nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2017‒06‒18
six papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Nudging in education: A survey By Mette Trier Damgaard; Helena Skyt Nielsen
  2. Digestible information: The impact of Multiple Traffic Light nutritional labeling in a developing country By Defago, Daniel; Geng, José F.; Molina, Oswaldo; Santa María, Diego
  3. Facing Yourself: A Note on Self-image By Armin Falk
  4. Essays on behavioral finance By Terzi, Ayse
  5. Revealing the Economic Consequences of Group Cohesion By Simon Gaechter; Chris Starmer; Fabio Tufano
  6. The Merit Primacy Effect By Alexander Cappelen; Karl Ove Moene; Siv-Elisabeth Skjelbred; Bertil Tungodden

  1. By: Mette Trier Damgaard (Department of Economics and Business Economics, Aarhus University, Denmark); Helena Skyt Nielsen (Department of Economics and Business Economics, Aarhus University, Denmark)
    Abstract: Can we nudge children, youths and their parents to make better educational decisions? Educational decisions involve immediate costs and potential future benefits. Research suggests that in such settings behavioural barriers (such as lack of self-control, limited attention and social norms) are likely to influence choices. This raises the question whether low cost ”nudges” can improve people’s educational choices. While interventions targeting cognitive or attentional limitations seem to be effective, it is too soon to provide a roadmap for introducing nudges in the education sector.
    Keywords: Behavioural bias, boost policies, education choice, human capital investment
    JEL: D03 D04 I20
    Date: 2017–06–08
  2. By: Defago, Daniel; Geng, José F.; Molina, Oswaldo; Santa María, Diego
    Abstract: Bad dietary habits are among the main causes of increasing obesity and other health problems. According to the literature, information asymmetry and cognitive biases may lead to suboptimal decisions by individuals regarding food consumption. Many countries have implemented different forms of nutritional labelling in order to provide individuals with better information when making choices. We assess the Multiple Traffic Light (MTL) system, an alternative and simplified labelling format implemented in the UK. Although this system has been found to significantly improve consumer’s understanding of nutritional quality, evidence regarding its effect on actual choices is scarce and uncertain. In order to evaluate this format’s effectiveness on consumer decisions, we conduct a selection experiment with a particular sample: university students in a developing country. Our results show that the proposed nutritional labeling system has a significant positive effect on the nutritional quality of consumers’ decisions regarding snacks and beverages. These findings contribute to the existing literature in two ways. First, we prove that MTL labels can in fact modify real consumer behavior towards healthier nutritional habits, despite the difficulties faced by previous work in identifying such an effect. Second, we provide new insights on how to assess the increasing problem of bad nutrition in emerging economies.
    Keywords: Nutritional labeling, Developing Countries, Experiment
    JEL: C91 I12 I18
    Date: 2017–06–06
  3. By: Armin Falk (briq)
    Abstract: Numerous signaling models in economics assume image concerns. These take two forms, as relating either to social image or self-image. While empirical work has identified the behavioral importance of the former, less is known about the role of enhanced self-image concerns. In this paper, we exogenously vary self-image concerns in manipulating self-directed attention and study the impact on moral behavior. The choice context in the experiment is whether subjects inflict a painful electric shock on another subject to receive a monetary payment. Three between-subjects conditions are studied. In the main treatment, subjects see their own face on the decision screen in a real-time video feed. In the two control conditions, subjects see either no video at all or a neutral video. We find that the exogenous increase in self-image concerns significantly reduces the fraction of subjects inflicting pain. The finding suggests the importance of self-awareness for moral decision making with implications for theory as well as practical applications to promote socially desirable outcomes.
    Keywords: self-image, moral behavior
    JEL: D64 C91
    Date: 2017–06
  4. By: Terzi, Ayse (Tilburg University, School of Economics and Management)
    Abstract: This thesis deals with a range of topics in experimental and behavioral finance. The first part investigates the role of personal inclination in reference point employment by individuals. The second part extends this questions by focusing on the role of personality traits and demographic factors in driving reference point exhibition in decision making under risk. The third part documents the role of ambiguity in the dissemination of private information in asset markets. Finally, the last part explores differences in time discounting under risk and ambiguity.
    Date: 2017
  5. By: Simon Gaechter (School of Economics, University of Nottingham); Chris Starmer (School of Economics, University of Nottingham); Fabio Tufano (School of Economics, University of Nottingham)
    Abstract: We introduce the concept of “group cohesion†to capture the economic consequences of ubiquitous social relationships in group production. We measure group cohesion, adapting the “oneness scale†from psychology. A comprehensive program of new experiments reveals the considerable economic impact of cohesion: higher cohesion groups are significantly more likely to achieve Pareto-superior outcomes in classic weak-link coordination games. We show that effects of cohesion are economically large, robust, and portable. We identify social preferences as a primary mechanism explaining the effects of cohesion. Our results provide proof of concept for group cohesion as a productive new tool of economic research.
    Date: 2017–09
  6. By: Alexander Cappelen (Norwegian School of Economics); Karl Ove Moene (University of Oslo); Siv-Elisabeth Skjelbred (University of Oslo); Bertil Tungodden (Norwegian School of Economics)
    Abstract: Do people give primacy to merit when luck partly determines earnings? This paper reports from a novel experiment where third-party spectators have to decide whether to redistribute from a high-earner to a low-earner in cases where earnings are determined by luck and merit. Our main finding is that the spectators assign strong primacy to merit in such situations, and as a result violate basic fairness conditions. We believe that the results shed new light on inequality acceptance in society, in particular by showing how just a little bit of merit can make people significantly more inequality accepting.
    Keywords: luck, experimental economics, Inequality, fairness
    JEL: C93 D31 D63
    Date: 2017–06

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