nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2016‒10‒09
nine papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. The Richness of Giving: Charity Selection and Charitable Gifts in a Large Field Experiment By Daniel Lee; John List; Michael Price; Shachar Kariv
  2. Reducing crime and violence: Experimental evidence from cognitive behavioral therapy in Liberia By Christopher Blattman; Julian Jamison; Margaret Sheridan
  3. Being Poorer than the Rest of the Neighbourhood: Relative Deprivation and Problem Behaviour of Youth By Nieuwenhuis, Jaap; van Ham, Maarten; Yu, Rongqin; Branje, Susan; Meeus, Wim; Hooimeijer, Pieter
  4. How Do Beliefs about Skill Affect Risky Decisions? By Adrian Bruhin; Luis Santos-Pinto; David Staubli
  5. Does Relative Grading Help Male Students? Evidence from a Field Experiment in the Classroom By Eszter Czibor; Mirjam van Praag; Randolph Sloof; Sander Onderstal
  6. Teams contribute more and punish less By Auerswald, Heike; Schmidt, Carsten; Thum, Marcel; Torsvik, Gaute
  7. The Solidarity Motive By Christoph Engel
  8. Imagined vs. Actual "Others": An Experiment on Interethnic Giving Afghanistan By Luke Condra; Mohammad Isaqzadeh; Sera Linardi
  9. Overconfidence of Students and Managers - Comparative Analysis By Elżbieta Wrońska-Bukalska

  1. By: Daniel Lee; John List; Michael Price; Shachar Kariv
    Abstract: We build on previous work in the charitable giving literature by examining not only how much subjects give to charity, but also which charities subjects prefer. We operationalize this choice in an artefactual field experiment with a representative sample of respondents. We then use these data to structurally model motives for giving. The novelty of this design allows us to ask several interesting questions regarding the choices one undertakes when deciding both whether and how much to give to charity. Further, we ask these questions in the context of a standard utility framework. Given the unique set up of this experiment, we also explore how these distributional preference parameters differ by charity choice and from what we have observed in the past. We find that there is more variation within demographics and charity types than across distributions.
    Date: 2016
  2. By: Christopher Blattman; Julian Jamison; Margaret Sheridan
    Abstract: We show that a number of "non cognitive" skills and preferences, including patience and identity, are malleable in adults, and that investments in them reduce crime and violence. We recruited criminally-engaged men and randomized half to eight weeks of cognitive behavioral therapy designed to foster self-regulation, patience, and a noncriminal identity and lifestyle. We also randomized $200 grants. Cash alone and therapy alone initially reduced crime and violence, but effects dissipated over time. When cash followed therapy, crime and violence decreased dramatically for at least a year. We hypothesize that cash reinforced therapy's impacts by prolonging learning-by-doing, lifestyle changes, and self-investment.
    Date: 2016
  3. By: Nieuwenhuis, Jaap (Delft University of Technology); van Ham, Maarten (Delft University of Technology); Yu, Rongqin (University of Oxford); Branje, Susan (Utrecht University); Meeus, Wim (Utrecht University); Hooimeijer, Pieter (Utrecht University)
    Abstract: According to the neighbourhood effects hypothesis, there is a negative relation between neighbourhood wealth and youths' problem behaviour. It is often assumed that there are more problems in deprived neighbourhoods, but there are also reports of higher rates of behavioural problems in more affluent neighbourhoods. Much of this literature does not take into account relative wealth. Our central question was whether the economic position of adolescents' families relative to the neighbourhood in which they lived, was related to adolescents' internalising and externalising problem behaviour. We used longitudinal data for youths between 12-21 years of age, combined with population register data. We employ between-within models to account for time-invariant confounders, including parental background characteristics. Our findings show that for adolescents, moving to a more affluent neighbourhood was related to increased levels of depression, social phobia, aggression, and conflict with father and mother. This could be indirect evidence for the relative deprivation mechanism, but we could not confirm this, and we did not find any gender differences. The results do suggest that future research should further investigate the role of individuals' relative position in their neighbourhood in order not to overgeneralise neighbourhood effects and to find out for whom neighbourhoods matter.
    Keywords: neighbourhood effects, externalising problems, internalising problems, relative deprivation, adolescents, residential mobility
    JEL: I30 R23
    Date: 2016–09
  4. By: Adrian Bruhin; Luis Santos-Pinto; David Staubli
    Abstract: Beliefs about relative skill matter for risky decisions such as career choices, market entry, and financial investments. Yet in most laboratory experiments risk is exogenously given and beliefs about relative skill play no role. We use a laboratory experiment free of strategy confounds to isolate the impact of beliefs about relative skill on risky choices. We find that low (high) skill individuals are more (less) willing to take risks on gambles with probabilities depending on relative skill than on gambles with exogenously given probabilities. Additionally, the correlation between stated and revealed beliefs -- beliefs estimated from choices -- is only moderate, suggesting that relying exclusively on stated beliefs may be misleading.
    Keywords: Individual risk taking behavior, Self-confidence, Laboratory experiment
    JEL: C91 D81
    Date: 2016–10
  5. By: Eszter Czibor; Mirjam van Praag; Randolph Sloof; Sander Onderstal
    Abstract: We conduct a framed field experiment in a Dutch university to compare student effort provision and exam performance under the two most prevalent evaluation practices: absolute (criterion-referenced) and relative (norm-referenced) grading. Based on the empirical stylized fact of gender differences in competitiveness we hypothesize that the rank-order tournament created by relative grading will increase male, but not female, performance. Contrary to our expectations, we find no impact of competitive grading on preparation behavior or exam scores among either gender. Our result may be attributed to the low value students in our sample attach to academic excellence.
