nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2017‒01‒08
eight papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Differences Attract: An Experimental Study of Focusing in Economic Choice By Andersson, Ola; Ingebretsen Carlson, Jim; Wengström, Erik
  2. Trust the Police? Self-Selection of Motivated Agents into the German Police Force By Friebel, Guido; Kosfeld, Michael; Thielmann, Gerd
  3. Reciprocity under moral wiggle room: is it a preference or a constraint? By Tobias Regner
  4. Prudence, emotional state, personality, and cognitive ability By Breaban, Adriana; Van De Kuilen, Gijs; Noussair, Charles N.
  5. The power of active choice: Field experimental evidence on repeated contribution decisions to a carbon offsetting program By Kesternich, Martin; Römer, Daniel; Flues, Florens
  6. Grind or Gamble? An Experimental Analysis of Effort and Spread Seeking in Contests By Andersson, Ola; Holm, Håkan J.; Wengström, Erik
  7. Locus of Control and Investment in Risky Assets By Salamanca, Nicolas; de Grip, Andries; Fouarge, Didier; Montizaan, Raymond
  8. Strategic Decisions: Behavioral Differences Between CEOs and Others By Holm, Håkan J.; Nee, Victor; Opper, Sonja

  1. By: Andersson, Ola (Research Institute of Industrial Economics (IFN)); Ingebretsen Carlson, Jim (Department of Economics); Wengström, Erik (Department of Economics)
    Abstract: Several recent behavioral models of choice build on the idea that decision makers put more weight on attributes in which the available options differ more. We test this assumption in a controlled experiment where such biases will generate choice inconsistencies. As hypothesized, we find that subjects make more inconsistent choices when we add new options that affect the maximal difference in attributes among the options. Our findings suggest that the decision maker's focus is drawn to attributes that stand out. We also test the focusing effect against theories of decoy effects (asymmetric dominance), but we find that the focus effect dominates.
    Keywords: Individual decision making; Focus; Attention; Salience; Decoy; Experiments
    JEL: C91 D03 D12
    Date: 2016–12–14
  2. By: Friebel, Guido (Goethe University Frankfurt); Kosfeld, Michael (Goethe University Frankfurt); Thielmann, Gerd (Deutsche Hochschule der Polizei)
    Abstract: We conduct experimental games with police applicants in Germany to investigate whether intrinsically motivated agents self-select into public service. Our focus is on trustworthiness and the willingness to enforce norms as key dimensions of intrinsic motivation in the police context. We find that police applicants are more trustworthy than non-applicants, i.e., they return higher shares as second-movers in a trust game. Furthermore, they invest more in rewards and punishment when they can enforce cooperation as a third party. Our results provide clear evidence for advantageous self-selection into the German police force, documenting an important mechanism by which the match between jobs and agents in public service can be improved.
    Keywords: self-selection, intrinsic motivation, public service, trustworthiness, norm enforcement
    JEL: C9 D64 D73 J45
    Date: 2016–12
  3. By: Tobias Regner (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We analyze reciprocal behavior when moral wiggle room exists. Dana et al. (2007) show that giving in a dictator game is only partly due to distributional preferences as the giving rate drops when situational excuses for selfish behavior are provided. Our binary trust game closely follows their design. Only a preceding stage (safe outside option vs. enter the game) is added in order to introduce reciprocity. We find significantly higher rates of selfish choices in our treatments that feature moral wiggle room manipulations (between 37.5% and 45%) in comparison to the baseline (6.25%). It seems that reciprocal behavior is not only due to people liking to reciprocate but also because they feel obliged to do so.
    Keywords: social preferences, pro-social behavior, experiments, reciprocity, moral wiggle room, self-image concerns, trust game
    JEL: C72 C91 D03 D80
    Date: 2017–01–02
  4. By: Breaban, Adriana (Tilburg University, School of Economics and Management); Van De Kuilen, Gijs (Tilburg University, School of Economics and Management); Noussair, Charles N. (Tilburg University, School of Economics and Management)
    Abstract: We report an experiment to consider the emotional correlates of prudent decision making. In the experiment, we present subjects with lotteries and measure their emotional response with facial recognition software. They then make binary choices between risky lotteries that distinguish prudent from imprudent individuals. They also perform tasks to measure their cognitive ability and a number of personality characteristics. We find that a more negative emotional state correlates with greater prudence. Higher cognitive ability and less conscientiousness is also associated with greater prudence.
