nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2016‒04‒23
eleven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. The Effect of Kinship on Intergenerational Cooperation: A Lab Experiment with Three Generations By Molina, José Alberto; Ferrer, Alfredo; Gimenez-Nadal, J. Ignacio; Gracia-Lazaro, Carlos; Moreno, Yamir; Sanchez, Angel
  2. Skills in the Marketplace: Market Equilibrium, Personality and Ability in a Field-Based Experiment By Fiala, Nathan
  3. Dynamic decision making under ambiguity By Konstantinos Georgalos
  4. Reward and punishment in a team contest By Heine F.A.; Strobel M.
  5. Is increasing inequality harmful? Experimental evidence By Fehr, Dietmar
  6. Facebook-to-Facebook: Online Communication and Economic Cooperation By Anna Lou Abatayo; John Lynham; Katerina Sherstyuk
  7. Can there be a market for cheap-talk information? Some experimental evidence By Cabrales, Antonio; Feri, Francesco; Gottardi, Piero; Meléndez-Jiménez, Miguel A.
  8. Is there a hidden cost of imposing a minimum contribution level for public good contributions? By Kocher, Martin G.; Martinsson, Peter; Persson, Emil; Wang, Xianghong
  9. Network Cognition By Roberta Dessi; Edoardo Gallo; Sanjeev Goyal;
  10. Not All Income is the Same to Everyone: Cognitive Ability and the House Money Effect in Public Goods Games By Hackinger, Julian
  11. Locus of Control and Performance Appraisal By John S. Heywood; Uwe Jirjahn; Cornelia Struewing

  1. By: Molina, José Alberto (University of Zaragoza); Ferrer, Alfredo (University of Zaragoza); Gimenez-Nadal, J. Ignacio (University of Zaragoza); Gracia-Lazaro, Carlos (University of Zaragoza); Moreno, Yamir (University of Zaragoza); Sanchez, Angel (University of Zaragoza)
    Abstract: In this paper, we analyze how kinship among family members affects intergenerational cooperation in a public good game. 165 individuals from 55 families, comprising three generations (youths, parents, and grandparents), play a public good game in three different treatments: one in which three members of the same family play each other (family), a second with the youth and two non-family members but preserving the previous generational structure (intergenerational), and a third in which three randomly-selected players play each other (random). We find that players contribute more to the public good when they play with other family members, than when they play with non-family members. This effect is present in all three generations, and is independent of the gender of the players. We also observe the significant result that older generations contribute more to the public good, relative to their children.
    Keywords: intergenerational cooperation, evolutionary game theory, public goods game, kinship, social networks
    JEL: D03 D64 D70
    Date: 2016–03
  2. By: Fiala, Nathan (University of Connecticut)
    Abstract: Classic economic theory predicts that markets will clear, leaving little or no marginal gains from trade left on the table. Laboratory experiments have largely confirmed this, though the results of recent field experiments have been mixed, with some artefactual markets in developing countries performing relatively inefficiently. I create a multi-round trading market in Uganda in order to explore the efficiency of trading and test if individual traits predict market efficiency and bargaining success. I use a rich dataset on individual characteristics, including indicators on personality, wealth and human capital. I find that measures of personality and human capital of the buyers and sellers predict levels of efficiency within rounds. The personality indicators are less correlated with individual success, though human capital remains important. Finally, rents obtained in the experiment correlate with wealth levels of participants two years later. The results suggest that market prowess can predict some lifetime outcomes and suggest an important role for individual personality in social efficiency outcomes. Future work on market and social efficiency outcomes will need to include an explicit role for individual personality.
