nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2016‒09‒04
thirteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Resolving Ambiguity as a Public Good: Experimental Evidence from Guyana By Kaywana Raeburn; Jim Engle-Warnick; Sonia Laszlo
  2. Are groups 'less behavioral'? The case of anchoring By Meub, Lukas; Proeger, Till
  3. Field Experiments on Anchoring of Economic Valuations By Craig Landry; John List; Jonathan Alevy
  4. Loss Averse Agents and Lenient Supervisors in Performance Appraisal By Lucia Marchegiani; Tommaso Reggiani; Matteo Rizzolli
  5. Determinants of Food Consumption Choices: Experimental Evidence from St. Kitts By Kaywana Raeburn; Jim Engle-Warnick; Sonia Laszlo
  6. On the Origins to Dishonesty: from Parents to Children By Anya Samek; Daniel Houser; Joachim Winter; John List; Marco Piovesan
  7. Lost in Transition: The Influence of Locus of Control on Delaying Educational Decisions By Katharina Jaik; Stefan C. Wolter
  8. Trust, ambiguity, and financial decision-making By Jim Engle-Warnick; Diego Pulido; Marine de Montaignac
  9. A Comparison of Survey and Incentivized-Based Risk Attitude Elicitation By Jim Engle-Warnick; Diego Pulido; Marine de Montaignac
  10. The Fight-or-Flight Response to the Joneses By Barnett, Richard; Bhattacharya, Joydeep; Bunzel, Helle
  11. Learning-by-Doing in an Ambiguous Environment By Jim Engle-Warnick; Sonia Laszlo
  12. Beliefs and Utility: Experimental Evidence on Preferences for Information By Falk, Armin; Zimmermann, Florian
  13. The Rapid Evolution of Homo Economicus: Brief Exposure to Neoclassical Assumptions Increases Self-Interested Behavior By Ifcher, John; Zarghamee, Homa

  1. By: Kaywana Raeburn; Jim Engle-Warnick; Sonia Laszlo
    Abstract: We present a decision-making experiment, conducted in the field, that explores the extent to which reduction of ambiguity can be a public good. We find evidence that people with a preference to avoid ambiguity contribute to the public good. We find that risk averse people free-ride. Cheap talk erases the predictability of who free rides, but does not affect the overall public good provision, either in a positive or a negative direction. Finally, we find that people draw appropriate inference from the evidence that the public good provides. We relate our findings to the issue of new technology adoption.
    Keywords: Ambiguity, Public Good, Technology Choice,
    JEL: C90 O33 Q16
    Date: 2016–08–24
  2. By: Meub, Lukas; Proeger, Till
    Abstract: Economic small group research points to groups as more rational decision-makers in numerous economic situations. However, no attempts have been made to investigate whether groups are affected similarly by behavioral biases that are pervasive for individuals. If groups were also able to more effectively avoid these biases, the relevance of biases in actual economic contexts dominated by group decision-making might be questioned. We consider the case of anchoring as a prime example of a well-established, robust bias. Individual and group biasedness in three economically relevant domains are compared: factual knowledge, probability estimates and price valuations. In contrast to previous anchoring studies, we find groups to successfully reduce, albeit not eliminate, anchoring in the factual knowledge domain. For the other two domains, groups and individuals are equally biased by external anchors. Group cooperation thus reduces biases for predominantly intellective tasks only, while no such reduction is achieved when judgmental aspects are involved.
    Keywords: anchoring bias,group decision-making,heuristics and biases,incentives,laboratory experiment
    JEL: C91 C92 D8
    Date: 2016
  3. By: Craig Landry; John List; Jonathan Alevy
    Abstract: A pillar of behavioral research is that preferences are constructed during the process of choice. A prominent finding is that uninformative numerical "anchors" influence judgment and valuation. It remains unclear whether such processes influence market equilibria. We conduct two experiments that extend the study of anchoring to field settings. The first experiment produces evidence that some consumers' valuations can be anchored in novel situations; there is no evidence that experienced agents are influenced by anchors. The second experiment finds that anchors have only transient effects on market outcomes that converge to equilibrium predictions after a few market periods.
