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on Cognitive and Behavioural Economics |
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Issue of 2017‒03‒26
seven papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Katarzyna Gawryluk (Centre for Economic Psychology and Decision Sciences Koźmiński University); Michal Krawczyk (Faculty of Economic Sciences, University of Warsaw) |
| Abstract: | We conduct a laboratory experiment to investigate the impact of deliberation time on behavior under risk and uncertainty. Towards this end we let our participant make quick, intuitive evaluations of a number of lotteries and modify them, should they wish to do so, after deliberation. Both certainty equivalents are incentivized (a double-response method). The main finding is that additional deliberation time reduces pessimism, especially in the case of lotteries involving unknown probabilities. |
| Keywords: | probability weighting, prospect theory, time pressure |
| JEL: | D81 C91 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2017-08&r=cbe |
| By: | Anthony Newell; Lionel Page |
| Abstract: | We design an asset market experiment in which participants are primed in a boom or bust market condition before trading. We find that pricing bubbles are significantly reduced in the markets in the bust priming condition and that mispricing of assets is larger in the boom condition. We also find that participants exhibit weaker predictive ability in the boom priming condition compared to the bust priming condition. These findings lend weight to the idea that traders’ risk attitude are time varying and that market dynamics may affect these risk attitudes, creating the possibility of feedback loops on market conditions themselves. |
| Keywords: | Behavioural finance, countercyclical risk aversion, time-varying risk aversion, feedback loops, financial bubbles. |
| JEL: | C91 C92 D81 G10 G12 |
| Date: | 2017–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:qut:qubewp:wp050&r=cbe |
| By: | Carlos Sáenz-Royo (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | This study meditates about mental heuristic rules as a representation of bounded rationality in individual decision making. The heuristic process presented here represents simultaneously limited computational capacity, the capacity to determine relevant information in complex contexts around beliefs, and time as an endogenous part of decision. The mathematical model of this heuristic rule correlates to the fallibility of the agent depending on the relative outcome of the alternatives in exogenous terms; the availability of only part of the information regarding the alternatives concert by beliefs; and the amount of time the decision maker is willing to spend on a decision based on previous experience and knowing that there is a tradeoff between time and fallibility. The resulting mathematical model can be applied to many disciplines like such as opinion models, game theory, the comparison of systems of distribution of authority, and fields that utilize the technique of agent-based models (ABM) that use individual behavior to study the macroscopic results of interactions. |
| Keywords: | Bounded rationality, individual decisions making, heuristic, fallibility, modelling decisions, ABM. |
| JEL: | A14 C00 D03 Z13 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2017/04&r=cbe |
| By: | Julian Conrads; Mischa Ellenberger; Bernd Irlenbusch; Elia Nora Ohms; Rainer Michael Rilke; Gari Walkowitz |
| Abstract: | In this article we examine the influence of two goal compensation schemes on lying behavior. Based on the die rolling task of Fischbacher/Föllmi-Heusi (2013), we apply an individual goal incentive scheme and a team goal incentive scheme. In both settings individuals receive a fixed bonus when attaining the goal. We find that under team goal incentives subjects are less inclined to over-report production outputs beyond the amount which is on average necessary for goal attainment. Investigating subjects’ beliefs on their team mates’ behavior under team goal incentives reveals that subjects who either believe that lying is not profitable (i.e., the team goal cannot be reached with a lie) or not absolutely necessary (i.e., there is a good chance that the team goal can also be reached without lying) tend to be honest. We also find that subjects who believe that the team goal has already been reached by their team mates tend to over-report production outputs. Across treatments, women are found to be more honest than men. Subjects’ personality is not associated with reported production outputs. Our work contributes to previous research on how different compensation schemes affect unethical behavior in organizational settings. |
| Keywords: | Compensation schemes, Lying, Teams, Goals, Individual differences, Experiment |
| JEL: | C91 C92 M52 |
| Date: | 2017–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:whu:wpaper:17-02&r=cbe |
| By: | Tristan Le Cotty (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Elodie Maitre d'Hotel (UMR MOISA - Marchés, Organisations, Institutions et Stratégies d'Acteurs - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - CIHEAM - Centre International des Hautes Études Agronomiques Méditerranéennes, CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement); Raphael Soubeyran (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM3 - Université Paul-Valéry - Montpellier 3 - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique); Julie Subervie (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM3 - Université Paul-Valéry - Montpellier 3 - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper investigates whether Burkinabe maize farmers’ fertilizer-use decisionsare correlated with their risk and time preferences. We conducted a survey and a se-ries of hypothetical experiments on a sample of 1,500 farmers. We find that morepatient farmers do use more fertilizer, but it is only because they plant more maize (afertilizer-intensive crop) rather than because they use more fertilizer per hectare ofmaize planted. Conversely, we find no statistically significant link between risk aver-sion and fertilizer use. We use a simple two-period model, which suggests that riskaversion may indeed have an ambiguous effect on fertilizer use. |
| Keywords: | agriculture,risk aversion,time preferences,agricultural price,western africa,fertilizer,aversion au risque,prix agricole,burkina faso,afrique occidentale,engrais |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:hal:ciredw:hal-01429099&r=cbe |
| By: | Alec Brandon; Paul Ferraro; John List; Robert Metcalfe; Michael Price; Florian Rundhammer |
| Abstract: | This study examines the mechanisms underlying long-run reductions in energy consumption caused by a widely studied social nudge. Our investigation considers two channels: physical capital in the home and habit formation in the household. Using data from 38 natural field experiments, we isolate the role of physical capital by comparing treatment and control homes after the original household moves, which ends treatment. We find 35 to 55 percent of the reductions persist once treatment ends and show this is consonant with the physical capital channel. Methodologically, our findings have important implications for the design and assessment of behavioral interventions. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:feb:natura:00598&r=cbe |
| By: | Alain Cohn; Ernst Fehr; Michel André Maréchal |
| Abstract: | In recent years, the banking industry has witnessed several cases of excessive risk-taking that frequently have been attributed to problematic professional norms. We conduct experiments with employees from several banks in which we manipulate the saliency of their professional identity and subsequently measure their risk aversion in a real stakes investment task. If bank employees are exposed to professional norms that favor risk-taking, they should become more willing to take risks when their professional identity is salient. We find, however, that subjects take significantly less risk, challenging the view that the professional norms generally increase bank employees’ willingness to take risks. |
| Keywords: | Risk culture, banking industry, experiment |
| JEL: | G02 M14 C93 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:244&r=cbe |