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on Cognitive and Behavioural Economics |
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Issue of 2017‒04‒02
eight papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Toke R. Fosgaard (Department of Food and Resource Economics, University of Copenhagen); Lars G. Hansen (Department of Food and Resource Economics, University of Copenhagen); Erik Wengström (Department of Economics, Lund University; Department of Economics, University of Copenhagen) |
| 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: | H41 C90 D03 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:foi:wpaper:2017_02&r=cbe |
| By: | Tomas Miklanek |
| Abstract: | This paper examines endogenous decisions to acquire useful information. My experimental design tries to test predictions of ego-utility theories and other relevant theories about the decision-making process of agents in the environment with costless signals. Only slightly more than half of the subjects acquired an optimal number of the signals for payoff maximization. The results suggest that for the subjects making sub-optimal decisions, aversion to cognitive dissonance is the prevalent channel. Contrary to this, I find much less support for the ego-utility theory and theory of information ignorance in my setting. The availability of information alone does not automatically lead to an improvement in decisions. |
| Keywords: | information acquisition; experiment; overconfidence; |
| JEL: | C91 D03 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp582&r=cbe |
| By: | Antonio Cabrales (Department of Economics, University College London); Antonio M. Espín (Department of Economics, Middlesex University Business School); Praveen Kujal (Department of Economics, Middlesex University and Economic Science Institute, Chapman University); Stephen Rassenti (Economic Science Institute, Chapman University) |
| Abstract: | Recent experiments suggest that social behavior may be shaped by the time available for decision making. It is known that fast decision making relies more on intuition whereas slow decision making is affected by reflective processes. Little is known, however, about whether people correctly anticipate the effect of intuition vs. reflection on others’ decision making. This is important in everyday situations where anticipating others’ behavior is often essential. A good example of this is the extensively studied Trust Game where the trustor, by sending an amount of money to the trustee, runs the risk of being exploited by the trustee’s subsequent action. We use this game to study how trustors’ choices are affected by whether trustees are externally forced to respond quickly or slowly. We also examine whether trustors’ own tendency to stop and reflect on their intuitions (as measured by the Cognitive Reflection Test) moderates how they anticipate the effect of reflection on the behavior of trustees. We find that the least reflective trustors send less money when trustees are forced to respond “reflectively” rather than “intuitively”, but we also argue that this is a wrong choice. In general, no group, including the ones with the largest number of reflective individuals, is good at anticipating the (positive) effect of forced delay on others’ trustworthiness |
| Keywords: | trust, trustworthiness, beliefs, reflection, dual-process, intuition |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:17-05&r=cbe |
| By: | Feld, Jan; Sauermann, Jan; de Grip, Andries (Research Centre for Educ and Labour Mark) |
| Abstract: | The Dunning–Kruger effect states that low performers vastly overestimate their performance while high performers more accurately assess their performance. Researchers usually interpret this empirical pattern as evidence that the low skilled are vastly overconfident while the high skilled are more accurate in assessing their skill. However, measurement error alone can lead to a negative relationship between performance and overestimation, even if skill and overconfidence are unrelated. To clarify the role of measurement error, we restate the Dunning–Kruger effect in terms of skill and overconfidence. We show that we can correct for bias caused by measurement error with an instrumental variable approach that uses a second performance as instrument. We then estimate the Dunning–Kruger effect in the context of the exam grade predictions of economics students, using their grade point average as an instrument for their exam grade. Our results show that the unskilled are more overconfident than the skilled. However, as we predict in our methodological discussion, this relationship is significantly weaker than ordinary least squares estimates suggest. |
| Keywords: | Dunning-Kruger effect, overconfidence, judgment error, measurement error, instrumental variable |
| JEL: | D03 I23 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umaror:2017003&r=cbe |
| By: | Bart Golsteyn (Maastricht University and SOFI); Cécile A. J. Magnée (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: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2017-023&r=cbe |
| By: | Tomas Miklanek |
| Abstract: | This study introduces a theoretical model of inequality aversion which can also be used in an environment with information asymmetries. The model is based on the non-paternalistic approach where, the own utility function incorporates the utility of other people as perceived by a decision maker. Moreover it allows extensions for other motives which may result in pro-social behavior. I extend the model by adding shame aversion as an additional driver for apparently altruistic behavior. Threat of shame is induced by different levels of exposure of either own actions or identity to the third party observers. I also experimentally test predictions of the model using a very simple environment of a dictator’s game. The experimental design aims to remove additional confounding behavioral effects present in the previous literature. The results suggest that even a very small exposure results in significantly higher amounts sent to recipients. The analysis also shows that the agents, who believe that they can conceal their own actions in front of the less informed counterpart, exploit this information asymmetry for their monetary benefit. |
| Keywords: | shame; dictator game; anonymity; experiment; |
| JEL: | C91 D03 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp581&r=cbe |
| By: | Louis Lévy-Garboua (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal); Claude Montmarquette (CIRANO - Centre Interuniversitaire de Recherche en ANalyse des Organisations); Jonathan Vaksmann (UM - Université du Maine); Marie-Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Etienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We study mutual-aid games in which individuals choose to contribute to an informal mutual insurance pool. Individual coverage is determined by the ag- gregate level of contributions and a sharing rule. We analyze theoretically and experimentally the (ex ante) efficiency of equal and contribution-based coverage. The equal coverage mechanism leads to a unique no-insurance equilibrium while contribution-based coverage develops multiple equilibria and improves efficiency. Experimentally, the latter treatment reduces the amount of transfers from high contributors to low contributors and generates a \dual interior equilibrium". That dual equilibrium is consistent with the co-existence of different prior norms which correspond to notable equilibria derived in the theory. This results in asymmetric outcomes with a majority of high contributors less than fully reimbursing the global losses and a significant minority of low contributors less than fully defecting. Such behavioral heterogeneity may be attributed to risk attitudes (risk tolerance vs risk aversion) which is natural in a risky context. |
| Keywords: | mutual-aid games |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-01476440&r=cbe |
| By: | Feld, Jan; Sauermann, Jan; De Grip, Andries |
| Abstract: | The Dunning–Kruger effect states that low performers vastly overestimate their performance while high performers more accurately assess their performance. Researchers usually interpret this empirical pattern as evidence that the low skilled are vastly overconfident while the high skilled are more accurate in assessing their skill. However, measurement error alone can lead to a negative relationship between performance and overestimation, even if skill and overconfidence are unrelated. To clarify the role of measurement error, we restate the Dunning–Kruger effect in terms of skill and overconfidence. We show that we can correct for bias caused by measurement error with an instrumental variable approach that uses a second performance as instrument. We then estimate the Dunning–Kruger effect in the context of the exam grade predictions of economics students, using their grade point average as an instrument for their exam grade. Our results show that the unskilled are more overconfident than the skilled. However, as we predict in our methodological discussion, this relationship is significantly weaker than ordinary least squares estimates suggest. |
| Keywords: | Dunning–Kruger effect, Overconfidence, Judgment error, Measurement error, Instrumental variable, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwecf:6170&r=cbe |