nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2018‒01‒08
eleven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Deadlines and Cognitive Limitations By Steffen Altmann; Christian Traxler; Philipp Weinschenk
  2. Creating an Efficient Culture of Cooperation By Fehr, Ernst; Williams, Tony
  3. Socio-Economic Status and Inequalities in Children's IQ and Economic Preferences By Deckers, Thomas; Falk, Armin; Kosse, Fabian; Pinger, Pia; Schildberg-Hörisch, Hannah
  4. The disposition effect when deciding on behalf of others By Hermann, Daniel; Mußhoff, Oliver; Rau, Holger A.
  5. Some (Mis)facts about 2D:4D, Preferences and Personality By Judit Alonso; Roberto Di Paolo; Giovanni Ponti; Marcello Sartarelli
  6. The Relative Importance of Personal Characteristics for Job Offers By Peter Hoeschler; Uschi Backes-Gellner
  7. Entitled Women – but Not Men – Make Tougher Strategic Demands as Proposers in the Ultimatum Game By Elif E. Demiral; Johanna Mollerstrom
  8. Does a Short-Term Increase in Incentives Boost Performance? By Angelova, Vera; Giebe, Thomas; Ivanova-Stenzel, Radosveta
  9. Last Place Aversion in Queues By Ryan W. Buell
  10. Aiming to choose correctly or to choose wisely? The optimality-accuracy trade-off in decisions under uncertainty By Thomas Garcia; Sébastien Massoni
  11. On the psychological motives of economic performance By Gonzalez Jimenez, Victor

  1. By: Steffen Altmann; Christian Traxler; Philipp Weinschenk
    Abstract: This paper studies the interplay between deadlines and cognitive limitations. We analyze an agent’s decision to complete a one-off task under a deadline. Postponing the task can be beneficial for the agent; missing the deadline, however, leads to a drop in the agent’s rewards. If the agent exhibits cognitive limitations, postponing increases the risk of becoming inattentive and failing to complete the task in time. Our framework provides a rich set of predictions on the behavioral implications of deadlines. We test these predictions in a field experiment at a dental clinic, in which we exogenously vary deadlines and rewards for arranging check-up appointments. The empirical results underline the behavioral relevance of cognitive limitations. Imposing relatively tight deadlines induces patients to act earlier and at a persistently higher frequency than without a deadline. Evidence from a follow-up experiment and complementary surveys supports the notion that deadlines may serve as a powerful instrument when individuals’ cognitive capacity is limited.
    Keywords: deadlines, cognitive limitations, limited memory, field experiment
    JEL: C93 D03 D91
    Date: 2017
  2. By: Fehr, Ernst (University of Zurich); Williams, Tony (University of Zurich)
    Abstract: Throughout human history, informal sanctions by peers were ubiquitous and played a key role in the enforcement of social norms and the provision of public goods. However, a considerable body of evidence suggests that informal peer sanctions cause large collateral damage and efficiency costs. This raises the question whether peer sanctioning systems exist that avoid these costs and whether other, more centralized, punishment systems are superior and will be preferred by the people. Here, we show that efficient peer sanctioning without much need for costly punishment emerges quickly if we introduce two relevant features of social life into the experiment: (i) subjects can migrate across groups with different sanctioning institutions and (ii) they have the chance to achieve consensus about normatively appropriate behavior. We also show that subjects universally reject peer sanctioning without a norm consensus opportunity – an institution that has hitherto dominated research in this field – in favor of our efficient peer sanctioning institution or an equally efficient institution where they delegate the power to sanction to an elected judge. Migration opportunities and normative consensus building are key to the quick emergence of an efficient culture of universal cooperation because the more prosocial subjects populate the two efficient institutions first, elect prosocial judges (if institutionally possible), and immediately establish a social norm of high cooperation. This norm appears to guide subjects' cooperation and punishment choices, including the virtually complete removal of antisocial punishment when judges make the sanctioning decision.
