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on Cognitive and Behavioural Economics |
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Issue of 2016‒08‒07
eleven papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Ismaël Rafaï (Université Côte d'Azur, France; GREDEG CNRS); Sébastien Duchêne (Université Côte d'Azur, France; GREDEG CNRS); Eric Guerci (Université Côte d'Azur, France; GREDEG CNRS); Ariane Lambert-Mogiliansky (Paris School of Economics); Fabien Mathy (Université Côte d'Azur; BCL CNRS) |
| Abstract: | In this paper, we will put forward an original experiment to reveal empirical "anomalies" in the process of acquisition, elaboration and retrieval of information in the context of reading. We show that the acquisition and elaboration of information leads to the formation of a mental picture that may be incompatible with the information stored in memory. To answer some specific questions, individuals make use of a mental picture rather than combine their stored information appropriately. Our hypothesis is that quantum cognition theory provides a fruitful interpretative framework to account for these anomalies. Finally, we provide evidence that individuals with a low CRT (Cognitive Reflection Test) score tend to demonstrate, more often than not, this particular behavior. |
| Keywords: | quantum cognition, learning, experimental economics |
| JEL: | C91 C90 D83 C21 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=&r=cbe |
| By: | Xiaochuan Huang (DT Capital Management Co., Ltd.); Takehito Masuda (Institute of Economic Research, Kyoto University); Yoshitaka Okano (School of Economics and Management, Kochi University of Technology); Tatsuyoshi Saijo (School of Economics and Management, Kochi University of Technology) |
| Abstract: | We experimentally test a two-stage mechanism called the stay-leave mechanism to achieve cooperation in n-plyer prisoner's dilemma situations. Under this mechanism, each cooperator has the chance to revise his choice when players' choices are not unanimous. We say a player is selfish if he eliminates dominated choices in each stage. If all participants of the stay-leave mechanism are selfish, for any value of public good benefit that arises, the unique equilibrium is unanimous cooperation. The average cooperation rate in the stay-leave mechanism experiment averaged 86.6% across 15 periods, with an upward trend, increasing to 96.0% after period 5. By examining earlier period data, we detected that selfish and conditionally cooperative subjects coexist at a proportion of approximately 3:1. Finally, we extended our model to incorporate a mixture of the observed two types and misbeliefs about others' types. Paradoxically, unanimous cooperation is less likely to occur as the number of conditionally cooperative players increase. The model also partially explains the observed upward trend in the cooperation rate in the stay-leave mechanism sessions. |
| Keywords: | social dilemma; experiment; conditional cooperator; behavioral heterogeneity |
| JEL: | C72 C72 D74 H41 P43 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=&r=cbe |
| By: | Fabrice Rousseau (Department of Economics, Finance and Accounting, Maynooth University.); Hervé Boco (University of Toulouse Toulouse Business School ISAE); Laurent Germain (Workplace-Name:University of Toulouse Toulouse Business School ISAE) |
| Abstract: | We develop a model in which informed overconfident market participants and informed rational speculators trade against trend-chasers. In this model positive feedback traders act as Computer Based Trading (CBT) and lead to positive feedback loops. In line with empirical findings we find a positive relationship between the volatility of prices and the size of the price reversal. The presence of positive feedback traders leads to a higher degree of trading activity by both types of informed traders. Overconfidence can lead to less price volatility and more efficient prices. Moreover, overconfident traders may be better off than their rational counterparts. |
| Keywords: | Overconfidence, Positive feedback trading, Bubbles, Excess volatility, Market efficiency, Computer Based Trading, Algorithmic Trading. |
| JEL: | D43 D82 G14 G24 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=&r=cbe |
| By: | Chen, Daniel L. |
| Abstract: | Some theories about the positive impact of markets on morality suggest that competition increases empathy, not between competitors, but between them and third parties. However, empathy may be a necessary evolutionary antecedent to guile, which is when someone knows what the other person wants and intentionally deceives him or her, and deception may have evolved as a means of exploiting empathy. This paper examines how individuals primed for empathy behave towards third parties in a simple economic game of deception. It reports the results of a data entry experiment in an online labor market. Individuals enter data randomized to be a prime for empathy, for guile, or a control. Empathy is then measured using a Reading the Mind in the Eyes Test and guile is measured using a simple economic game. Individuals primed for empathy become less deceptive towards third parties. Individuals primed for guile become less likely to perceive that deceiving an individual is unfair in a vignette. These results are robust to a variety of controls and to restricting to workers who entered the prime accurately. These findings are inconsistent with the hypothesis that empathy causes guile and suggests that empathy may cause those who are making judgements to become less deceptive. |
| Keywords: | Normative Commitments, Other-Regarding Preferences, Empathy, Deception, Guile |
| JEL: | D03 D64 K00 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=&r=cbe |
| By: | Raphaële Préget (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - UM3 - Université Paul-Valéry - Montpellier 3 - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique); Phu Nguyen Van (UMR Beta - CNRS - Centre National de la Recherche Scientifique); Marc Willinger (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - UM3 - Université Paul-Valéry - Montpellier 3 - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique, Université de Montpellier) |
| Abstract: | We rely on the methodology of Fischbacher et al. (2001) in order to identify subjects’ behavioral types. We then link the likelihood to act as a leader in a repeated public goods game to the elicited behavioral types. The leader in a group is defined as the subject who voluntarily decides in the first place about his contribution. The leader’s contribution is then reported publicly to the remaining group members who take their contribution decisions simultaneously. Our main findings are that leaders emerge in almost all rounds and that subjects who are identified as conditional cooperators are more likely to act as leaders than other types, e.g. free-riders or triangle-contributors. We also find that voluntary leaders, irrespective of their behavioral type, contribute always more than followers. However the presence of leadership does not prevent the decay that is commonly observed in linear public goods experiments. |
