nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2017‒11‒05
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Thinking about Tomorrow? Predicting Experimental Choice Behavior and Life Outcomes from a Survey Measure of Present Bias By Pia R. Pinger
  2. Can Rank-Order Competition Resolve the Free-Rider Problem in the Voluntary Provision of Impure Public Goods? Experimental Evidence By Andrej Angelovski; Tibor Neugebauer; Maroš Servatka
  3. A Matter of Perspective: How Experience Shapes Preferences for Redistribution By Lea Cassar; Arnd H. Klein
  4. Trusting versus Monitoring: An Institutional Choice Experiment By Andrej Angelovski; Daniela Di Cagno; Werner Güth; Daniela Grieco
  5. The Importance of Peers for Compliance with Norms of Fair Sharing By Simon Gaechter; Leonie Gerhards; Daniele Nosenzo
  6. Contests as Selection Mechanisms: The Impact of Risk Aversion By Christoph March; Marco Sahm
  7. (Un-)Stable Preferences, Beliefs, and the Predictability of Behaviour By Wolff, Irenaeus
  8. The Big Five personality traits and partisanship in England By Aidt, T.; Rauh, C.
  9. Focusing Attention in Multiple Tasks By Breu, Maximilian
  10. Disappointment Aversion and Social Comparisons in a Real-Effort Competition By Simon Gaechter; Lingbo Huang; Martin Sefton

  1. By: Pia R. Pinger
    Abstract: Using a representative sample of the German adult population, this paper investigates the extent to which a survey measure of present bias predicts present-biased choice behavior in incentive-compatible experiments and real-world outcomes related to in-vestments in financial assets and human capital. The results are threefold. First, the survey and experimental measures of present bias are significantly related. Second, the survey measure predicts choices between immediate and delayed monetary payoffs inan incentive-compatible experiment, but not between payoffs at two future points in time. Third, the survey measure of present bias is a good predictor of the propensity to save money, to obtain a university degree, and to maintain a healthy life style. In most specifications, the survey measure tends to be a stronger predictor of real life outcomes than the experimentally elicited measure of present bias.
    Keywords: time discounting, present bias, self-control, education, health behavior
    JEL: D01 D03 C91 D91
    Date: 2017
  2. By: Andrej Angelovski (LUISS Guido Carli); Tibor Neugebauer (University of Luxembourg); Maroš Servatka (Macquarie Graduate School of Management;University of Economics in Bratislava)
    Abstract: Publicly provided goods often create differential payoffs due to timely or spatial distances of group members. We design and test a provision mechanism which utilizes rank competition to mitigate free-riding. In our Rank-Order Voluntary Contribution Mechanism (Rank-Order-VCM) group members compete via observable contributions for a larger share of the public good; high contributors receive preferential access (and thus a larger share), while low contributors receive a restricted access (lower share). In a laboratory experiment Rank-Order-VCM elicits median contributions equal to the full endowment throughout the finitely played games with constant groups, including the last period. In the control treatment, with randomly assigned ranks and therefore also payoffs from the public good, the contributions are significantly lower and decline over time. We thus provide evidence of rank competition, in situations where discriminatory access to public goods is possible, being efficiency enhancing.
    Keywords: Competition, contest, cooperation, public goods, experiment, voluntary contribution mechanism.
    JEL: C91 H41
    Date: 2017–08
  3. By: Lea Cassar; Arnd H. Klein
    Abstract: We investigate in a laboratory experiment if the experience of economic failure or success shapes people’s preferences for redistribution beyond self-interest. Subjects generated a high or a low income either through a lottery or through an effort-based tournament. A sub-set of subjects could then redistribute the income of another sub-set of subjects. We find that individuals who lost the tournament (lottery) redistribute significantly more than all the other types of distributors when the inequality is generated by the tournament (lottery). The effect still holds when controlling for self-selection into different outcomes of the tournament and can be explained by in- or out-group bias and a self-serving bias in responsibility attribution. These findings have implications for public policies and for the design of compensation schemes in organizations.
    Keywords: distributive justice, experience, failure, in-group bias, self-serving bias
    JEL: D31 D63 H23 M52
    Date: 2017
  4. By: Andrej Angelovski (LUISS Guido Carli, Rome); Daniela Di Cagno (LUISS Guido Carli, Rome); Werner Güth (Luiss Guido Carli, Rome; Frankfurt School of Finance and Management, Frankfurt; Max Planck Institute on Collective Goods, Bonn); Daniela Grieco (Università Bocconi)
    Abstract: To shed light on the choice between trusting a partner versus monitoring her, we let one party decide between two stylized game paradigms—namely, the Ultimatum Game and the Yes–No Game. While in Ultimatum Games responders monitor the allocation proposal, in Yes–No Games, responders react without monitoring. Since monitoring can be costly, we allow the shared amount in Yes–No Games to be larger than that in Ultimatum Games. Experimental conditions can vary the monitoring cost, who decides between trusting and monitoring (i.e., proposer or responder), and whether the responder’s conflict payoff will be negative or positive. The latter brings about Yes–No Game (i.e., trusting) social dilemma situations. We question whether some responders opt for trusting and predominantly accept an unknown offer, especially when justified by efficiency concerns, and whether some proposers, due to behavioral concerns, are more inclined to suggest monitoring.
