nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2017‒01‒22
nine papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Grind or Gamble? An Experimental Analysis of Effort and Spread Seeking in Contests By Ander, Ola; Holm, Håkan J.; Wengström, Erik
  2. Hyperbolic discounting can be good for your health By Strulik, Holger; Trimborn, Timo
  3. Does Uncertainty Deter Provision of Public Goods? By Béatrice Boulu-Reshef; Samuel H. Brott; Adam Zylbersztejn
  4. Property rights and loss aversion in contests By Subhasish M. Chowdhury; Joo Young Jeon; Abhijit Ramalingam
  5. The Origins and Extent of Entrepreneurial Action-Orientedness: An Experimental Study By Ahmad Barirani; Randolph Sloof; Mirjam van Praag
  6. Does Experience Affect Fairness, Reciprocity and Cooperation in Lab Experiments? By V. Pelligra; T. Reggiani; T. Medda
  7. Can occupational norms foster cooperative behavior? An experimental study comparing cooperation by military officers and civilians By Johannemann, Kirsten; Morasch, Karl; Wiens, Marcus
  8. Testing the Effect of the Cookie Banners on Behaviour By René van Bavel; Nuria Rodríguez-Priego
  9. Behavioural types in public goods games: A re-analysis by hierarchical clutering By Francesco Fallucchi; R. Andrew Luccasen; Theodore L. Turocy

  1. By: Ander, Ola (Uppsala University); Holm, Håkan J. (Lund University); Wengström, Erik (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: 2017–01–11
  2. By: Strulik, Holger; Trimborn, Timo
    Abstract: It has been argued that hyperbolic discounting of future gains and losses leads to time-inconsistent behavior and thereby, in the context of health economics, not enough investment in health and too much indulgence of unhealthy consumption. Here, we challenge this view. We set up a life-cycle model of human aging and longevity in which individuals discount the future hyperbolically and make time-consistent decisions. This allows us to disentangle the role of discounting from the time consistency issue. We show that hyperbolically discounting individuals, under a reasonable normalization, invest more in their health than they would if they had a constant rate of time preference. Using a calibrated life-cycle model of human aging, we predict that the average U.S. American lives about 4 years longer with hyperbolic discounting than he would if he had applied a constant discount rate. The reason is that, under hyperbolic discounting, experiences in old age receive a relatively high weight in life time utility. In an extension we show that the introduction of health-dependent survival probability motivates an increasing discount rate for the elderly and, in the aggregate, a u-shaped pattern of the discount rate with respect to age.
    Keywords: discount rates,present bias,health behavior,aging,longevity
    JEL: D03 D11 D91 I10 I12
    Date: 2016
  3. By: Béatrice Boulu-Reshef (Centre d'Economie de la Sorbonne); Samuel H. Brott (Berkeley Research Group, LLC, Washington); Adam Zylbersztejn (GATE L-SE, Université Lumière Lyon 2)
    Abstract: We study a finitely repeated public goods game (based on the voluntary contribution mechanism) played under complete uncertainty about the marginal benefit of the public good relative to the private consumption (commonly known as the marginal per capita return: neither one's marginal per capita return nor other players' marginal per capita returns are known at the time of decision-making. We show that contributions are equivalent when the rate of return is predetermined and when it is uncertain, and display a similar decay over time. Combined with the previous experimental findings, our results suggest that the cooperation in public goods games is sensitive to the source of uncertainty about marginal per capita return
    Keywords: Cooperation; uncertainty; voluntary contribution mechanism; public good; expected return
    JEL: H41 D81 C91 C92
    Date: 2017–01
  4. By: Subhasish M. Chowdhury (University of East Anglia); Joo Young Jeon (University of East Anglia); Abhijit Ramalingam (University of East Anglia)
    Abstract: We analyze the effects of property rights and the resulting loss aversion on contest outcomes. We study three treatments: in ‘gain’ two players start with no prize and make sunk bids to win a prize; whereas in ‘loss’ both the subjects start with prizes and whoever loses the contest loses their prize. Finally, in ‘mixed’ one player starts with a prize, which stays with him if he wins but is transferred to the rival otherwise. Since the differences among the treatments arise only from framing, the expected utility or the standard loss aversion models predict no difference in bids across treatments. We introduce a new model with loss aversion in which the property rights are made salient. This model predicts average bids in descending order in the loss, the mixed, and the gain treatment; and higher bids by the player with property rights in the mixed treatment. The results from a laboratory experiment broadly support these predictions. In the laboratory, no significant difference is found in bids in the loss (gain) treatment versus bids by property rights holder (non-holder) in the mixed treatment. A model incorporating both loss aversion and social preference explains this result.
