nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2017‒01‒29
nine papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Risk taking and risk sharing: does responsibility matter? (RM/13/045-revised-) By Cettolin, Elena; Tausch, Franziska
  2. Response Error in a Web Survey and a Mailed Questionnaire: The Role of Cognitive Functioning By Martin Kroh; Denise Lüdtke; Sandra Düzel; Florin Winter
  3. Incentives for Effort or Outputs? A Field Experiment to Improve Student Performance By Sarojini Hirshleifer
  4. Risk Aversion and Job Mobility By T.M. van Huizen; Rob Alessie
  5. Mathematics self-confidence and the "prepayment effect" in riskless choices By Lian Xue; Stefania Sitzia; Theodore L. Turocy
  6. Locus of Control and Mothers' Return to Employment By Eva M. Berger; Luke Haywood
  7. Gender Diversity is Detrimental to Team Performance: Evidence from a Field Experiment By Bernd Frick; Anica Rose; André Kolle
  8. The Behavioral Effect of Pigovian Regulation: Evidence from a Field Experiment By Bruno Lanz; Jules-Daniel Wurlod; Luca Panzone; Timothy Swanson
  9. Implicit Motivation Makes the Brain Grow Younger: Improving Executive Functions of Older Adults By Shira Cohen-Zimerman; Ran R. Hassin

  1. By: Cettolin, Elena (university tilburg); Tausch, Franziska (max planck institute for research on collective goods bonn)
    Abstract: Risk sharing arrangements diminish individuals’ vulnerability to probabilistic events that negatively affect their financial situation. This is because risk sharing implies redistribution, as lucky individuals support the unlucky ones. We hypothesize that responsibility for risky choices decreases individuals’ willingness to share risk by dampening redistribution motives, and investigate this conjecture with a laboratory experiment. Responsibility is created by allowing participants to choose between two different risky lotteries before they decide how much risk they share with a randomly matched partner. Risk sharing is then compared to a treatment where risk exposure is randomly assigned. We find that average risk sharing does not depend on whether individuals can control their risk exposure. However, we observe that when individuals are responsible for their risk exposure, risk sharing decisions are systematically conditioned on the risk exposure of the sharing partner, whereas this is not the case when risk exposure is random.
    JEL: D81 C91
    Date: 2016
  2. By: Martin Kroh; Denise Lüdtke; Sandra Düzel; Florin Winter
    Abstract: Web-based interviewing is gradually replacing traditional modes of data collection, in particular telephone and mailed surveys. This global trend takes place despite the fact that established knowledge of its consequences on response error is incomplete. This paper studies differences between a web (CAWI) and a mailed version (MAIL) of a questionnaire in various forms of response error, namely item nonresponse, satisficing, person-reliability, and social desirable responding. We posit 1) that response error depends on respondents cognitive functioning, namely in the domains of global reading abilities, fluid intelligence, as well as working and episodic memory; and 2) that these effects differ across modes of data collection with generally higher prevalence in the CAWI mode since this mode is more demanding. The analysis builds on a randomized mode experiment implemented in the context of the Berlin Aging Study II (BASE-II), a survey that primarily focuses on multidimensional processes of physical and mental aging (see Bertram et al. 2014). The analysis reveals a high impact of cognitive functioning at the various stages of the survey response process. While we do found moderate mode-differences in response error, such as higher item nonresponse rates in the CAWI mode, we did not find cognitive functioning to be a better predictor of response error in web-based interviewing.
    Keywords: Mixed-mode design, CAWI, cognitive functioning, response quality
    Date: 2016
  3. By: Sarojini Hirshleifer (Department of Economics, University of California Riverside)
    Abstract: One key choice in designing an incentive is whether to reward outcomes directly (outputs) or to reward the actions and behaviors that lead to those outcomes (effort/inputs). I conduct a novel direct test of an input incentive designed to increase student effort against both an output incentive and a control that does not receive an incentive. The interventions were implemented in a classroom-level randomized experiment with school children in India. A math software curriculum is implemented in all classrooms regardless of which activity is incentivized. It includes learning modules (the incentivized input) that are completed throughout a unit as well as a test at the end of the unit (the incentivized output). The two incentives are both piecerate and announced at the beginning of each unit. Students who receive an input incentive perform .57 standard deviations better than the control group on a non-incentivized outcome test. This performance is statistically significantly larger than the impact of the output incentive (which .24 standard deviations and not significant relative to the control). The input incentive is also almost twice as cost-effective as the output incentive. These results provide evidence that there can be large returns to directly inducing student effort in the classroom. The input incentive works better for present-biased students along an incentive-compatible measure of time preferences collected at baseline, which provides evidence to support the hypothesis that more frequent payments can address time inconsistency. This study also provides direct evidence that piecerate input incentives can be more effective than piecerate output incentives.
    JEL: C93 D99 I21 M52 O15
    Date: 2017–01
  4. By: T.M. van Huizen; Rob Alessie
    Abstract: Job mobility is inherently risky as workers have limited ex ante information about the quality of outside jobs. Using a large longitudinal Dutch dataset, which includes data on risk preferences elicited through (incentivized) experiments, we examine the relation between risk aversion and job mobility. The results for men show that risk averse workers are less likely to move to other jobs. For women, the evidence that risk aversion affects job mobility is weak. Our empirical findings indicate that the negative relation between risk aversion and job mobility is driven by the job acceptance rather than the search effort decision.