    Keywords: Trust, Monitoring, Institutional Choice, Ultimatum Game, Yes No Game
    JEL: C91 C72 C73
    Date: 2017–08
  5. By: Simon Gaechter; Leonie Gerhards; Daniele Nosenzo
    Abstract: A burgeoning literature in economics has started examining the role of social norms in explaining economic behavior. Surprisingly, the vast majority of this literature has studied social norms in asocial decision settings, where individuals are observed to act in isolation from each other. In this paper we use a large-scale dictator game experiment (N = 850) to show that “peers†can have a profound influence on individuals’ perceptions of norms of fair sharing, which we elicit in an incentive compatible way. However, in contrast to these strong peer effects in social norms of fair sharing, we find limited evidence of the influence of norms and peers on actual sharing behavior. We discuss how these results can be explained by heterogeneity in normative views as well as in willingness to comply with norms.
    Keywords: social norms, norm compliance, peer effects, fair sharing, dictator game, framing, experiments
    JEL: A13 C92 D03
    Date: 2017
  6. By: Christoph March; Marco Sahm
    Abstract: We investigate how individual risk preferences affect the likelihood of selecting the more able contestant within a two-player Tullock contest. Our theoretical model yields two main predictions: First, an increase in the risk aversion of a player worsens her odds unless she already has a sufficiently large advantage. Second, if the prize money is sufficiently large, a less able but less risk averse contestant can achieve an equal or even higher probability of winning than a more able but more risk averse opponent. In a laboratory experiment we confirm both, the non-monotonic impact and the compensating effect of risk aversion on winning probabilities. Our results suggest a novel explanation for the gender gap and the optimality of limited monetary incentives in selection contests.
    Keywords: selection contest, risk aversion, competitive balance, gender gap
    JEL: C72 D72 J31 K41 M51 M52
    Date: 2017
  7. By: Wolff, Irenaeus
    Abstract: I show that whether participants generally believe in others’ preference stability is a crucial determinant of behaviour. Whether a participant’s behaviour can be predicted by her best-response or a Nash-equilibrium in a context where she can observe others' elicited preferences depends heavily both on the participant having stable preferences and on her generally believing in others’ preference stability. The latter is true because such a belief is associated with less dispersed beliefs.
    JEL: C72
    Date: 2017
  8. By: Aidt, T.; Rauh, C.
    Abstract: We propose a new framework for the study of the psychological foundation of party identification. We draw a distinction between the part of an individual's party preference that is stable throughout adult life and the dynamic part responding to lifecycle events and macro shocks. We theorize that the Big Five personality traits exert a causal effect on the stable part of an individual's party preference and provide evidence from a large nationally representative English panel dataset in support of this theory. We find that supporters of the major parties (Labour, the Conservatives and the Liberal Democrats) have substantively different personality traits. Moreover, we show that those not identifying with any party, who are close to holding the majority, are similar to those identifying with the Conservatives. We show that these results are robust to controlling for cognitive skills and parental party preferences, and to estimation on a subsample of siblings. The relationship between personality traits and party identification is stable across birth cohorts.
    Keywords: Big Five personality traits, Party identification, Partisanship, England
    JEL: D72
    Date: 2017–10–23
  9. By: Breu, Maximilian
    Abstract: With increasingly complex workplaces, agents face a multitude of different tasks. Contract theory predicts complex contracts, however, actual contracts are simpler. I resolve this puzzle through agents' limited attention which leads to an instinctive focus on tasks with high outcome variation. The limited attention results in the wrong allocation of effort. This provides an explanation of findings in field studies, when the reduction of additional incentives increases productivity.
    Date: 2017
  10. By: Simon Gaechter; Lingbo Huang; Martin Sefton
    Abstract: We present an experiment to investigate the source of disappointment aversion in a sequential real-effort competition. Specifically, we study the contribution of social comparison effects to the disappointment aversion previously identified in a two-person real-effort competition (Gill and Prowse, 2012). To do this we compare “social†and “asocial†versions of the Gill and Prowse experiment, where the latter treatment removes the scope for social comparisons. If disappointment aversion simply reflects an asymmetric evaluation of losses and gains we would expect it to survive in our asocial treatment, while if losing to or winning against another person affects the evaluation of losses/gains we would expect treatment differences. We find behavior in social and asocial treatments to be similar, suggesting that social comparisons have little impact in this setting. Unlike in Gill and Prowse we do not find evidence of disappointment aversion.
    Keywords: real effort competition, social comparison effects, disappointment aversion, reference-dependent preferences
    JEL: C91 D12 D81 D84
    Date: 2017

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