contribution level to have a positive and substantially significant effect on cooperation. The main impact is on the extensive margin, meaning that it is possible to force free riders to increase their contribution without crowding out others’ voluntary contributions. This result is robust to the mode of implementation and thus when the minimum level is enforceable, it is a simple policy that will increase provision of the public good.
    Keywords: Public goods; Minimum level; Voting; Experiment
    JEL: C91 D72 H41
    Date: 2016–04
  10. By: Jaime Torres, Mónica Marcela (Department of Economics, School of Business, Economics and Law, Göteborg University); Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper investigates direct and spillover effects of a social information campaign aimed at encouraging residential water savings in Colombia. The campaign was organized as a randomized field experiment, consisting of monthly delivery of consumption reports, including normative messages, for one year. Results indicate that social information and appeals to normbased behavior reduce water use by up to 6.8% in households directly targeted by the campaign. In addition, we find evidence of spillover effects: households that were not targeted by the campaign reduced water use by 5.8% in the first six months following the intervention. Nevertheless, neither direct nor spillover effects can be attributed to social networks for any of our chosen proxies of social and geographic proximity.
    Keywords: Peer effects; social norms; randomized evaluation; water utilities
    JEL: C93 D03 L95 O12
    Date: 2016–04
  11. By: Morone, Piergiuseppe; Falcone, Pasquale Marcello; Imbert, Enrica; Morone, Marcello; Morone, Andrea
    Abstract: Food security, along with growing population and the associated environmental concerns, make food waste and loss a central topic in economic analysis. While food losses occur mostly at the production, postharvest and processing phases of the supply chain, food waste takes place mainly at the end of the chain and therefore concerns primarily the habits and behaviour patterns of retailers and consumers. Many solutions and practices have been proposed and oftentimes implemented in order to “keep food out of landfills”, thus reducing food waste at the source. However, little attention has been paid to the possible sharing of consumer-side food surplus. In this context, food sharing could represent an effective way to tackle food waste at the consumers’ level, with both environmental and economic potential positive effects. Currently, several initiatives and start-ups are being developed in the US and Europe, involving the collection and use of the excess of food from consumers and retailers and the promotion of collaborative consumption models (e.g. Foodsharing, Growington, Feastly, etc.). Nevertheless, there is still little empirical evidence testing the effectiveness of introducing sharing economy approaches to reduce food waste. This study seeks to fill this gap through a framed field experiment. We run two experimental treatments; in the control treatment students were asked to behave according to their regular food consumption habits, and in the food sharing treatment the same students were instructed to purchase food, cook and consume it collectively. Preliminary results showed that the adoption by households of food sharing practices do not automatically translate into food waste reduction. A number of factors (environmental and economic awareness, domestic skills and collaborative behaviors) might act as ‘enablers’ to make sharing practices effective.
    Keywords: Food waste; sharing economy; food sharing; framed field experiment
    JEL: C93 Q5
    Date: 2016–04–10

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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