nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2017‒03‒12
thirteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Cooperation, Framing and Political Attitudes By Fosgaard, Toke R.; Hansen, Lars G.; Wengström, Erik
  2. The "Sales Agent" Problem: Effort Choice under Performance Pay as Behavior toward Risk By Zubanov, Nick; Cadsby, Bram; Song, Fei
  3. Loss Aversion under Risk: The Role of Complexity By Cagala, Tobias
  4. Does Birth Spacing Affect Personality? By Golsteyn, Bart H.H.; Magnée, Cécile A. J.
  5. True Overconfidence, Revealed through Actions: An Experiment By Cheung, Stephen L.; Johnstone, Lachlan
  6. Doing it once is good, doing it twice is even better. On the dynamics of altruistic behavior By Timme, Florian; Sass, Markus
  7. Social Networks and Peer Effects at Works By Julie Beugnot; Bernard Fortin; Guy Lacroix; Marie Claire Villeval
  8. The Effectiveness of Incentive Schemes in the Presence of Implicit Effort Costs By Goerg, Sebastian J.; Kube, Sebastian; Radbruch, Jonas
  9. Risk aversion and wealth: evidence from person-to-person lending portfolios By Daniel Paravisini; Veronica Rappoport; Enrichetta Ravina
  10. Endogenous Sanctioning Institutions and Migration Patterns: Experimental Evidence By Ramon Cobo-Reyes; Gabriel Katz; Simone Meraglia?
  11. Does the reliability of institutions affect public good contributions? Evidence from a laboratory experiment By Jahnke, Björn; Fochmann, Martin; Wagener, Andreas
  12. Flip a coin or vote: An Experiment on Choosing Group Decision Rules By Hoffmann, Timo; Renes, Sander
  13. Peer Effects and Risk-Taking Among Entrepreneurs: Lab-in-the-Field Evidence By Steeve Marchand; Maria Adelaida Lopera

  1. By: Fosgaard, Toke R. (Department of Food and Resource Economics, University of Copenhagen); Hansen, Lars G. (Department of Food and Resource Economics, University of Copenhagen); Wengström, Erik (Department of Economics, Lund University)
    Abstract: This paper shows that political attitudes are linked to cooperative behavior in an incentivized experiment with a large sample randomly drawn from the Danish population. However, this relationship depends on the way the experiment is framed. In the standard game in which subjects give to a public good, contributions are the same regardless of political attitudes. In an economically equivalent version, in which subjects take from a public good, left-wingers cooperate significantly more than subjects in the middle or to the right of the political spectrum. Through simulation techniques we find that this difference in the framing effect across political point of views is to some extent explained by differences in beliefs and basic cooperation preferences.
    Keywords: Cooperation; Social Dilemma; Political Ideology; Experiment; Simulation
    JEL: C90 D03 H41
    Date: 2017–03–02
  2. By: Zubanov, Nick (University of Konstanz); Cadsby, Bram (University of Guelph); Song, Fei (Ryerson University)
    Abstract: We present a model and an experiment that show, in a very general setting, that effort choice under a given linear pay-for-performance contract depends on how the financial risk associated with the scheme interacts with effort. We find that, under a given contract, if risk increases with effort, risk-averse (loving) individuals exert less (more) effort. In contrast, when risk is independent of effort, risk preferences do not affect effort choice. Our findings complement the larger literature on selection into incentive pay by showing that lower effort exerted by the risk-averse under a given incentive contract is another type of behaviour toward risk.
    Keywords: incentives, effort, risk aversion
    JEL: M52
    Date: 2017–02
  3. By: Cagala, Tobias
    Abstract: In choice under risk, differences between alternative states of the world render choice environments complex. Moreover, they entail powerful experiences of loss if satisfaction falls short of prospective states that did not materialize. An increase in complexity, i.e. a larger number of differences, can have ambiguous effects on loss aversion. Complexity can direct the decision maker's attention to prospective experiences of loss but also requires a higher cognitive effort of weighting and comparing satisfaction in all states. This paper investigates empirically how loss aversion interacts with complexity. Structural estimates of preference parameters indicate an inverse-U shaped relationship between complexity and the weight of expected gain-loss utility in choice under risk.