    Date: 2016
  5. By: Kesternich, Martin; Römer, Daniel; Flues, Florens
    Abstract: We study the effect of a subtle change in the choice architecture on offsetting behavior. In a large-scale field experiment, we examine repeated voluntary contributions to a carbon offsetting program during the online purchase of long-distance bus tickets. In the control group, travelers had the option to offset their carbon emissions resulting from their bus trip, but they could also simply ignore the offer. In the treatment group, travelers were forced to actively choose whether to offset their carbon emissions or not. This "active choice" requirement immediately increased participation in the offsetting program by almost 50%. Investigating returning customers, we find that this treatment remains effective over time. We report evidence that some customers tend to keep avoiding active contribution decisions in subsequent booking decisions.
    Keywords: voluntary carbon offsets,randomized field experiment,default setting,choice architecture
    JEL: H41 C93 D03 L92
    Date: 2016
  6. By: Andersson, Ola (Research Institute of Industrial Economics (IFN)); Holm, Håkan J. (Department of Economics, Lund University); Wengström, Erik (Department of Economics, Lund University)
    Abstract: We conduct a contest experiment where participants can invest in increasing both the mean and the spread of an uncertain performance variable. Subjects are treated with different prize schemes and in accordance with theory we observe substantial investments in spread. We find that both types of investments can be controlled with a three level prize scheme. However, the control is imperfect and behavior is characterized by inertia. The winner-take-all prize scheme has many disadvantages including high spread and heterogeneous behavior. The scheme where only one loser is punished appears superior; it generates high mean, low spread and is most popular.
    Keywords: Contest; Risk; Spread; Incentives; Institutional Choice; Experiment
    JEL: C70 D02 D03 D80
    Date: 2016–12–30
  7. By: Salamanca, Nicolas (Melbourne Institute of Applied Economic and Social Research); de Grip, Andries (ROA, Maastricht University); Fouarge, Didier (ROA, Maastricht University); Montizaan, Raymond (ROA, Maastricht University)
    Abstract: We show that household heads with a strong internal economic locus of control are more likely to hold equity and hold a larger share of equity in their investment portfolio. This relation holds when we control for economic preferences and possible confounders such as financial literacy, overconfidence, optimism, trust, and other personality traits. We argue that this relation is driven by a link between internal economic locus of control and a lower perception of the risk of investing inequity. Those with a strong internal economic locus of control perceive less variance in equity, making these investments more attractive.
    Keywords: household portfolios, personality traits, risk and time preferences, risk perception
    JEL: G11 D14 D19
    Date: 2016–12
  8. By: Holm, Håkan J. (Department of Economics, Lund University); Nee, Victor (Department of Sociology, Cornell University); Opper, Sonja (Department of Economics, Lund University)
    Abstract: Differences in strategic decision making between CEOs and other people are interesting since CEOs make important economic decisions and impact values and norms in society. Our study combines a large stratified random sample of 199 CEOs of medium-size firms with a carefully selected control group of 200 comparable people. All subjects participated in three different incentivized strategic games — Prisoner’s Dilemma, Chicken, Battle-of-the-Sexes. We report substantial and robust differences in both behavior and beliefs between the CEOs and the control group. The CEOs are closer to the socially optimal strategy profile in all games. Hence, as a group the CEOs out-competes the control-group members and thereby receives higher average earnings, but not by being smarter (in the narrow “rationalistic” sense) or more selfish, but by being more cooperative and less aggressive.
    Keywords: Strategies; Efficiency; Nash equilibrium; Incentivized behavior; CEOs
    JEL: C70 C93 D22 L26
    Date: 2016–12–13

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