    Keywords: Experimental market, market interactions, market efficiency, developing markets, personality, individual ability
    JEL: J24 D14 C91
    Date: 2014–09
  3. By: Konstantinos Georgalos
    Abstract: Neoclassical economic theory assumes that when agents tackle dynamic decisions under ambiguity, preferences are represented by Expected Utility and prior beliefs are updated according to Bayes rule, upon the arrival of partial information. Nevertheless, when one considers non-neutral ambiguity attitudes, either the axiom of dynamic consistency or of consequentialism should be relaxed. We report the results of a new experiment, designed to investigate how people behave in a dynamic choice problem under ambiguity, where decisions are made both before and after the resolution of some uncertainty. We study which of the two rationality axioms people violate, along with the question of whether this violation is part of a conscious planning strategy or not. The combination of the two, allows us to classify subjects to three behavioural types: resolute, naïve and sophisticated. Using data from a portfolio choice experiment where ambiguity is represented in a transparent and non-manipulable way, we cannot reject the hypothesis of Bayesian updating for half of our experimental population. For ambiguity non-neutral subjects, we find that the majority are sophisticated, a few are naïve and few are resolute.
    Keywords: Ambiguity, Subjective Beliefs, Dynamic Consistency, Consequentialism, Portfolio Choice, Experiment
    JEL: C91 D81 D83 D90
    Date: 2016
  4. By: Heine F.A.; Strobel M. (GSBE)
    Abstract: A team contest entails both public good situations within the teams as well as a contest across teams. In an experimental study, we analyse behaviour in such a team contest when allowing to punish or to reward other group members. Moreover, we compare two types of contest environment One in which two groups compete for a prize and another one in which we switch off the between-group element of the team contest. Unlike what experimental studies in isolated public goods games indicate, we find that reward giving, as opposed to punishing, induces higher contributions to the group project. Furthermore, comparing treatment groups, expenditures on rewarding other co-players are significantly higher than those for punishing. This is particularly pronounced for the between-group contest.
    Keywords: Cooperative Games; Design of Experiments: Laboratory, Group Behavior; Microeconomic Behavior: Underlying Principles;
    JEL: C92 D01 C71
    Date: 2015
  5. By: Fehr, Dietmar
    Abstract: Increasing inequality is commonly associated with social unrest and conflict between social classes. This paper reports the results of a laboratory experiment to study the implications of rising inequality on the tendency to burn others' income. The experiment considers an environment where higher earnings are typically associated with higher effort and varies how fair and transparent this relationship is. The findings indicate that increasing inequality does not per se lead to more money burning. Rather, it depends on whether the increase in inequality can be unequivocally attributed to exerted effort. If subjects can tweak the income-generating process in their favor, money burning is substantially higher. Low-income subjects are more likely to burn others' income and most of the money burning is aimed at subjects with higher incomes.
    Keywords: inequality,money burning,fairness
    JEL: C72 C92
    Date: 2015
  6. By: Anna Lou Abatayo (University of Hawaii at Manoa); John Lynham (University of Hawaii at Manoa); Katerina Sherstyuk (University of Hawaii at Manoa)
    Abstract: Communication is often critical for economic cooperation and enhancement of trust. Traditionally, direct face-to-face communication has been found to be more effective than any form of indirect, mediated communication. We study whether this is still the case given that many people routinely use texting and online social media to conduct economic transactions. In out laboratory experiment, groups of participants communicate either (i) face-to-face, (ii) through the most popular online social network – Facebook, or (iii) using text messaging, before participating in a public goods or a trust game. While people talk significantly more under traditional face-to-face, discussion through Facebook and text messages prove as effective as face-to-face communication in enhancing cooperation and increasing trust. For all three media, discussions that focus on the game of use more positive emotion words are correlated with enhanced trust. It appears that young American adults are now just as adept at communicating and reducing social distance online as they are in person.
    Keywords: communication technology; laboratory experiments; public good games; trust games
    JEL: C91 C92 D03 D71
    Date: 2015–09
  7. By: Cabrales, Antonio; Feri, Francesco; Gottardi, Piero; Meléndez-Jiménez, Miguel A.
    Abstract: This paper reports on experiments testing the viability of markets for cheap talk information. We find that these markets are fragile. The reasons are surprising given the previous experimental results on cheap-talk games. Our subjects provide low-quality information even when doing so does not increase their monetary payoff. We show that this is not because subjects play a different (babbling) equilibrium. By analyzing subjects’ behavior in another game, we find that those adopting deceptive strategies tend to have envious or non-pro-social traits. The poor quality of the information transmitted leads to a collapse of information markets.