    Date: 2016
  6. By: Auerswald, Heike; Schmidt, Carsten; Thum, Marcel; Torsvik, Gaute
    Abstract: Challenges in global politics like climate change, maritime piracy and fighting highly contagious diseases concern global public goods. The related policy decisions are mostly made by teams. In contrast, economic models of global public goods typically assume a single rational decision-maker. We use a laboratory experiment to compare team decisions to decisions of individuals in a finitely repeated public good game with and without a costly punishment option. Teams of three participants coordinate on decisions either by majority or unanimity rule. We find that in absence of a punishment option teams contribute more to the public good than individuals. With a punishment option subsequently to the contribution decision team treatments exhibit a less frequent use of anti-social punishment and lower levels of social as well as anti-social punishment. Extreme preferences for punishment are eliminated by the majority decision rule. Overall, team decisions are closer to the social optimum and teams yield higher net payoffs when compared to individuals.
    Keywords: Public Good,Group Decision-Making,Punishment,Experiment,Öffentliche Güter,Entscheidungsverhalten in Gruppen,Bestrafung,Experiment
    JEL: C72 C92 H41
    Date: 2016
  7. By: Christoph Engel (Max Planck Institute for Research on Collective Goods)
    Abstract: For decades, experimental economics has been very interested in behavior that could be characterized as practicing solidarity (although the term is rarely used). Solidarity is a key concept in Catholic Social Teaching. This paper builds a bridge between these two endeavors that, thus far, had little contact with each other. Catholic Social Teaching is essentially normative. People are informed what they should do if they are good Christians. Experimental Economics is descriptive. Experimenters want to learn how much solidarity experimental participants exhibit when this is costly. But from a Catholic perspective it is interesting how strongly their norms are reflected in actual behavior. The many distinctions uncovered by behavioral economics may also help refine Catholic thinking. And behavioral economics is confronted with new questions, in particular regarding deontological motives.
    Keywords: Solidarity, Dictator Game, Stealing Game, Public Good Game, Social Preferences, Deontological Motives
    JEL: A12 A13 C91 D03 D63 D64 Z12
    Date: 2016–10
  8. By: Luke Condra; Mohammad Isaqzadeh; Sera Linardi
    Abstract: Does willingness to aid "others" change when in their physical presence? We argue that studies cueing non-coethnics through names and photos may underestimate discrimination resulting from actual interethnic interaction. In an experiment in Kabul, Afghanistan, Dari-speaking day-laborers contribute their earnings to a hospital under one of three randomly-assigned experimental conditions. In In-group, the hospital is in a Dari-speaking province; in Out-group-Abstract and Out-group-Real, it is in a Pashto-speaking (Pashtun) province. While subjects in In-group and Outgroup- Abstract wait for the experiment with only Dari-speakers present, subjects in Out-group-Real wait among both Dari-speakers and Pashto-speakers. When Pashtuns are absent, the findings accord with other experiments that find little to no out-group discrimination. However, the physical presence of Pashtuns (Out-group-Real) decreases contributions by 25%. Consistent with the threat hypothesis, contributions decrease the longer Dari-speakers wait with Pashtuns, though subjects' youth and ability to speak Pashto mediate this effect.
    Date: 2016
  9. By: Elżbieta Wrońska-Bukalska (Maria Curie-Skłodowska University)
    Abstract: Overconfidence is one of the biases and fallacies that affect cognitive process. But overconfidence is one that is most pervasive. The concept of overconfidence comes from cognitive psychology and is widely applied in behavioral finances. But so far the adoption of overconfidence effect is present when explaining the investors’ decisions. There are still few attempts that aim to explain managers’ behavior with cognitive biases and fallacies. Existing research show that there is relation between manager’s overconfidence and financial decisions. The main problem of all these research is that each one of them applies different overconfidence measures. This paper is to identify the overconfidence phenomena and compare it between the group of managers and the group of managers-to-be (students of finance and accounting). To conduct it, the original tool and measure is proposed and later on verified in order to make it possible for common use of it (not only in psychology or only in finance). The main research hypothesis assumes that the frequency and the level of managers’ overconfidence is the same as frequency and the level of students’ (managers-to-be) overconfidence. The main method applied was to construct the tool to identify and measure the overconfidence. After having identified overconfidence, the U Mann Whitney significance test was applied to compare the overconfidence between the two groups. The result shows that there is statistically significant difference between overconfidence of the managers and students. But the main reason of this difference is the structure of the groups that were the subject of the analysis. Among the students the majority are women, while among the managers the majority are men. This supports the results of previous research showing that the men’s overconfidence is higher than women’s. At the same time it proves that the applied tool and measure of overconfidence is proper and might be used for different groups. After verifying the tool of overconfidence and identifying the overconfidence it might be reasonable to try to find relation between overconfidence and results of human activity (learning results or financial results of running business). Understanding the relation between managers’ overconfidence and financial results allows to apply proper methods of recruitments and supervising.Originality of the paper lies in the applied tool of identifying and measuring overconfidence. The subject and the findings of this paper are important for theory and practice: it helps to shed light on financial management by understanding the managers’ behavior.
    Keywords: behavioral finance, overconfidence,
    JEL: G02 G39 L26

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