nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2017‒02‒26
eleven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Incidental emotions and risk-taking: An experimental analysis By Colasante, Annarita; Marini, Matteo M.; Russo, Alberto
  2. Morale, Relationships, and Wages: An Experimental Study By Englmaier, Florian; Segal, Carmit
  3. Dual decision processes: Retrieving preferences when some choices are intuitive By Francesco Cerigioni
  4. Indirect Reciprocity, Resource Sharing, and Environmental Risk: Evidence from Field Experiments in Siberia By Drew Gerkey; E. Lance Howe; James Murphy; Colin West
  5. The impact of psychological traits on performance in sequential tournaments: Evidence from a tennis field experiment. By Christoph Bühren; Philip J. Steinberg
  6. Capacity precommitment and price transparency platforms. Theoretical benchmark and experimental evidence By Stadler, Manfred; Güth, Werner; Zaby, Alexandra
  7. Taking Aversion By Korenok Oleg; Edward L. Millner; Laura Razzolini
  8. A Theory of Sequential Group Reciprocity By Moreno-Okuno, Alejandro T.; Mosiño, Alejandro
  9. How do people reason in dynamic games? By Chlaß, Nadine; Perea, Andrés
  10. Feelings of Ownership in Dictator Games By Korenok Oleg; Edward L. Millner; Laura Razzolini
  11. Because of you I did not give up - How peers affect perseverance By Gerhards, Leonie; Gravert, Christina

  1. By: Colasante, Annarita; Marini, Matteo M.; Russo, Alberto
    Abstract: In this paper we test in a controlled environment the impact of incidental emotions induced through musical stimuli on individual risk-taking behavior. A modified version of the Multiple Price List method is used to elicit risk preference. We find that both positive and negative stimuli make experimental subjects more risk averse than subjects in the neutral treatment. This result is obtained with respect to the first lottery, while the impact of music on risk-taking is not statistically significant in the subsequent lottery, meaning that its effect vanishes as time elapses.
    Keywords: laboratory experiment, music, mood induction, preference elicitation, risk aversion.
    JEL: C91 D81
    Date: 2017–02–22
  2. By: Englmaier, Florian; Segal, Carmit
    Abstract: Many labor relations are characterized by the possibility of repeated interaction without long term contracts and with discretionary pay components. We implement such a structure in the lab by allowing workers and firms to interact repeatedly for many periods absent a pre-announced final period. In this setting persistent and different human resource practices emerge endogenously: we find (long-term) relationships characterized by generous surplus sharing and spot-interactions with little to no rent for the workers. Efficiency, i.e. exerted effort, is comparable across these two institutions. Hence, spot-interactions are at least as profitable for firms engaging in such relationships. In control treatments, we show that neither limited firm commitment nor structural unemployment alone is sufficient to generate these patterns. Analyzing individual level data, we document that firm and worker behavior are individually rational and that individual histories play a significant role in explaining the observed behavior.
    JEL: C91 D21 M50
    Date: 2016
  3. By: Francesco Cerigioni
    Abstract: Evidence from cognitive sciences shows that some choices are conscious and re ect individual prefer- ences while others tend to be intuitive, driven by analogies with past experiences. Under these circum- stances, usual economic modeling might not be valid because not all choices are the consequence of individual tastes. We here propose a behavioral model that can be used in standard economic analysis that formalizes how conscious and intuitive choices arise by presenting a decision maker composed by two systems. One system compares past decision problems with the one the decision maker faces, and it replicates past behavior when the problems are similar enough (Intuitive choices). Otherwise, a second system is activated and preferences are maximized (Conscious choices). We then present a novel method capable of nding conscious choices just from observed behavior and nally, we provide a choice theoretical foundation of the model and discuss its importance as a general framework to study behavioral inertia.
    Keywords: Dual Processes, Fast and Slow Thinking, Similarity, Revealed Preferences, Memory, Intuition
    JEL: D01 D03 D60
    Date: 2016–09
  4. By: Drew Gerkey; E. Lance Howe; James Murphy; Colin West
    Abstract: Integrating information from existing research, qualitative ethnographic interviews, and participant observation, we designed a field experiment that introduces idiosyncratic environmental risk and a voluntary sharing decision into a standard public goods game. Conducted with subsistence resource users in rural villages on the Kamchatka Peninsula in Northeast Siberia, we find evidence consistent with a model of indirect reciprocity and local social norms of helping the needy. When participants are allowed to develop reputations in the experiments, as is the case in most small-scale societies, we find that sharing is increasingly directed toward individuals experiencing hardship, good reputations increase aid, and the pooling of resources through voluntary sharing becomes more effective. We also find high levels of voluntary sharing without a strong commitment device; however, this form of cooperation does not increase contributions to the public good. Our results are consistent with previous experiments and theoretical models, suggesting strategic risks tied to rewards, punishments, and reputations are important. However, unlike studies that focus solely on strategic risks, we find the effects of rewards, punishments, and reputations are altered by the presence of environmental factors. Unexpected changes in resource abundance increase interdependence and may alter the costs and benefits of cooperation, relative to defection. We suggest environmental factors that increase interdependence are critically important to consider when developing and testing theories of cooperation.
    Date: 2016
  5. By: Christoph Bühren (University of Kassel); Philip J. Steinberg (University of Wuppertal)
    Abstract: In order to analyze if heterogeneity in psychological traits affects individual performance in sequential tournaments, we conducted a tennis field experiment. In the experiment, we also varied the payment schemes (individual, team, competition) to control for moderating effects of different incentives. Team incentives, risk taking, and self-esteem reduced performance whereas a preference towards competition enhanced it. On average, we observe a second mover advantage. However, individuals’ psychological traits, such as self-esteem or self-efficacy, can turn a second mover into a first mover advantage. Our results shed new light on the discussion of first vs. second mover advantages and performance under pressure. Study findings have implications for psychological requirements of competitive and team tasks in business settings.