    Keywords: contest, experiment, framing, property rights, loss aversion
    JEL: C91 C72 D23 D74
    Date: 2016–09–23
  5. By: Ahmad Barirani (Copenhagen Business School, Denmark); Randolph Sloof (Amsterdam School of Economics, University of Amsterdam, The Netherlands); Mirjam van Praag (Copenhagen Business School in Denmark, Tinbergen Institute in The Netherlands)
    Abstract: We test the hypothesis, based on popular and theoretical perspectives, that entrepreneurs are more action-oriented than other occupational groups. We compare their playing strategies in an optimal stopping game using a randomized online experiment among 100s of entrepreneurs, managers and employees. Our experimental results show that entrepreneurs are indeed more action-oriented than others. We theorize that this is driven by their lower levels of loss aversion and higher levels of curiosity. Our empirical test results show that (i) entrepreneurs score indeed higher, on average, than managers and employees on curiosity and lower on loss aversion; (ii) the di fference in action-orientedness between entrepreneurs and others vanishes when controlling for individual curiosity levels and (iii) an alternative treatment that provides subjects with counterfactual information (about what would have happened in case of stopping) increases their willingness to stop. Under some assumptions, the combination of these results leads to the conclusion that the higher action-orientedness of entrepreneurs can be linked to their greater curiosity, but not to their lower level of loss aversion. Hence, we find support for the intuitive idea that (curiosity driven) action-orientedness enhances the identi fication and/or exploitation of opportunities.
    Keywords: Entrepreneurs; Managers; Employees; Inaction; Curiosity; Loss aversion; Lab-in-the field experiment.
    JEL: L26 C93 D03
    Date: 2017–01–13
  6. By: V. Pelligra; T. Reggiani; T. Medda
    Abstract: One of the most common criticisms about the external validity of lab experiments in economics concerns the representativeness of participants usually considered in these studies. The ever-increasing number of experiments and the prevalent location of research centers in university campuses produced a peculiar category of subjects - Students with high level of laboratory experience built through repeated participations in experimental sessions. We investigate whether the experience accumulated in this way biases subjects’ behaviour in a set of simple games widely used to study social preferences (Dictator Game, Ultimatum Game, Trust Game, and Prisoner’s Dilemma Game). Our main finding shows that subjects with a high level of experience in lab experiments do not behave in a significantly different way from novices.
    Keywords: lab experiment,External Validity,Experimental Methodology,Experience
    Date: 2016
  7. By: Johannemann, Kirsten; Morasch, Karl; Wiens, Marcus
    Abstract: In this experimental study we examine the behavior of Bundeswehr officers and officer candidates regarding their willingness to cooperate. Due to the military training which focuses on comradeship and reliable teamwork even under extreme conditions, we expect a strong bond between soldiers and therefore more cooperation among them. Furthermore there are additional norms for soldiers that explicitly call for social responsibility and an appropriate behavior relative to civilians. For that reason we also expect more altruism and trust of soldiers compared to pure civilian groups. To explore these issues in an experimental setting, the subjects had to play the dictator game, the ultimatum game, and the trust game. These three established experiments allow us to measure and distinguish between different aspects of social and cooperative motivation. We find that soldiers are on average more altruistic, more cooperative, and more trusting as well as more trustworthy. These results do not only hold for the interaction among soldiers but in most cases also with regard to the behavior of soldiers towards civilians.
    Keywords: Experiment,Dictator Game,Ultimatum Game,Trust Game,Cooperative Behavior,Professional Norms,Military
    JEL: C72 C78 C91 D01 D63 D64
    Date: 2016
  8. By: René van Bavel (European Commission - JRC); Nuria Rodríguez-Priego (European Commission - JRC)
    Abstract: We conducted a laboratory experiment (n=602) to test the effect on behaviour of six different cookie banner messages. These messages were based on four behavioural insights: defaults, information deficit model, protection motivation theory (PMT) and social norms. A control condition presented the traditional cookie banner message as recommended by the European Commission (EC). The behavioural measures were (a) the decision to accept cookies, (b) the decision to learn more about a website's cookie policy and (c) the time spent reading cookie policy pages. The main results are that a default banner, which told participants that continuing to browse implied cookie acceptance, led to higher cookie acceptance rates. With regard to users' decision to learn more about cookies, a message which combined all elements from PMT made people less likely to click on the link for more information.
    Keywords: cookies, privacy, online behaviour, behavioural economics, nudging, experiments
    Date: 2016–12
  9. By: Francesco Fallucchi (University of East Anglia); R. Andrew Luccasen (Mississippi University for Women); Theodore L. Turocy (University of East Anglia)
    Abstract: We re-analyse participant behaviour in standard economics experiments studying voluntary contributions to a public good. Previous approaches were based in part on a priori models of decision-making, such as maximising personal earnings, or reciprocating the behaviour of others. Many participants however do not conform to one of these models exactly, requiring ad hoc adjustments to the theoretical baselines to identify them as belonging to a given behavioural type. We construct a typology of behaviour based on a similarity measure between strategies using hierarchical clustering analysis. We identify four clearly distinct behavioural types which together account for over 90% of participants in six experimental studies. The resulting type classification distinguishes behaviour across groups more consistently than previous approaches.
    JEL: C65 C71 H41
    Date: 2017–01–12

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