nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2016‒06‒18
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Reacting to Unfairness: Group Identity and Dishonest Behavior By Nives Della Valle; Matteo Ploner
  2. Risk, Ambiguity and Efficient Liability Rules: An experiment. By Nicolas Lampach; Kene Boun My; Sandrine Spaeter
  3. It's the thought that counts: The role of intentions in noisy repeated games By Rand, David Gertler; Fudenberg, Drew; Dreber, Anna
  4. Theory of Mind Predicts Cooperative Behavior By Gregory DeAngelo; Bryan McCannon
  5. Guilt-Averse or Reciprocal? Looking at Behavioural Motivations in the Trust Game By Yola Engler; Rudolf Kerschbamer; Lionel Page
  6. Affirmative action and effort choice An experimental investigation By Juliana Silva-Goncalves; Uwe Dulleck; Anita Hong; Markus Schaffner; Stephen Whyte
  7. Game Theory, Institutions and the Schelling-Bacharach Principle: Toward an Empirical Social Ontology By Cyril Hédoin; Lauren Larrouy
  8. All Frames Created Equal are Not Identical: On the Structure of Kahneman and Tversky's Framing Effects By Dorian Jullien
  9. Preference Cloud Theory: Imprecise Preferences and Preference Reversals By Bayrak, Oben; Hey, John
  10. Why did he do that? Using counterfactuals to study the effect of intentions in extensive form games By Yola Engler; Rudolf Kerschbamer; Lionel Page

  1. By: Nives Della Valle; Matteo Ploner
    Abstract: Employees' misconduct can be attributed to experiences of unfairness. Does this dishonest reaction change when employees identify with the whole organization or with a subunit only? We experimentally investigate whether individuals are more likely to engage in dishonest behavior after having experienced unfairness perpetrated by a peer with a salient group identity. Two peers generate an endowment together, but only one can decide how to share it. They either share the same group identity or have distinct group identities. Then, they approach a task in which they can opportunistically engage in dishonest behavior. Our results show that when peers share the same group identity, unfair distributive decisions do not trigger a dishonest reaction. In contrast, when di erent group identities coexist, dishonest behavior is observed as a reaction to unfairness.
    Keywords: Group Identity, Fairness, Dishonesty
    JEL: C91 C92 D03 D63
    Date: 2016
  2. By: Nicolas Lampach; Kene Boun My; Sandrine Spaeter
    Abstract: We conduct experiments to study the incentive effects of strict liability by comparing both regimes, unlimited and limited liability in the domain of risk and ambiguity. We assume that the firm’s activities cause a risk of technological disaster and can invest in prevention to reduce the likelihood of accident. We assess Lampach and Spaeter’s theoretical predictions. We find on average high levels of investment under limited liability in the domain of risk, consistent with the theory, but lower level of investment in prevention in the domain of ambiguity. We do not find that subjects’ degree of optimism affect the decision choice albeit we demonstrate strong evidence in favor of inequity aversion, fairness and risk preferences.
    Keywords: Strict liability; Technological disaster; Experiment; Risk; Ambiguity; Optimism.
    JEL: K13 C91 D81
    Date: 2016
  3. By: Rand, David Gertler; Fudenberg, Drew; Dreber, Anna
    Abstract: We examine cooperation in repeated interactions where intended actions are implemented with noise but intentions are perfectly observable. Observable intentions lead to more cooperation compared to control games where intentions are unobserved, allowing subjects to reach similar cooperation levels as in games without noise. Most subjects condition exclusively on intentions, and use simpler, lower-memory strategies compared to games where intentions are unobservable. When the returns to cooperation are high, some subjects are tolerant, using good outcomes to forgive attempted defections; when the returns to cooperation are low, some subjects are punitive, using bad outcomes to punish accidental defections.
    Date: 2015
  4. By: Gregory DeAngelo (West Virginia University, Department of Economics); Bryan McCannon (West Virginia University, Department of Economics)
    Abstract: Explanations for cooperation in Prisoner’s Dilemma games (PD) have generated significant interest. While institutional explanations, such as the role of repeated interactions and communication, have offered considerable explanatory ability, a psychological measure of Theory of the Mind (ToM) – Reading the Mind in the Eyes – of an individual’s ability to process social and emotional cognition offers new insights. Using this measure, we examine how ToM explains (un)cooperative behavior in a standard PD game. We find that subjects who have higher ToM are less cooperative in PD games and extract higher payoffs.
