nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2016‒10‒23
twelve papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Nudging Backward Induction By William Neilson; Michael Price; Mikhael Shor
  2. Mentalism Versus Behaviourism in Economics: A Philosophy-of-Science Perspective By Franz Dietrich; Christian List
  3. An experiment on temptation and attitude towards paternalism By Lukasz Wozny; Michal Krawczyk
  4. Seeking risk or answering smart? Framing in elementary schools By Wagner, Valentin
  5. Financial incentives and academic performance: An experimental study By Noemí Herranz-Zarzoso; Gerardo Sabater-Grande
  6. Leveraging the Honor Code: Public Goods Contributions under Oath By Jérôme Hergueux; Nicolas Jacquemet; Stéphane Luchini; Jason Shogren
  7. Salience, Selective Attention and Learning with Information-Overload By Inga Jonaityte
  8. Miscommunication in an investment game with one-way messages By Di Bartolomeo Giovanni; Papa Stefano
  9. Antisocial Attitudes, Gender and Moral Judgments: An Experimental Study By Juergen Bracht; Adam Zylbersztejn
  10. Nice to You, Nicer to Me: Does Self-Serving Generosity Diminish the Reciprocal Response? By Woods, Daniel; Servátka, Maroš
  11. Pleasing or Fighting Future Tastes? Projection Bias versus Conflict of Selves By Sebastian Krügel; Matthias Uhl
  12. Counter Intuitive Learning: An Exploratory Study By Nobuyuki Hanaki; Alan Kirman; Paul Pezanis-Christou

  1. By: William Neilson (University of Tennessee, Knoxville); Michael Price (Georgia State University); Mikhael Shor (University of Connecticut)
    Abstract: A growing literature shows that interim incentives can help people achieve favorable long-term outcomes. We design a laboratory experiment to explore how interim incentives impact learning backward induction using a race game: Subjects play a simple game against a computer in which winning requires a sequence of correct moves. Our data highlight a perverse effect of incentives. Interim rewards inserted along the optimal path—nudges—help subjects learn patterns but crowd-out the skills required to solve a related game. Interim payments off the optimal path—teasers —can either help or hurt learning. JEL Classification: C91, D03, D60 Key words:
    Date: 2016–10
  2. By: Franz Dietrich (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Christian List (LSE - London School of Economics and Political Science)
    Abstract: Behaviourism is the view that preferences, beliefs, and other mental states in social-scientific theories are nothing but constructs re-describing people's behaviour. Mentalism is the view that they capture real phenomena, on a par with the unobservables in science, such as electrons and electromagnetic fields. While behaviourism has gone out of fashion in psychology, it remains influential in economics, especially in 'revealed preference' theory. We defend mentalism in economics, construed as a positive science, and show that it fits best scientific practice. We distinguish mentalism from, and reject, the radical neuroeconomic view that behaviour should be explained in terms of brain processes, as distinct from mental states.
    Keywords: decision theory,scientific realism,Mentalism,behaviourism,revealed preference
    Date: 2016–04–21
  3. By: Lukasz Wozny; Michal Krawczyk
    Abstract: In this project we investigate experimentally the link between self-control and attitude towards paternalism in a principal-agent framework. We invite our subjects for a free lunch: a burger or a turkey. We verify in a pre-test that the burger is considered (much) more tasty and tempting, while the turkey is seen as healthier. In the experiment proper we observe incentivized choices of four types: what menus (must eat burger; must eat turkey; your choice: burger or turkey) subjects assign to another; how they reward each of these menu choices yet another participant made for them; which of the two dishes they pick on the spot (if given the choice); whether they want to pre-commit to a choice of dish for a future session. Similarly to some recent experimental results we find a significant fraction of subjects willing to self-commit. We also observe non-trivial sets of individuals who reward highly a restricted choice and paternalistically restrict other's choice. Moreover, there is a strong link between these three tendencies, suggesting a common thread underlying the use of commitment devices and paternalistic behavior as well as approval thereof in environments involving temptations. We propose a simple theoretical framework organizing the results.