    JEL: C91 D81 D84
    Date: 2016
  4. By: Golsteyn, Bart H.H. (Maastricht University); Magnée, Cécile A. J. (Maastricht University)
    Abstract: This paper studies the causal effect of birth spacing (i.e., the age difference between siblings) on personality traits. We use longitudinal data from a large British cohort which has been followed from birth until age 42. Following earlier studies, we employ miscarriages between the first and second child as an instrument for birth spacing. The results show that a larger age gap between siblings negatively affects personality traits of the youngest child in two-child households. This result sheds a first light on the causal effects of birth spacing on personality traits.
    Keywords: birth spacing, family structure, personality traits
    JEL: J12 J13 J24
    Date: 2017–02
  5. By: Cheung, Stephen L. (University of Sydney); Johnstone, Lachlan (University of Sydney)
    Abstract: We report an experiment that infers true overconfidence in relative ability through actions, as opposed to reported beliefs. Subjects choose how to invest earnings from a skill task when the returns depend solely upon risk, or both risk and relative placement, enabling joint estimation of individual risk preferences and implied subjective beliefs of placing in the top half. We find evidence of aggregate overconfidence only in a treatment that receives minimal feedback on performance in a trial task. In treatments that receive more detailed feedback, aggregate overconfidence is not observed although identifiable segments of overand underconfident individuals persist.
    Keywords: true overconfidence, overplacement, subjective beliefs, joint estimation
    JEL: C91 D03 D81 D83
    Date: 2017–02
  6. By: Timme, Florian; Sass, Markus
    Abstract: We study a series of dictator games repeated a number of times at considerably large time intervals. The experimental design is such that reputation and learning effects can be ruled out. Treatments differ with respect to the number of repetitions, the time span between repetitions and observability of behavior. We observe in all treatments a strong tendency towards more selfish behavior over the course of the repeated experiment. We argue that this behavior can be rationalized if giving in dictator games is driven by a social norm that approves repeated gifts more than a single altruistic act. We report experimental evidence for the existence of such a norm using the norm elicitation method introduced by Krupka and Weber (2013).
    JEL: C91 C73 B41
    Date: 2016
  7. By: Julie Beugnot (CRESE EA3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France); Bernard Fortin (Department of economics, Université Laval, CRREP and CIRANO, Canada); Guy Lacroix (Department of economics, Université Laval, CRREP, IZA and CIRANO, Canada); Marie Claire Villeval (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France; IZA, Bonn, Germany)
    Abstract: This paper extends the standard work effort model by allowing workers to interact through networks. We investigate experimentally whether peer performances and peer contextual effects influence individual performances. Two types of network are considered. Participants in Recursive networks are paired with participants who played previously in isolation. In Simultaneous networks, participants interact in real-time along an undirected line. Mean peer effects are identified in both cases. Individual performances increase with peer performances in the recursive network. In the simultaneous network, endogenous peer effects vary according to gender : they are large for men but not statistically different from zero for women.
    Keywords: Peer effects, social networks, work effort, piece rate, experiment
    JEL: C91 J16 J24 J31 M52
    Date: 2017
  8. By: Goerg, Sebastian J. (Florida State University); Kube, Sebastian (University of Bonn); Radbruch, Jonas (IZA)
    Abstract: Agents' decisions to exert effort depends on the provided incentives as well as the potential costs for doing so. So far most of the attention has been on the incentive side. However, our lab experiments underline that both the incentive and cost side can be used separately to shape work performance. In our experiment, subjects work on a real-effort task. Between treatments, we vary the incentive scheme used for compensating workers. Additionally, by varying the available outside options, we explore the role of implicit costs of effort in determining workers' performance. We observe that incentive contracts and implicit costs interact in a non-trivial manner. Performance reacts significantly to changes in implicit effort costs under low-powered piece-rate and target-based bonus contracts, but not under a high piece rate contract. In addition, comparisons between the incentive schemes depend crucially on the implicit costs.