| Keywords: | Voluntary Contribution Mechanism,Leadership,Public Goods,Experimental Economics |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=&r=cbe |
| By: | Dalton, Patricio (Tilburg University, Center For Economic Research); Gonzalez Jimenez, Victor (Tilburg University, Center For Economic Research); Noussair, Charles (Tilburg University, Center For Economic Research) |
| Abstract: | We study whether poverty can induce affective states that decrease productivity. In a controlled laboratory setting, we find that subjects randomly assigned to a treatment, in which they view a video featuring individuals that live in extreme poverty, exhibit lower subsequent productivity compared to subjects assigned to a control treatment. Questionnaire responses, as well as facial recognition software, provide quantitative measures of the affective state evoked by the two treatments. Subjects exposed to images of poverty experience a more negative affective state than those in the control treatment. Further analyses show that individuals in a more positive emotional state exhibit less of a treatment effect. Also, those who exhibit greater attentiveness upon viewing the poverty video are less productive. The results are consistent with the notion that exposure to poverty can induce a psychological state in individuals that adversely affects productivity. |
| Keywords: | poverty; productivity; mood; emotions; limited attention; experiments |
| JEL: | D03 J24 C91 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=&r=cbe |
| By: | Tiziana Medda (University of Cagliari); Vittorio Pelligra (University of Cagliari); Tommaso Reggiani (LUMSA University) |
| Abstract: | One of the most common criticisms about the external validity of lab experiments in economics concerns the representativeness of participants usually considered in these studies. The ever-increasing number of experiments and the prevalent location of research centers in university campuses produced a peculiar category of subjects: Students with high level of laboratory experience built through repeated participations in experimental sessions. We investigate whether the experience accumulated in this way biases subjects’ behaviour in a set of simple games widely used to study social preferences (Dictator Game, Ultimatum Game, Trust Game, and Prisoner’s Dilemma Game). Our main finding shows that subjects with a high level of experience in lab experiments do not behave in a significantly different way from novices. |
| Keywords: | Experimental Methodology, External Validity, Experience, Lab Experiment |
| JEL: | D03 D83 C91 C92 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=&r=cbe |
| By: | Nobuyuki Hanaki (Université Côte d'Azur; GREDEG CNRS; Skema Business School; IUF); Alan Kirman (CAMS-EHESS; Aix Marseille University); Paul Pezanis-Christou (School of Economics, University of Adelaide) |
| Abstract: | The literature on learning in unknown environments emphasises reinforcing on actions which produce positive results. But, in some cases, success requires shifting from a currently successful actions to others. We examine, experimentally and theoretically in a very simple framework, how individuals initially learn by exploiting information from the pay-offs of actions taken but also from exploring new actions. We analyse if and how they learn that pay-offs are inter-temporally dependent. We then ran the same experiments but where individuals could observe the actions taken or the pay-offs obtained by others or both. Such observations improved pay-offs if one of the pair had learned to obtain the maximum pay-off. |
| Keywords: | Multi-armed bandit, reinforcement learning, eureka moment, pay-off patterns, observational learning |
| JEL: | D81 D83 |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=&r=cbe |
| By: | Sprenger, Julia |
| Abstract: | The current study examines individual decision making in the fi eld of personal finance. How do people arrive at a financial decision? A laboratory experiment investigates the way external information is integrated into the decision making process. The objective is to explore the link between financial literacy and information acquisition behavior. The results show that participants with low financial literacy generally try to compensate for their low decision-specific knowledge with a higher demand for external information but give up this strategy when the information environment is restricted to impersonal information. For female participants, low financial literacy increases demand for advice. These findings reveal that a low knowledge base in finance can translate into low engagement in information search which might further increase the risk of low decision quality. The study links these findings to the debate on consumer empowerment and discusses implications for the financial services industry. |
| Keywords: | financial literacy,information acquisition,decision making,experiment |
| JEL: | C91 G02 D83 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=&r=cbe |
| By: | Morone, Andrea; Temerario, Tiziana |
| Abstract: | The recent literature on individual and group choices over risk has led to different results. In some studies under unanimity, groups were found to be less risk averse than individuals, while those under majority did not highlight significant differences. However, both the types of studies impose the decision rule to the group. In the present work we elicited groups’ preference under risk using a consensus rule, i.e. groups are free to solve disagreement endogenously, just as in the real life. Results from our pairwise choices experiment shows that when group members are free to use any rule they want in order to reach unanimity, there is no statistical difference between individuals’ and groups’ risk aversion. |
| Keywords: | Risk; uncertainty; decision-making; group decision; lottery; experimental economics; experiment; |
| JEL: | C92 D81 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=&r=cbe |
| By: | Piergiuseppe Morone (University of Rome & Unitelma Sapienza, Italy); Pasquale Marcello Falcone (University of Ancona, Italy); Enrica Imbert (University of Rome & Unitelma Sapienza, Italy); Marcello Morone (Independent); Andrea Morone (Università degli Studi di Bari, Italy & LEE-Department of Economics, Universitat Jaume I, Castellón, Spain) |
| 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 L66 Q50 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=&r=cbe |