    Keywords: Job mobility, risk aversion, job search, risk preferences
    Date: 2016
  5. By: Lian Xue (University of East Anglia); Stefania Sitzia (University of East Anglia); Theodore L. Turocy (University of East Anglia)
    Abstract: We extend the analysis of a riskless choice experiment reported recently by Hochman et al. (2014). Participants select from among sets of standard playing cards valued by a simple formula. In some sessions, participants are given a prepayment associated with some of the cards, which need not be the earnings-maximizing ones. Hochman et al. find that participants choose an earnings-maximizing card less frequently when another card is prepaid. We replicate this result under the original instructions, but not with instructions which explain the payment process more explicitly. Participants who state they do not consider themselves good at mathematics make earnings-maximizing choices much less frequently. Prior experience with economics experiments in general improves performance only modestly. The results suggest that even when comparisons among choices require only simple quantitative reasoning steps, market designers and regulators may need to pay close attention to how the terms of offers are expressed, explained, and implemented.
    Keywords: loss aversion, prepayment, replication, mathematics self-confidence, lab rats
    JEL: C91 D83
    Date: 2016–09–20
  6. By: Eva M. Berger; Luke Haywood
    Abstract: This paper investigates the effect of locus of control (LOC) on the length of mothers’ employment break after childbirth. Using data from the German Socio-Economic Panel Study (SOEP), duration data reveals that women with an internal LOC return to employment more quickly than women with an external LOC.We find that this effect is particularly pronounced in jobs in which the penalties in terms of lower wage growth are highest. We thus argue that the effect of LOC on return is mainly related to differential appreciation of the career costs of longer maternity leave.
    Keywords: Locus of Control, Noncognitive Skills, Personality, Maternal Employment, Female Labor Supply, Survival Analysis
    JEL: J22 J24
    Date: 2016
  7. By: Bernd Frick (Paderborn University); Anica Rose (Paderborn University); André Kolle (Paderborn University)
    Abstract: We contribute to the inconclusive empirical research on the relationship between team gender diversity and team performance by investigating the returns to gender diversity in academia. Using a unique sample with 164 randomly formed student teams, we show that gender heterogeneity adversely affects team performance in a business strategy game. Both all-female and all-male teams outperform gender-heterogeneous teams in terms of financial success. We find evidence for the detrimental gender diversity effect to increase with task complexity. Our findings suggest that all-men and all-women teams do not differ in their strategic management behavior.
    Keywords: Gender; Diversity; Teams; Performance; Business strategy game
    JEL: J16 C93
    Date: 2017–01
  8. By: Bruno Lanz (University of Neuchâtel, Department of Economics and Business; ETH Zurich, Chair for Integrative Risk Management and Economics; Massachusetts Institute of Technology, Joint Program on the Science and Policy of Global Change.); Jules-Daniel Wurlod (Boston Consulting Group, Geneva, Switzerland.); Luca Panzone (Newcastle University, School of Agriculture, Food and Rural Development, UK.); Timothy Swanson (Graduate Institute of International and Development Studies, Centre for International Environmental Studies, Switzerland.)
    Abstract: Pigovian regulation provides monetary penalties/rewards to incentivize prosocial behavior, and may thereby trigger behavioral effects beyond a more standard response associated with a change in relative prices. This paper quantifies the magnitude of these behavioral effects using data from an experiment on real product choices together with a structural model of consumer behavior. First, we show that information about external effects (products’ embodied carbon emissions) triggers voluntary substitution towards cleaner alternatives, and we estimate that this effect is equivalent to a change in relative prices of GBP30.69-165.15/tCO2. Second, comparing a Pigovian intervention (GBP19/tCO2) with a neutrally-framed price change of the same magnitude, we find a negative behavioral effect associated with regulation. Compensating this bias would require increasing the Pigovian price signal by up to 48.06/tCO2. Finally, based on a cross-product comparison, we show that the magnitude of behavioral effects declines with substitutability between clean and dirty product alternatives, a measure of effort to reduce emissions.
    Keywords: Externalities; Pigovian regulation; Consumer behavior; Information; Field experiments; Environmental policy.
    JEL: C93 D03 D12 H23 Q58
    Date: 2017–01
  9. By: Shira Cohen-Zimerman; Ran R. Hassin
    Abstract: The dominant view of cognitive aging holds that while controlled processes (e.g., working memory and executive functions) decline with age, implicit (automatic) processes do not. In this paper we challenge this view by arguing that high-level automatic processes (e.g., implicit motivation) decline with age, and that this decline plays an important and as yet unappreciated role in cognitive aging. Specifically, we hypothesized that due to their decline, high-level automatic processes are less likely to be spontaneously activated in old age, and so their subtle, external activation should have stronger effects on older (vs. younger) adults. In two experiments we used different methods of implicitly activating motivation, and measured executive functions of younger and older adults via the Wisconsin Card Sorting Test. In Experiment 1 we used goal priming to subtly increase achievement motivation. In Experiment 2 motivation was manipulated by subtly increasing engagement in the task. More specifically, we introduce the Jerusalem Face Sorting Test (JFST), a modified version of the WCST that uses cards with faces instead of geometric shapes. In both experiments, implicitly induced changes in motivation improved older- but not younger- adults’ executive functioning. The framework we propose is general, and it has implications as to how we view and test cognitive functions. Our case study of older adults offers a new look at various aspects of cognitive aging. Applications of this view to other special populations (e.g., ADHD, schizophrenia) and possible interventions are discussed.
    Date: 2017–01

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