    Keywords: workers' performance, work environments, implicit cost, opportunity costs, incentive schemes
    JEL: C91 D01 D03 D24 J22 J24 J33 L23 M52
    Date: 2017–02
  9. By: Daniel Paravisini; Veronica Rappoport; Enrichetta Ravina
    Abstract: We estimate risk aversion from the actual financial decisions of 2,168 investors in Lending Club (LC), a person-to-person lending platform. We develop a methodology that allows us to estimate risk aversion parameters from each portfolio choice. Since the same individual makes repeated investments, we are able to construct a panel of risk aversion parameters that we use to disentangle heterogeneity in attitudes towards risk from the elasticity of investor-specific risk aversion to changes in wealth. In the cross section, we find that wealthier investors are more risk averse. Using changes in house prices as a source of variation, we find that investors become more risk averse after a negative wealth shock. These preferences consistently extrapolate to other investor decisions within LC.
    Keywords: risk aversion; portfolio choice; crowdfunding
    JEL: D12 D14 E21 G11
    Date: 2016–02–29
  10. By: Ramon Cobo-Reyes (Department of Economics, University of Exeter); Gabriel Katz (Department of Politics, University of Exeter); Simone Meraglia? (Department of Economics, University of Exeter)
    Abstract: We experimentally analyze the effect of the endogenous choice of sanctioning institutions on cooperation and migration patterns across societies. In our experiment, subjects are allocated to one of two groups, are endowed with group-specific preferences, and play a public goods game for 30 periods. Each period, subjects can move between groups and, at fixed intervals, can vote on whether to implement formal (centralized) sanctioning institutions in their group. We compare this environment to one in which only one group is exogenously endowed with sanctioning institutions. We find that subjects' ability to vote on institutions leads to (i) a more efficient partition of subjects between groups, (ii) a lower migration rate, (iii) an increase in overall payoffs, and (iv) a decrease in both inter- and intra-groups (payoff) inequality. Over time, subjects tend to vote for sanctioning institutions and contribute to the public good.
    Keywords: Formal Sanctions, Cooperation, Migration, Voting, Experiment.
    JEL: C73 C91 C92 D72 H41 H73
    Date: 2017
  11. By: Jahnke, Björn; Fochmann, Martin; Wagener, Andreas
    Abstract: Reliable institutions - i.e., institutions that live up to the norms that agents expect them to keep - foment cooperative behavior. We experimentally confirm this hypothesis in a public goods game with a salient norm that cooperation was socially demanded and corruption ought not to occur. When nevertheless corruption attempts came up, groups that were told that "the system" had fended off the attempts made considerably higher contributions to the public good than groups that only learned that the attempt did not aect their payoffs or that were not at all exposed to corruption.
    JEL: H41 A13 C91
    Date: 2016
  12. By: Hoffmann, Timo; Renes, Sander
    Abstract: Before a group can take a decision, its members must agree on a mechanism to aggregate individual preferences. In this paper we present the results of an experiment on the influence of private payoff information and the role of the available alternatives on individuals’ mechanism choices in such group choice situations. While efficient mechanisms are desirable, we experimentally show that participation constraints can prevent their implementation. We find strong indications that individual preferences for choice rules are sensitive to individual expected payoffs. Our results highlight the importance of considering participation constraints when designing choice institutions.
    JEL: C91 D70 D82
    Date: 2016
  13. By: Steeve Marchand; Maria Adelaida Lopera
    Abstract: We study how social interactions influence entrepreneurs' attitudes toward risk. We conduct two risk-taking experiments within workshops organized for young Ugandan entrepreneurs. Between the two experiments, the entrepreneurs participate in a networking activity where they build relationships and discuss with each other. We collect detailed data on peer network formation and on participants' choices before and after the networking activity. Our design implicitly controls for homophily effects (i.e. the tendency of individuals to develop relationships with people who have similar characteristics). We find that risk aversion is affected by social conformity. Participants tend to become more (less) risk averse in the second experiment if the peers they discuss with are on average more (less) risk averse in the first experiment. This suggests that social interactions play a role in shaping risk preferences.
    Keywords: preference, risk aversion, entrepreneur, social norms
    JEL: D03 D81 M13 Z13
    Date: 2017

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