    Date: 2015
  4. By: Lucia Marchegiani (University of Rome 3); Tommaso Reggiani (LUMSA University); Matteo Rizzolli (LUMSA University)
    Abstract: A consistent empirical literature shows that in many organizations supervisors systematically overrate their employees’ performance. Such leniency bias is at odds with the standard principalagent model and has been explained with causes that range from social interactions to fairness concerns and to collusive behavior between the supervisor and the agent. We show that the principal-agent model, extended to consider loss-aversion and reference-dependent preferences, predicts that the leniency bias is comparatively less detrimental to effort provision than the severity bias. We test this prediction with a laboratory experiment where we demonstrate that failing to reward deserving agents is significantly more detrimental than rewarding undeserving agents. This offers a novel explanation as to why supervisors tend to be lenient in their appraisals.
    Keywords: Performance appraisal, TypeI and TypeII errors, Leniency bias, Severity bias, Economic experiment, Loss aversion, Reference-dependent preferences.
    JEL: C91 M50 J50
    Date: 2016–07
  5. By: Kaywana Raeburn; Jim Engle-Warnick; Sonia Laszlo
    Abstract: In this paper, we use economics experiment laboratory intruments to measure time, risk and ambiguity preferences, which we correlate with food choice factors (items that influence food choice) and actual food consumption measures. We find that present bias, and to a lesser extent risk preferences, are significantly correlated with the food choice factors of health, natural content, and weight control. We find these correlations to be less consistent with actual reported food chocies. This finding indicates a discrepancy between what individuals ideally would like to eat and what they actually consume. This finding suggests scope for intervention to bring the two into alignment.
    Keywords: Field Experiment,
    Date: 2016–08–24
  6. By: Anya Samek; Daniel Houser; Joachim Winter; John List; Marco Piovesan
    Abstract: Acts of dishonesty permeate life. Understanding their origins, and what mechanisms help to attenuate such acts is an under explored area of research. This study takes an economics approach to explore the propensity of individuals to act dishonestly across different economic environments. We begin by developing a simple model that highlights the channels through which one can increase or decrease dishonest acts. We lend empirical insights into this model by using an experiment that includes both parents and their young children as subjects. We find that the highest level of dishonesty occurs in settings where the parent acts alone and the dishonest act benefits the child rather than the parent. In this spirit, there is also an interesting effect of children on parents' behavior: in the child's presence, parents act more honestly, but there are gender differences. Parents act more dishonestly in front of sons than daughters. This finding has the potential of shedding light on the origins of the widely documented gender differences in cheating behavior observed among adults.
    Date: 2015
  7. By: Katharina Jaik (Department of Business Administration, University of Zurich); Stefan C. Wolter (University of Bern; Swiss Coordination Center for Research in Education; CESifo and IZA)
    Abstract: The transition from compulsory schooling to upper-secondary education is a crucial and frequently difficult step in the educational career of young people. In this study, we analyze the impact of one non-cognitive skill, locus of control, on the intention and the decision to delay the transition into post-compulsory education in Switzerland. We find that locus of control, measured at ages 13–14, has a significant impact on the intention to delay the transition into upper-secondary education. Furthermore, we find that the intention to delay the transition is strongly correlated with the actual delay, measured one and a half years after the intention. Finally, students with the initial intention to delay but successfully continuing into upper-secondary education show a stronger internal locus of control than comparable students who do delay their transition.
    Keywords: Locus of control, school-to-school transition
    JEL: I21 J24
    Date: 2016–08
  8. By: Jim Engle-Warnick; Diego Pulido; Marine de Montaignac
    Abstract: This paper reports results from an on-line economics experiment with head of household participants that explores the connection between trust and investment behavior. We show that trust is correlated with both the degree to which an investor makes decisions independently and the willingness to invest in an ambiguous asset. Our experiment is the first to suggest a link between trust, ambiguity, and investor independence.
    Keywords: trust, ambiguity, investment decisions, portfolio theory, artefactual field experiment,
    JEL: C91 C93 G02 G11
    Date: 2016–08–24
  9. By: Jim Engle-Warnick; Diego Pulido; Marine de Montaignac
    Abstract: This paper reports results from an on-line economics experiment with heads of households that explores the link between a sample of survey questions on the Canadian Know-Your-Client survey form and several incentivized laboratory instruments, both aimed at measuring risk attitudes and loss aversion. We find that the instruments significantly predict responses to risk questions, with the exception of a question that includes a time dimension. By contrast, the loss aversion instruments do not predict responses to loss questions. Indeed, if anything, risk instruments predict the majority of the loss questions. We conclude that the survey appears to be successful in eliciting attitudes towards risk; that the survey appears to be less successful with regard to loss aversion; and that it may be useful to include survey questions about higher order risk preferences on the form.
