nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2017‒10‒01
seven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Thou shalt not steal. Taking aversion with legal property claims By Marco Faillo; Matteo Rizzolli; Stephan Tontrup
  2. Cognitive Ability and Bidding Behavior in Second Price Auctions: An Experimental Study By Lee, Ji Yong; Nayga, Rodolfo; Deck, Cary; Drichoutis, Andreas C.
  3. Preference purification and the inner rational agent: a critique of the conventional wisdom of behavioural welfare economics By Gerardo Infante; Guilhem Lecouteux; Robert Sugden
  4. Multidimensional Group Identity and Redistributive Allocation: An Experimental Study By Fuhai HONG; Yohanes E. RIYANTO; Ruike ZHANG
  5. Does Reminding of Behavioural Biases Increase Returns from Financial Trading? A Field Experiment By De Paola, Maria; Gioia, Francesca; Piluso, Fabio
  6. Eliciting Guilt Sensitivity to Predict Real-World Behavior By Shoji, Masahiro
  7. Unethical Behavior and Group Identity in Contests By Julien Benistant; Marie Claire Villeval

  1. By: Marco Faillo (University of Trento); Matteo Rizzolli (LUMSA University); Stephan Tontrup (New York University)
    Abstract: Abstract Some recent experimental literature on the taking game (a variation of the dictator game) suggests that human subjects may generally be taking averse, implying that the moral cost of taking exceeds the moral cost of not giving. In our experiment, our subjects could decide to take tangible objects (lottery scratchcards) brought from outside the lab and thus legally owned by other subjects. This legal treatment was compared with a more standard one where subjects earned their scratchcards inside the lab. Evidence is provided of a (weak) taking aversion that is greater when property is established inside the lab via an effort task than when it is pre-existing and legally enforceable outside the lab
    Keywords: property rights, dictator game, bully game, taking game, taking aversion, stealing, anonymity, effort, scratchcards.
    JEL: C91 D23 K11 P14 P26
    Date: 2017–09
  2. By: Lee, Ji Yong; Nayga, Rodolfo; Deck, Cary; Drichoutis, Andreas C.
    Abstract: Behavioral biases are more pronounced for individuals with lower cognitive abilities. This paper examines what connection if any there is between cognitive ability and bidding strategy in second price auctions. Despite truthful revelation being a weakly dominant strategy, previous experiments have consistently observed overbidding, which makes use of such auctions for inferring homegrown value problematic. Examining the effect of cognitive ability is important as it may help identify when one can reliably recover values from bids. The results indicate that more cognitively able subjects behave in closer accordance with theory, and that cognitive ability partially explains heterogeneity in bidding behavior.
    Keywords: Cognitive ability; Second price auction; Bid deviation; Overbidding; Laboratory experiment
    JEL: C91 C92
    Date: 2017–09–19
  3. By: Gerardo Infante (UEA - University of East Anglia (Norwich)); Guilhem Lecouteux (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS - Centre National de la Recherche Scientifique); Robert Sugden (UEA - University of East Anglia (Norwich))
    Abstract: Neoclassical economics assumes that individuals have stable and context-independent preferences, and uses preference satisfaction as a normative criterion. By calling this assumption into question, behavioural findings cause fundamental problems for normative economics. A common response to these problems is to treat deviations from conventional rational choice theory as mistakes, and to try to reconstruct the preferences that individuals would have acted on, had they reasoned correctly. We argue that this preference purification approach implicitly uses a dualistic model of the human being, in which an inner rational agent is trapped in an outer psychological shell. This model is psychologically and philosophically problematic.
    Keywords: context-dependent preferences, behavioural welfare economics, libertarian paternalism,preference purification, inner rational agent
    Date: 2016
  4. By: Fuhai HONG (Division of Economics, Nanyang Technological University, 14 Nanyang Drive, Singapore 637332.); Yohanes E. RIYANTO (Division of Economics, Nanyang Technological University, 14 Nanyang Drive, Singapore 637332.); Ruike ZHANG (Division of Economics, Nanyang Technological University, 14 Nanyang Drive, Singapore 637332.)
    Abstract: Social identity is embedded in social structures, generated by various social processes, and has multiple dimensions. We report ?ndings from a laboratory experiment eliciting two-dimensional social identities: a horizontal identity determined either randomly or by preferences and a vertical identity de?ned by income status and determined either by luck or performance. We also vary income gaps between vertical identity groups. Participants make redistributive allocation decisions between two others di¤ering in identity attributes. We ?nd robust evidence of in-group favoritism and that both the identity distance between the allocator and the in-group recipient and income gaps in?uence the degree of in-group favoritism.
    Keywords: Social Identities, Horizontal and Vertical Identity Attributes, In-group Favoritism, Income Inequality
    JEL: C91 D03
    Date: 2016–12
  5. By: De Paola, Maria (University of Calabria); Gioia, Francesca (University of Edinburgh); Piluso, Fabio (University of Calabria)
    Abstract: We ran a field experiment to investigate whether nudge policies, consisting in behavioural insight messaging, help to improve performance in financial trading. Our experiment involved students enrolled in a financial trading course in an Italian University who were invited to trade on Borsa Italiana's virtual platform. Students were randomly assigned to a control group and a treatment group. Treated students received a message reminding them of the existence of behavioural biases in financial trading. We find that treated students significantly improve the performance of their portfolio. Several behaviours may explain the increase in performance. We find evidence pointing to a reduction in the home and status quo biases for risk averse nudged participants.
    Keywords: financial trading, behavioural biases, reminders, nudges, home bias, status quo bias, risk aversion
    JEL: D14 E21 E22 O16
    Date: 2017–09
  6. By: Shoji, Masahiro
    Abstract: This study tests guilt aversion by experimentally eliciting guilt sensitivity of villagers in Bangladesh and evaluating its impact on real-world behavior. In a trust game with hidden action, villagers in this study are asked about their reciprocal behavior toward seven potential opponents with different levels of trusting belief. Guilt sensitivity is elicited from the threshold belief to switch from selfish to reciprocal behavior. It appears that males exhibit higher guilt sensitivity. I also find robust supporting evidence for guilt aversion but not for pure altruism or trustworthiness; guilt-averse villagers can borrow from and repay to community members after a disaster. Individuals also suffer less from property crime in villages with a higher guilt-sensitivity neighborhood. However, guilt sensitivity is uncorrelated with contribution to community events. A potential reason for the insignificant effect is discussed.
    Keywords: Guilt aversion; peer effects; antisocial behavior; experiment; Bangladesh
    JEL: C91 C93
    Date: 2017–09–19
  7. By: Julien Benistant (Univ Lyon, Université Lumière Lyon 2, GATE L-SE UMR 5824, F-69130 Ecully, France); Marie Claire Villeval (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France)
    Abstract: Using a real-effort experiment, we studied how minimal group identity affects unethical behavior in a contest game. We varied (i) whether individuals had to report their own output or the output of their competitor, (ii) whether group identity was induced or not, and (iii) whether pairs of competitors shared the same group identity or not. We show that individuals misreported in the same proportion and to the same extent by inflating their output or by decreasing their opponent’s output. Misreporting was affected neither by the competitor’s group identity nor by the individual’s beliefs about misreporting. This suggests that in such competitive settings, unethical behavior is mainly driven by an unconditional desire to win.
    Keywords: Unethical behavior, lying, group identity, competition, experiment
    JEL: C92 M54 D63
    Date: 2017

This nep-cbe issue is ©2017 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.