nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2016‒09‒25
three papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Concentration and Unpredictability of Forecasts in Artificial Investment Games By Xiu Chen; Fuhai Hong; Xiaojian Zhao
  2. An Experimental Approach to Comparing Similarity- and Guilt-Based Charitable Appeals By van Rijn, Jordan; Barham, Bradford; Sundaram-Stukel, Reka
  3. Preferences for Truth-Telling By Abeler, Johannes; Nosenzo, Daniele; Raymond, Collin

  1. By: Xiu Chen (Department of Economics, Hong Kong University of Science and Technology, Hong Kong); Fuhai Hong (Division of Economics, Nanyang Technological University, 14 Nanyang Drive, Singapore 637332.); Xiaojian Zhao (Department of Economics, Hong Kong University of Science and Technology, Hong Kong)
    Abstract: This paper investigates how people’s forecasts about financial market are shaped by the environment, in which people interact before making investment decisions. By recruiting 1385 subjects on WeChat, one of the largest social media, we conduct an online experiment of artificial investment games. Our treatments manipulate whether subjects can observe others’ forecasts and whether subjects engage in public or private investment decisions. We find that subjects’ forecasts significantly converge when shared, though in different directions across groups. We also observe a strong positive correlation between forecasts and investments, suggesting that an individual’s reported forecast is associated with his belief.
    Keywords: forecast, investment, online experiment
    JEL: C90 D83 D84 G11
    Date: 2016–08
  2. By: van Rijn, Jordan (University of Wisconsin); Barham, Bradford (University of Wisconsin); Sundaram-Stukel, Reka (University of Wisconsin)
    Abstract: Non-profit organizations face the challenge of eliciting pro-social behavior (e.g.: donations) amidst an increasingly competitive landscape. One traditional approach involves "guilt appeals", where the organization attempts to create negative emotions through story-telling, defining an explicit need, and emphasizing differences between potential donors and aid recipients. Recently, some non-profit organizations have used the opposite strategy and designed charitable appeals that focus on positive emotions and similarities between donors and recipients. This study uses a dictator game experiment with undergraduate students to test how a positive charitable appeal video that highlights similarities between donors and recipients affects donor behavior relative to a traditional guilt appeal video that highlights differences. We find that both feelings of guilt and similarity are positively associated with donation behavior; however, only the guilt-appeal treatment has a statistically significant positive effect on donations relative to the control. Yet, we cannot reject the null hypothesis of equal donations between similarity- and guilt-based treatments. We also find major gender differences in pro-social behavior: average male donations in the control were 40% higher than female donations; whereas, this outcome is almost completely reversed in the guilt appeal treatment, where females donated over twice as much as males. In other words, guilt appeals appear to work on women but have the opposite effect on men. This difference may be partially explained by males' aversion to feelings of manipulation, a feeling that seemed to discourage their donations but had no impact on female donations.
    Date: 2016–08
  3. By: Abeler, Johannes (University of Oxford); Nosenzo, Daniele (University of Nottingham); Raymond, Collin (Amherst College)
    Abstract: Private information is at the heart of many economic activities. For decades, economists have assumed that individuals are willing to misreport private information if this maximizes their material payoff. We combine data from 72 experimental studies in economics, psychology and sociology, and show that, in fact, people lie surprisingly little. We then formalize a wide range of potential explanations for the observed behavior, identify testable predictions that can distinguish between the models and conduct new experiments to do so. None of the most popular explanations suggested in the literature can explain the data. We show that only combining a preference for being honest with a preference for being seen as honest can organize the empirical evidence.
    Keywords: private information, honesty, truth-telling, lying, meta study
    JEL: D03 D82 H26 I13 J31
    Date: 2016–09

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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