    Keywords: temptation, time consistency, self control, paternalism, experiment
    JEL: C91 D03
    Date: 2016–10
  4. By: Wagner, Valentin
    Abstract: This paper investigates how framing manipulations affect the quantity and quality of decisions. In a field experiment in elementary schools, 1.377 pupils are randomly assigned to one of three conditions in a multiple-choice test: (i) gain frame (Control), (ii) loss frame (Loss) and (iii) gain frame with a downward shift of the point scale (Negative). On average, pupils in both treatment groups answer significantly more questions correctly compared to the "traditional grading". This increase is driven by two different mechanisms. While pupils in the Loss Treatment increase significantly the quantity of answered questions - seek more risk - pupils in the Negative Treatment seem to increase the quality of answers - answer more accurately. Moreover, differentiating pupils by their initial ability shows that a downward shift of the point scale is superior to loss framing. High-performers increase performance in both treatment groups but motivation is significantly crowded out for low-performers only in the Loss Treatment.
    Keywords: behavioral decision making,quantity and quality of decisions,framing,loss aversion,field experiment,motivation,education
    JEL: D03 I20 D80 C93 M54
    Date: 2016
  5. By: Noemí Herranz-Zarzoso (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain); Gerardo Sabater-Grande (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: This paper analyzes the effect of financial incentives on academic performance by means of a randomized field experiment. Using two alternative payment mechanisms we implement two experimental treatments designed to motivate students depending on their absolute or relative academic performance. Subjects, recruited among students from Microeconomics, were split in two groups depending on whether they had a failed background in the aforementioned subject (returning students) or not (new students). New students were informed that they would receive a reward depending on their bet (the grade they thought would achieve) and the real grade obtained. In the case of the returning students, the reward was calculated taking into account the bet, the obtained real grade and their improvement with respect to previous semesters. In the first treatment students were rewarded according to a piece rate system whereas in the second one we established two rankings (one for new students and another one for returning students) classifying them depending on their academic performance. In both treatments we find that the implemented incentives are effective to increase the average of grades for both types of students (new and returning), but the piece rate mechanism is more powerful to motivate a higher number of students.
    Keywords: Betting for grades, incentives, academic performance, piece rate mechanism, rank-order tournament
    JEL: C93 D03 I21 J24
    Date: 2016
  6. By: Jérôme Hergueux (ETH Zurich); Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Stéphane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales - Université Paul Cézanne - Aix-Marseille 3 - Université de la Méditerranée - Aix-Marseille 2 - CNRS - Centre National de la Recherche Scientifique); Jason Shogren (Departement of Economics and Finance, University of Wyoming - UW - University of Wyoming)
    Abstract: Real economic commitment (or the lack of it) of others affects a person's preferences to cooperate. But what if the commitment of others cannot be observed ex ante? Herein we examine how a classic non-monetary institution– a solemn oath of honesty –creates economic commitment within the public goods game. Commitment-through-the-oath asks people to hold themselves to a higher standard of integrity. Our results suggest the oath can increase cooperation (by 33%)– but the oath does not change preferences for cooperation. Rather people react quicker and cooperate, taking less time to ponder on the strategic free riding behavior.
    Keywords: WorkingPublic good game,Social Preference,Truth Keywords: Public good game
    Date: 2016–10
  7. By: Inga Jonaityte (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: A fundamental question is how firms adapt to environments that present multiple dimensions. Generally, the number of dimensions may exceed the limits of human attention. Subsequently, as organizations try to adapt to such environments they may be constrained to consider only a few dimensions. In fact, selection of dimensions is a process that may be driven by multiple factors. Especially relevant are the validity, the predictive weight of dimensions, and the perceptual salience of features through which the competing dimensions are perceived. When these aspects diverge, their conflict will affect the learning process. In this paper, we explore how salience and validity interact in the process where agents have to learn to evaluate a stream of task inputs with the number of dimensions that overloads the average short-term memory capacity. We hypothesize that the interplay between the cue salience and the validity affects the ability to assess accurately the cue-outcome relationship, detect changes in task environments, and adapt decision-making strategies accordingly. To test our hypothesis, we conducted three behavioral experiments and then proposed a classification model that accounts for the observed behavioral outcome. We consider a set of sequential binary classification decision tasks to be completed by a participant. We vary whether the difficulty of the task, also vary whether the performance of another is observable to the participants in the experiment. The behavioral data analysis highlight that cue salience is instrumental in driving learning. The simulation results illustrate that our classification model can indeed replicate the human participant data. The best fit was obtained when the single-cue salience bias was present. This suggests that humans tend to favor decision-making strategies that arise from focusing on a single, yet the most salient, cue when assessing cue-outcome relationship in multi-cue environments. Ours is perhaps the first study to demonstrate the effect of salience and validity interaction on choice and learning in multi-dimensional and changing environments in the context of organizational adaptation. Finally, we discuss variations in our linear classification model and suggest extensions of our experiment..