    Keywords: Cooperation, Experiment, Prisoner’s Dilemma, Reading Mind in the Eyes, Theory of the Mind
    Date: 2016–06
  5. By: Yola Engler; Rudolf Kerschbamer; Lionel Page
    Abstract: For the trust game, recent models of belief-dependent motivations make opposite predictions regarding the correlation between back-transfers and secondorder beliefs of the trustor: While reciprocity models predict a negative correlation, guilt-aversion models predict a positive one. This paper tests the hypothesis that the inconclusive results in previous studies investigating the reaction of trustees to their beliefs are due to the fact that reciprocity and guilt-aversion are behaviorally relevant for different subgroups and that their impact cancels out in the aggregate. We find little evidence in support of this hypothesis and conclude that type heterogeneity is unlikely to explain previous results.
    JEL: C25 C70 C91 D63 D64
    Date: 2016–06–07
  6. By: Juliana Silva-Goncalves; Uwe Dulleck; Anita Hong; Markus Schaffner; Stephen Whyte
    Abstract: We study the effect of affirmative action on effort in an experiment conducted in high schools in socioeconomically disadvantaged areas in Queensland, Australia. All participating schools have a large representation of indigenous Australians, a population group that is frequently targeted by affirmative action. Our participants perform a simple real-effort task in a competitive setting. Those ranked in the top third receive a high piece-rate payment and all the others receive a low payment.We introduce affirmative action by providing the lowest (bottom third) performers with a positive handicap increasing their chances to achieve the high payment target. Our findings show that the policy increases effort of those that it aims to favour, without discouraging effort of those who are indirectly penalized by affirmative action.
    Keywords: Field experiments, Public administration, Public policy (Law)
    Date: 2016
  7. By: Cyril Hédoin (University of Reims Champagne-Ardenne, France); Lauren Larrouy (University of Nice Sophia Antipolis, France; GREDEG CNRS)
    Abstract: This article defends a methodological and theoretical claim according to which the combination of epistemic game theory with the recent developments in the so-called “theory of mind” is able to provide an empirically grounded and theoretically consistent perspective on the mechanisms through which institutions determine the individuals’ beliefs and choices. This move toward an empirical social ontology is captured through what we call the Schelling-Bacharach principle in game theory. According to it, game-theoretic analysis of coordination and cooperation should study how the players are actually reasoning in different game situations.
    Keywords: Social ontology, epistemic game theory, institutions, theory of Mind, Schelling-Bacharach principle
    JEL: B41 C72 D02
    Date: 2016–06
  8. By: Dorian Jullien (University of Nice Sophia Antipolis; GREDEG CNRS)
    Abstract: This paper revisits Daniel Kahneman and Amos Tversky's work on 'framing'. It shows how various conventions from economic theory allow the establishment of different equivalence relations between pairs of problems in framing experiments. Then, an exegesis of their comments on these experiments is conducted regarding the relation between their theoretical explanation through prospect theory and the positive/normative distinction in models of individual behaviors. Throughout, a methodological framework with a distinction between identity, equivalence and equality (borrowed to philosopher Craig Dilworth) is developed for a critical analysis of the relation between external frames (the empirical structure of a decision problem) and internal frames (the psychological representation of the decision problem by decision makers).
    Keywords: Framing, description invariance, extensionality, consequentialism, prospect theory, behavioral economics, Kahneman and Tversky
    JEL: D03 D81 B21 B40 B41
    Date: 2016–06
  9. By: Bayrak, Oben; Hey, John
    Abstract: This paper presents a new theory, called Preference Cloud Theory, of decision-making under uncertainty. This new theory provides an explanation for empirically-observed Preference reversals. Central to the theory is the incorporation of preference imprecision which arises because of individuals’ vague understanding of numerical probabilities. We combine this concept with the use of the Alpha model (which builds on Hurwicz’s criterion) and construct a simple model which helps us to understand various anomalies discovered in the experimental economics literature that standard models cannot explain.
    Keywords: Imprecise Preferences; Preference Reversals; Decision under Uncertainty; Anomalies in Expected Utility Theory
    JEL: D0 D00 D01 D02 D03 D04 D8 D80 D81
    Date: 2015
  10. By: Yola Engler; Rudolf Kerschbamer; Lionel Page
    Abstract: We investigate the role of intentions in two-player two-stage games. For this purpose we systematically vary the set of opportunity sets the first mover can chose from and study how the second mover reacts not only to opportunities of gains but also of losses created by the choice of the first mover. We find that the possibility of gains for the second mover (generosity) and the risk of losses for the first mover (vulnerability) are important drivers for second mover behavior. On the other hand, efficiency concerns and an aversion against violating trust seem to be far less important motivations. We also find that second movers compare the actual choice of the first mover and the alternative choices that would have been available to him to allocations that involve equal material payoffs.
    Keywords: Social Preferences, Other-Regarding Preferences, Intentions, Reciprocity, Trust Game, Experimental Economics, Behavioral Economics
    JEL: C91 C92 D63 D64
    Date: 2016–06

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