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on Cognitive and Behavioural Economics |
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Issue of 2016‒05‒21
fourteen papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Anna Blajer-Gołębiewska (University of Gdansk); Dagmara Wach (University of Gdansk); Maciej Kos (Northeastern University) |
| Abstract: | When making financial decisions, decision-makers should perceive having complete risk information as beneficial. Surprisingly, in some situations decision-makers prefer to know less than more, even when it may result in losing money. Some shareholders do not keep themselves informed about the company they have invested in, and some online customers prefer not to read the terms of service of the online stores they shop at. The aim of this study was to identify the impact of selected characteristics of financial threats on individuals’ decisions to avoid information about the probability that a given threat may occur. To reach this goal, we conducted an incentivized full-factorial 2x2x2 experiment in which subjects (n=395) made financial decisions to minimize the amount of money they could lose. We investigated their behaviour under such threat focusing mainly on their willingness to attain information that can protect them from losing money.We hypothesized that: (1) the more serious the financial threat, the fewer people avoid risk information; (2) the higher the perceived probability of the financial threat, the more people avoid risk information; (3) the lower the effectiveness of prevention of the threat, the more people avoid risk information. Additionally, we investigated the role of coping-styles (Miller, 1987) and locus of control (Rotter, 1966) on risk information avoidance in the financial domain. Specifically, we tested the conjectures that: (4) blunters are less likely to attain risk information than monitors; (5) external locus of control leads to more risk information avoidance than internal locus of control. Furthermore, we controlled for: anticipated emotional response, rational/emotional thinking, risk attitudes, and basic demographics.To analyse the data we ran a logistic regression model with Huber-White sandwich variance estimator and rejected hypotheses 1-3. However, we found an interesting interaction effect: the effect of threat severity on information avoidance depends on perceived probability of the threat. Specifically, people tend to avoid financial risk information more often when the financial threat is more serious and the perceived probability of the threat is high. In other words, they avoid financial risk information when knowing it would benefit them most. Finally, our data provides support for hypotheses 4 and 5, and suggests that anticipated emotional response and sex are statistically significant predictors of financial risk information avoidance. |
| Keywords: | Decision making, behavioural economics, behavioural finance, risk information avoidance |
| JEL: | D81 G02 D03 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:3606236&r=cbe |
| 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: | Are humans intuitively cooperative, or do we need to deliberate in order to be generous to others? The Social Heuristics Hypothesis (SHH) proposes that fast instinctive decision making promotes cooperation in social dilemmas. In this paper, we conduct a novel time-pressure experiment to shed light on the cognitive underpinnings of cooperation. Although we find no evidence for a time-pressure effect when considering all subjects, our results, together with a re-analysis of independent data, indicate that a single factor – payoff comprehension – accounts for some studies failure to replicate the finding that fast and intuitive decision making promotes cooperation. Given payoff comprehension, the SHH predicts behavior well. We believe this finding provides a unifying interpretation of the conflicting results in the literature. |
| Keywords: | Cooperation; Intuition; Dual-Process; Public Goods Game |
| JEL: | C72 C91 C92 D03 |
| Date: | 2016–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bergec:2016_002&r=cbe |
| By: | Victor Aguirregabiria; Erhao Xie |
| Abstract: | This paper studies the identification of players' preferences and beliefs in empirical applications of discrete choice games using experimental data. The experiment comprises a set of games with similar features (e.g., two-player coordination games) where each game has different values for the players' monetary payoffs. Each game can be interpreted as an experimental treatment group. The researcher assigns randomly subjects to play these games and observes the outcome of the game as described by the vector of players' actions. Data from this experiment can be described in terms of the empirical distribution of players' actions conditional on the treatment group. The researcher is interested in the nonparametric identification of players' preferences (utility function of money) and players' beliefs about the expected behavior of other players, without imposing restrictions such as unbiased or rational beliefs or a particular functional form for the utility of money. We show that the hypothesis of unbiased/rational beliefs is testable and propose a test of this null hypothesis. We apply our method to two sets of experiments conducted by Goeree and Holt (2001) and Heinemann, Nagel and Ockenfels (2009). Our empirical results suggest that in the matching pennies game, a player is able to correctly predict other player's behavior. In the public good coordination game, our test can reject the null hypothesis of unbiased beliefs when the payoff of the non-cooperative action is relatively low. |
| Keywords: | Testing biased beliefs; Multiple equilibria; Strategic uncertainty; Coordination game |
| JEL: | C57 C72 |