    Keywords: bounded rationality, learning, decision making, information processing, salience bias, complex environments, confidence, competitive incentives, experiment.
    JEL: D81 D83 C91
    Date: 2016–10
  8. By: Di Bartolomeo Giovanni; Papa Stefano
    Abstract: This paper aims to study the effects of free-form messages (cheap talk) in an investment game as Berg et al. (1995). We guess that messages matter, but they may not affect the outcomes on average because different outcomes of communication can be systematically misunderstood generating different effects that offset each other. Considering a non-binary choice game, where misunderstandings are more likely to be observed, we test our intuition in two steps. First, we classify messages by their contents and then we verify their impact on participants’ behavior accordingly to their kind.
    Keywords: Trust, reciprocity, promises, requests, empty talk
    JEL: D03 C91 D83
    Date: 2016–07
  9. By: Juergen Bracht (University of Aberdeen Business School, Department of Economics, Edward Wright Building, Dunbar Street, Aberdeen, AB24 3QY, Scotland); Adam Zylbersztejn (Univ Lyon, Université Lyon 2, GATE L-SE UMR 5824, F-69342 Lyon, France)
    Abstract: We study questionnaire responses to moral dilemmas hypothetical situations in which sacrificing one life may save many other lives. We demonstrate gender differences in moral judgments: male participants are more supportive of the sacrifice than female participants. We investigate the importance of the previously studied source of the endorsement of the sacrfice: antisocial attitudes. First, we elicit the individual proneness to spiteful behavior using an incentivized experimental game. We demonstrate that spitefulness can be sizable but it is not associated with gender. Second, we find that gender is associated with moral judgments even when we account for individual differences in antisocial attitudes. Our results suggest that the performance of many institutions (related to the distribution of wealth or punishment, for instance) may be affected by the gender of the decision-makers.
    Keywords: Gender, moral dilemmas, moral judgments, spite, antisocial attitudes, experiment
    JEL: C91 D03 D63
    Date: 2016
  10. By: Woods, Daniel; Servátka, Maroš
    Abstract: We propose a conjecture that self-serving but generous actions diminish the positively reciprocal response, compared to selfless generous actions. We embed our conjecture in Cox, Friedman & Sadiraj’s (2008) model of Revealed Altruism. According to Revealed Altruism reciprocal responses are influenced by a ‘more generous than’ (MGT) ordering. The MGT ordering is defined by two conditions. Condition A states that an action that increases one’s opportunity set is MGT an action that decreases, does not change, or increases the opportunity set by less. Condition B states that the action cannot increase the ‘giver’s’ opportunity set by more than the ‘recipient’s’ opportunity set. We focus on Condition B, and classify actions that satisfy Condition B as selfless generous actions, and actions that violate Condition B as self-serving generous actions. We hypothesize that selfless generous actions are MGT self-serving generous actions, and that self-serving generous actions will result in a diminished reciprocal response. We test this conjecture using two novel experimental designs and find evidence that subjects perceive self-serving generous actions as being less generous than selfless generous actions, but no empirical support for our conjecture on the diminished reciprocal response, suggesting a refinement for the MGT ordering that does not include Condition B.
    Keywords: Reciprocity, generosity, self-serving, experiment, Revealed Altruism, lost wallet game, investment game
    JEL: C7 C72 C9 C91
    Date: 2016–10–14
  11. By: Sebastian Krügel (University of Giessen); Matthias Uhl (University of Munich)
    Abstract: Many real life choices concern consumption in future periods. Previous studies apparently demonstrate that people systematically mispredict future tastes in such situations. This evidence, however, is also consistent with the idea that people understand, but do not approve of their future tastes. To disentangle both approaches, we conducted a framed field experiment with commitment option. In our experiment, commitment was not a device against weak will. It was a judgment which a planner imposed on another planner. The results suggest that people do not always aim to please future tastes. People may sometimes experience a con ict between two far-sighted selves.
    Keywords: State-dependent preferences, Empathy gap, Multiple selves, Commitment, Intrapersonal confl ict
    JEL: C93 D03 D90
    Date: 2016
  12. By: Nobuyuki Hanaki (Universite C^ote d'Azur, SKEMA, CNRS, GREDEG, and IUF.); Alan Kirman (CAMS, EHESS, and 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

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