    Keywords: Risk preferences, Risk preference elicitation, Prudence, Temperance, Ambiguity, Investing behavior,
    JEL: G02 D03 G11 C90
    Date: 2016–08–23
  10. By: Barnett, Richard (School of Economics Drexel University); Bhattacharya, Joydeep (Department of Economics Iowa State University); Bunzel, Helle (Department of Economics Iowa State University)
    Abstract: This paper studies the fight-or-flight ambivalence people show towards the success of the proverbial Joneses. If an agent cares about leisure and his consumption relative to a benchmark set by the Joneses, his preferences display the keeping-up-with-the-Joneses (KUJ) property if an increase in the benchmark urges him to substitute away from leisure into work, allowing him to finance more consumption; the opposite is labeled running-away-from-the-Joneses (RAJ). The long literature, thus far, assumes these definitions apply globally: if any agent’s preferences display KUJ (or RAJ), everyone’s will. In an otherwise-standard environment with endowment heterogeneity, we showcase the possibility that these definitions may apply locally but not globally. This means heterogeneous agents sharing the same underlying preferences may respond very differently to the Joneses: while some may choose to keep up, others, possibly their close neighbors, may choose to run away. Depending on the benchmark, the same agent may exhibit KUJ and RAJ on different parts of the consumption space. The analysis is novel because a) such fight-or-flight conflict does not arise in existing models of consumption externalities, b) it arises endogenously here, and c) it exposes a deep connection between the fight-or flight-response and wealth-dependent risk aversion of agents and explains the behavior in terms of textbook income/substitution effects.
    Keywords: leisure distribution; rat race; wealth-dependent risk aversion; keeping up with the Joneses; income inequality
    JEL: E20 I31 J22
    Date: 2016–08–31
  11. By: Jim Engle-Warnick; Sonia Laszlo
    Abstract: We apply an instrument to measure ambiguity preferences in an experiment and show that revealed ambiguity preferences, but not risk preferences, predict behavior in a separate game that involves exploitation vs. exploration of a maximization problem. We provide direct evidence of ambiguity preferences acting on decision making separately from risk preferences, and advance knowledge regarding how ambiguity preferences operate on decision-making.
    Keywords: Learning-by-doing; Technology choice; Risk preferences; Risk measurement instruments; Ambiguity Aversion; Experimental economics,
    Date: 2016–08–24
  12. By: Falk, Armin (University of Bonn); Zimmermann, Florian (University of Zurich)
    Abstract: Beliefs are a central determinant of behavior. Recent models assume that beliefs about or the anticipation of future consumption have direct utility-consequences. This gives rise to informational preferences, i.e., preferences over the timing and structure of information. Using a novel and purposefully simple set-up, we experimentally analyze preferences for information along four dimensions. We find evidence that the majority of subjects prefers receiving information sooner. This preference, however, is not uniform but depends on context. When the environment allows subjects to not focus attention on (negative) consumption events, later information becomes more attractive. We also identify an aversion towards piecemeal information. Variations in prior distributions do not seem to affect information preferences.
    Keywords: beliefs, anticipatory utility, news utility, information preferences, attention, reference-dependent preferences, experiments
    JEL: C91 D03 D12 D83
    Date: 2016–08
  13. By: Ifcher, John (Santa Clara University); Zarghamee, Homa (Barnard College)
    Abstract: Economics students have been shown to exhibit more selfishness than other students. Because the literature identifies the impact of long-term exposure to economics instruction (e.g., taking a course), it cannot isolate the specific course content responsible; nor can selection, peer effects, or other confounds be properly controlled for. In a laboratory experiment, we use a within- and across-subject design to identify the impact of brief, randomly-assigned economics lessons on behavior in games often used to measure selfishness: the ultimatum game (UG), dictator game (DG), prisoner's dilemma (PD), and public-goods game (PGG). We find that a brief lesson that includes the assumptions of self-interest and strategic considerations moves behavior toward traditional economic rationality in UG, PD, and DG. Despite entering the study with higher levels of selfishness than others, subjects with prior exposure to economics instruction have similar training effects. We show that the lesson reduces efficiency and increases inequity in the UG. The results demonstrate that even brief exposure to commonplace neoclassical economics assumptions measurably moves behavior toward self-interest.
    Keywords: economics instruction, self-interest, game theory, laboratory experiment, social preferences
    JEL: A2 D6 C9 C7 A1
    Date: 2016–08

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