| Date: | 2016–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-560&r=cbe |
| By: | Stephen L. Cheung |
| Abstract: | This methodological survey reviews recent developments in the design of experiments to elicit individuals' time preferences, with a focus on the measurement or control for potentially non-linear utility. While the objective of a time preference experiment is usually to estimate parameters of a discount function, assumptions concerning the nature of utility may have an important influence upon these estimates. The survey classifies experiment designs on two dimensions: whether they assume an equivalence between utility under risk and over time, and whether they result in an estimate of the curvature of utility. |
| Keywords: | time preference, discounted utility, instantaneous utility, choice list |
| JEL: | C91 D03 D90 |
| Date: | 2015–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:qut:qubewp:wp034&r=cbe |
| By: | Matthias Greiff; Kurt A. Ackermann; Ryan O. Murphy |
| Abstract: | Different social contexts have been used when measuring distributional preferences. This could be problematic as contextual variance may inadvertently muddle the measurement process. We use a within-subjects design and measure distributional preferences 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 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. |
| Keywords: | Distributional preferences, social preferences, other regarding preferences, Social Value Orientation (SVO), measurement methods, individual differences |
| JEL: | C91 D03 D64 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:224&r=cbe |
| By: | Güth, Werner; Pull, Kerstin; Stadler, Manfred; Zaby, Alexandra |
| Abstract: | This paper analyzes blindfolded versus informed ultimatum bargaining where proposer and responder are both either uninformed or informed about the size of the pie. Analyzing the transition from one information setting to the other suggests that more information induces lower (higher) price offers and acceptance thresholds when the pie is small (large). While our experimental data confirm this transition effect, risk aversion leads to diverging results in blindfolded ultimatum bargaining due to task-independent strategies such as 'equal sharing' or the 'golden mean.' The probability of successful bargaining is lower in case of blindfolded than informed ultimatum bargaining. |
| Keywords: | ultimatum bargaining,information structure,experimental economics |
| JEL: | C91 D82 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuewef:90&r=cbe |
| By: | Giuseppe Attanasi; Nikolaos Georgantzís; Valentina Rotondi; Daria Vigani |
| Abstract: | In this paper we compare two mutually uncorrelated risk-attitude elicitation tasks. In particular, we test for correlation of the elicited degrees of monetary risk aversion at a within-subject level. We show that sufficiently similar incentivized mechanisms elicit correlated decisions in terms of monetary risk aversion only if other risk-related attitudes are accounted for. Furthermore, we ask subjects to self-report their general willingness to take risks. We find evidence of some external validity of the two tasks as predictors of self-reported risk attitudes in general human domains. |
| Keywords: | Risk aversion, Elicitation method, Lottery choices. |
| JEL: | D81 C91 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2016-24&r=cbe |
| By: | Sven Hoeppner (Center for Advanced Studies in Law and Economics, Ghent University Law School, Ghent); Laura Lyhs (Friedrich Schiller University Jena) |
| Abstract: | Doctrinal lawyers strive to reduce legal uncertainty based on the premise that difficult to predict legal consequences discourage socially desirable activities. Contributions from the economic theory of law suggest that increasing legal uncertainty can be socially beneficial. We test in an innovative laboratory experiment whether increasing the variability of an exogenous choice threshold (legal standard) increases or reduces socially desirable behavior. The results indicate a U-shaped relationship between increases in variability and activity choices: increases in variability first induce lower than optimal choices under an efficient standard (overcompliance), but eventually lead to greater than optimal choices under an efficient standard (undercompliance). We also find that overcompliance arises only under low degrees of standard variability. Moreover, increasing variability gradually crowds-out compliant choices. Finally, in the experiment minimal variability of the legal standard induces erratic individual behavior beyond socially satisfactory levels such that the standard loses its coordination function. |
| Keywords: | legal uncertainty, vague legal standard, overcompliance and undercompliance, experimental law and economics, compliance crowding-out |
| JEL: | C91 D02 K10 |
| Date: | 2016–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2016-010&r=cbe |
| By: | Glimcher, Paul W.; Tymula, Agnieszka A. |
| Abstract: | We present a descriptive model of choice that incorporates neurobiological constraints, representational structures and costs into a traditional economic framework. An individual's behavior is fully described by two, in principle observable, primitives: an individual's neural/mental capacity and an endogenous rational expectation. The model captures the phenomena captured by Prospect Theory: reflection in risk attitudes and loss aversion, but unlike Prospect Theory accounts for individual heterogeneity in each and employs fewer parameters. Our theory provides an alternative explanation for endowment effect and makes a series of novel predictions amenable to future testing. |
| Keywords: | Utility; decision-making; reference point; neuroeconomics |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2016-08&r=cbe |