    Keywords: Experiment, Cheap talk, Auction, Information Acquisition, Information Sale
    JEL: D83 C72 G14
    Date: 2016
  8. By: Kocher, Martin G. (Department of Economics, School of Business, Economics and Law, Göteborg University); 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); Wang, Xianghong (School of Economics, Renmin University of China)
    Abstract: We examine the effects of either exogenously imposing or endogenously letting subjects choose whether to impose minimum contribution levels (MCLs) in a linear public goods experiment using the strategy method. Our results on contribution levels to the public goods are fairly independent of how MCLs are imposed. We find that the main effect of an MCL on unconditional contributions is that it increases low contribution levels to the MCL imposed, while the effect of those contributing more than the MCL before its introduction depends on the size of the MCL. Unexpectedly, there is much more crowding out for a low MCL than for a relatively high MCL. However, the distribution of contribution types is stable across different MCLs.
    Keywords: Cooperation; China; experiment; minimum level; public good
    JEL: C91 D03 D64
    Date: 2016–04–05
  9. By: Roberta Dessi; Edoardo Gallo; Sanjeev Goyal;
    Abstract: We study individual ability to memorize and recall information about friendship networks using a combination of experiments and survey-based data. In the experiment subjects are shown a network, in which their location is exogenously assigned, and they are then asked questions about the network after it disappears. We find that subjects exhibit three main cognitive biases: (i) they underestimate the mean degree compared to the actual network; (ii) they overestimate the number of rare degrees; (iii) they underestimate the number of frequent degrees. We then analyse survey data from two `real' friendship networks from a Silicon Valley firm and from a University Research Center. We find, somewhat remarkably, that individuals in these real networks also exhibit these biases. The experiments yield three further: findings: (iv) network cognition is a affected by the subject's location, (v) the accuracy of network cognition varies with the nature of the network, and (vi) network cognition has a significant effect on economic decisions.
    Date: 2014–08–27
  10. By: Hackinger, Julian
    Abstract: The provision of public goods often suffers from a social dilemma generating too little contributions. Yet, it remains an open question how positive contributions materialise. Existing studies suggest that individuals' decisions on how much to contribute depend on cognitive skills. Furthermore, mental accounting research indicates that the source of income matters for economic decision making. I show experimentally that subjects' contributions in a one-shot linear public goods game depend on an interplay of the two factors. While a house money effect exists for subjects with low cognitive skills there is no such effect for those with high cognitive skills. My findings have important implications for taxation, redistribution, and voting behaviour, as well as past and future experiments.
    Keywords: Public Goods; Experiment; Cognitive Skills; House Money Effect; Mental Accounting; Endowment Source;
    JEL: C91 D03 H41
    Date: 2016–04–19
  11. By: John S. Heywood; Uwe Jirjahn; Cornelia Struewing
    Abstract: This work contributes to the literature demonstrating an important role for psychological traits in labor market decisions. We show that West German workers with an internal locus of control sort into jobs with performance appraisals. Appraisals provide workers who believe they control their environment a tool to demonstrate their value and achieve their goals. We confirm that workers who are risk tolerant also sort into jobs with performance appraisals but explain why the influence of the locus of control and risk tolerance should not be additive. We demonstrate this by estimating a routinely large and significantly negative interaction in our sorting equations. We also show that important patterns of sorting are revealed only when taking into account the interaction of locus of control and risk tolerance.
    Keywords: Locus of control, risk attitude, performance appraisal, performance pay, sorting, extrinsic rewards, intrinsic motivation
    JEL: D03 J33 M52
    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.
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