    Keywords: Performance under pressure; experiment; psychological traits; second mover advantage; tennis; sequential tournaments
    JEL: C93 D81 Z20 M52
    Date: 2017
  6. By: Stadler, Manfred; Güth, Werner; Zaby, Alexandra
    Abstract: Price transparency in the sense of ‘more information for customers’ is known to increase efficiency. However, the introduction of price transparency platforms does not only providemore information for customers but also for rival firms—who may (mis)use the legal information channel to collude. We experimentally investigate transparency platforms in the context of a capacity-then-price setting game. Price transparency is implemented by allowing firms to send non-binding price messages after capacity but before price choices. As such messages are cheap talk they do not affect the subgame perfect equilibrium of the game. In our experiment, however, we find collusive price choices when price messages are possible, especially when they are truthful. While we find strong support for the theoretically predicted negative relation between capacities and prices, participants frequently install excessive capacities, which, in turn, induce collusive pricing behavior.
    JEL: C72 C91 L41
    Date: 2016
  7. By: Korenok Oleg (Department of Economics, VCU School of Business); Edward L. Millner (Department of Economics, VCU School of Business); Laura Razzolini (Department of Economics, VCU School of Business)
    Abstract: We determine whether the moral cost of taking exceeds the moral cost of not giving. We design and conduct an experiment to determine whether a dictator prefers a giving game over a taking game when the payoff possibilities are identical and to measure the strength of the preference. We find that aversion to taking is prevalent and strong. Over 85% of the dictators in our experiment choose to play a giving game over a taking game when the payoff possibilities are identical and, on average, dictators are willing to sacrifice over 31% of their endowment to avoid taking.
    Keywords: Taking; Dictator Game; Impure Altruism; Equivalent Variation
    JEL: C91 D01 D64 H30 H41
    Date: 2017–01
  8. By: Moreno-Okuno, Alejandro T.; Mosiño, Alejandro
    Abstract: Games that appear to be independent, involving none of the same players, may be related by emotions of reciprocity between the members of the same groups. In the real world, individuals are members of groups and want to reward or punish those groups whose members have been kind or unkind to members of their own. In this paper we extend Dufwenberg and Kirchsteiger's model of sequential reciprocity (2004) to groups of individuals and define a new "sequential group reciprocity equilibrium" for which we prove its existence. We study the case of two games with two players in each game, where each player belongs to the same group as a player in the other game. We show that when the payoffs of one game are much higher than the payoffs of the other, the outcome of the game with higher payoffs determines the outcome of the other game. We also find that when the payoffs are very asymmetric, the outcome where the sum of the payoffs is maximized is a sequential group reciprocity equilibrium.
    Keywords: Fairness, Groups, Psychological Games, Game Theory
    JEL: A12 C60 D63
    Date: 2017–02–19
  9. By: Chlaß, Nadine; Perea, Andrés
    Abstract: Do individuals choose how to a solve a dynamic game or is their mode of reasoning a type-like predisposition? We show experimentally that an individual’s propensity to forwardly or backwardly induct is a function of (i) her belief whether an opponent’s previous action was a trembling hand mistake or a rational choice, and (ii) her personality. In a two-stage game, the individual observes an action of a computerized opponent (stage 1) before both interact (stage 2). The opponent chooses rationally most of the time and makes random choices with a small commonly known likelihood. Hence, the opponent’s action in stage 1 discloses with some probability the opponent’s type (choice) in stage 2. The individual can either believe that (i) the opponent chose randomly in stage 1, or that (ii) the opponent made a rational choice. An individual rationally responds to this belief if she solves stage 2 by backwards induction in the first, and by forward induction in the second case.
    JEL: C73 C91 D82
    Date: 2016
  10. By: Korenok Oleg (Department of Economics, VCU School of Business); Edward L. Millner (Department of Economics, VCU School of Business); Laura Razzolini (Department of Economics, VCU School of Business)
    Abstract: This paper determines if differences in feelings of ownership mediate the effect of changing who earns the endowment and the frame of actions on dictatorsÕ generosity. We conduct an experiment with two treatments. The Dictator Earns-Give treatment is designed to induce strong feelings of ownership, while the Recipient Earns-Take treatment induces weak feelings of ownership. We measure feelings of ownership in the two treatments. As expected, dictators report stronger feelings of ownership in the first treatment and these feelings mediate the dictatorÕs generosity. Moving from the Recipient Earns-Take treatment to the Dictator Earns-Give treatment indirectly reduces the payoff to the recipient by increasing the dictatorsÕ feelings of ownership.
    Keywords: dictator game; feelings of ownership; altruism
    JEL: C72 C91 D03
    Date: 2017–02
  11. By: Gerhards, Leonie; Gravert, Christina
    Abstract: Various empirical paper have shown that peers affect productivity and behavior in the workplace. However, the mechanisms through which peers influence each other are still largely unknown. In this laboratory experiment we study a situation in which individuals might look at their peers' behavior to motivate themselves to endure in a task that requires perseverance. We test the impact of unidirectional peer effects under individual monetary incentives, controlling for ability and tactics. We find that peers significantly increase their observers' perseverance, while knowing about being observed does not significantly affect behavior. In a second experiment we investigate the motives to self-select into the role of an observing or an observant subject and what kind of peers individuals deliberately choose. Our findings from this treatment provide first insights on the perception of peer situations by individuals and new empirical evidence on how peer groups emerge.
    JEL: C91 M50 J24
    Date: 2016

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