| By: | Maria Cubel (Universitat de Barcelona); Santiago Sanchez-Pages (Universitat de Barcelona) |
| Abstract: | Recent literature has emphasized that individuals display varying levels of strategic reasoning. This paper presents ten years worth of experimental data from two countries exploring the existence and endogeneity of gender differences in strategic sophistication. We report results from two experimental studies employing the beauty contest game, one from the classroom and one from the laboratory. We observe robust and signi?cant gender differences in strategic sophistication in favour of men in zero-stake situations. These differences disappear when a monetary prize is awarded. We also ?find that depth of strategic reasoning varies with gender priming. Females display signi?cantly higher levels of strategic sophistication than males when gender is made salient. This effect of gender priming is driven by females who believe women are superior in the game. |
| Keywords: | guessing game, strategic sophistication, gender, stereotype threat,beliefs. |
| JEL: | C72 C91 D81 J16 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ewp:wpaper:338web&r=cbe |
| By: | Christoph Engel (Max Planck Institute for Research on Collective Goods) |
| Abstract: | In three distinct disciplines, crime and punishment are studied experimentally: in empirical legal studies, in experimental economics, and an experimental criminology. These three disciplines have surprisingly little interaction. The current paper surveys the rich evidence, and discusses the methodological reasons for running experiments on these issues, the limitations of the method, and how they can be mitigated. |
| Keywords: | crime, punishment, experiment, experimental economics, experimental criminology |
| JEL: | A12 C91 C93 D03 H26 K14 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2016_07&r=cbe |
| By: | Victoria Ovsyannikova (National Research University Higher School of Economics) |
| Abstract: | This study examines the effect of mood on emotion recognition and the relationship of mood, emotion recognition and information processing styles. This study hypothesized that a positive mood promotes a global processing style, associated with more efficient emotion recognition. In this study, subjects’ eye movements were analyzed to measure global versus local processing styles. The results suggest that people in a positive mood recognize happiness expression more slowly than those in a neutral mood. Participants’ processing styles were not related to emotion recognition speed. The findings clarify mechanisms of efficient emotion recognition. |
| Keywords: | emotion recognition, mood induction, congruency effect, global and local information processing styles, eye movements |
| JEL: | Z |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:60psy2016&r=cbe |
| By: | Ewa Magier-Šakomy (WSB University in Gdańsk); Honorata Neumueler (WSB University in Gdańsk) |
| Abstract: | The gender issue in management is still vividly discussed (i.e. :Byron 2008; Chua; Murray, 2015; Lakshmi, Peter, 2015). Researchers are interested in both: relation between manager’s gender and real efficacy, and between manager’s gender and perceiving his/her efficacy. The aim of this work is to understand the role of manager’s gender and his/her emotions in the perception of his/her professional competencies and social or personal skills. Authors try to answer the question whether the evaluation of the manager’s professional and behavioral competencies depends on manager’s gender and emotions expressed at his/her face. It was expected that negative emotion, especially expressed by female manager would decrease the evaluation of her competencies. To test the hypotheses, 4 questionnaires were developed. Each questionnaire consist of picture, short description of manager and 25 characteristics given in the form of semantic differential scale. Each version differed with an attached picture according to independent variables included to the research: gender (man vs woman) and emotion (joy vs anger). 25 characteristics referred to professional and behavioral skills. 160 subjects (employees) participated in the study. Results show that expressed emotion more significantly determines female manager’s competencies than male. In addition, negative emotion expressed by woman conduces to low evaluation. The emotion expressed by man does not influence how he is perceived, sometimes his negative emotion leads to perceiving his competencies as higher (i.e.: in decision making, or being reliable). The results are discussed in the frame of social perception theories. |
| Keywords: | economic psychology, manager's competencies, gender, emotions, social perception, decision making, ANOVA |
| JEL: | A10 A13 A14 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:3606360&r=cbe |
| By: | Salvatore Di Falco; Brice Magdalou; David Masclet; Marie-Claire Villeval; Marc Willnger |
| Abstract: | Embezzlement is a major concern in various settings. By means of a sequential modified dictator game, we investigate theoretically and experimentally whether making information more transparent and reducing the number of intermediaries in transfer chains can reduce embezzlement and improve the recipients’ welfare. Consistent with referencedependent preferences in terms of moral ideal, we show that the impact of transparency is conditional on the length of the transfer chain and on the position of the intermediaries in the chain. Its direct effect on image encourages honesty. Its indirect effect via expectations plays in the opposite direction, motivating individuals to embezzle more when they expect that the following intermediary will embezzle less. Senders react positively to a reduction of the length of the chain but negatively to transparency. |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpaper:04-16&r=cbe |