    Keywords: endogenous institutions, punishment, cooperation, public goods
    JEL: D02 D03 D72 H41
    Date: 2017–11
  3. By: Deckers, Thomas (University of Bonn); Falk, Armin (briq, University of Bonn); Kosse, Fabian (briq); Pinger, Pia (University of Bonn); Schildberg-Hörisch, Hannah (Heinrich Heine University Düsseldorf)
    Abstract: This paper explores inequalities in IQ and economic preferences between children from high and low socio-economic status (SES) families. We document that children from high SES families are more intelligent, patient and altruistic, as well as less risk-seeking. To understand the underlying causes and mechanisms, we propose a framework of how parental investments as well as maternal IQ and economic preferences influence a child's IQ and preferences. Within this framework, we allow SES to influence both the level of parental time and parenting style investments, as well as the productivity of the investment process. Our results indicate that disparities in the level of parental investments hold substantial importance for SES gaps in economic preferences and, to a lesser extent, IQ. In light of the importance of IQ and preferences for behaviors and outcomes, our findings offer an explanation for social immobility.
    Keywords: socio-economic status, time preferences, risk preferences, altruism, experiments with children, origins of preferences, human capital
    JEL: C90 D64 D90 D81 J13 J24 J62
    Date: 2017–11
  4. By: Hermann, Daniel; Mußhoff, Oliver; Rau, Holger A.
    Abstract: The disposition effect is a well-established phenomenon which describes the behavior of investors that are more willing to sell capital gains than capital losses. In this article we present experimental evidence on a situation where an investor decides on behalf of another person. In our setting, trading effort should only be affected by investors' intrinsic motivation, as trading actions only influence the profits of a matched person. In a control treatment, trades directly influence investors' profits. Overall, we find that trading on behalf of others increases disposition effects. In this treatment, we find that the effect is caused by inexperienced investors, characterized by a greater concern for others. Thus, trading for others results in an emotional burden for these investors, which leads to weak trading performance.
    Keywords: disposition effect,experiment,decisions on behalf of others,social value orientation,loss aversion
    JEL: C91 D14 D81
    Date: 2017
  5. By: Judit Alonso (Universidad de Alicante); Roberto Di Paolo (Universidad de Alicante); Giovanni Ponti (Universidad de Alicante); Marcello Sartarelli (Dpto. Fundamentos del Análisis Económico)
    Abstract: We study how the ratio between the length of the second and fourth digit (2D:4D) correlates with choices in risk and social preferences elicitation tasks by building a large dataset from six experimental projects with more than 900 subjects. We find that social preferences are weakly significantly lower when 2D:4D is above the median value and, in addition, we find that they vary significantly with cognitive ability. When we look at risk preferences, we find that a high 2D:4D is not significantly associated with the frequency of subjects’ risky choices. Finally, when we look at personality traits, we find no significant association, except for some significant association with individual questions used to obtain personality proxies.
    Keywords: 2D:4D, cognitive re¿ection, gender, personality, risk, social preferences
    JEL: C91 C92 D8
    Date: 2017–12
  6. By: Peter Hoeschler (University of Zurich); Uschi Backes-Gellner (University of Zurich)
    Abstract: We investigate the relative importance of different personal characteristics for firms' hiring decisions. Our design allows firms to observe potential workers during a long screening period. At the end of that period firms can decide to make job offers, thereby revealing their preferences about workers' personal characteristics. We connect real-world job offers and workers' personal characteristics, both of which are usually unobserved. To investigate the relative importance of various personal characteristics for the likelihood to receive a job offer, we use a unique panel data set of entry-level workers. We find that grades and non-cognitive skills are important for receiving a job offer, with the Big Five Personality traits being the most important predictor. We find no effects for intelligence or economic preferences.
    Keywords: Job Offers, Ability, Non-Cognitive Skills, Preferences, Vocational Education
    JEL: D03 M51 J24
    Date: 2017–12
  7. By: Elif E. Demiral; Johanna Mollerstrom
    Abstract: In a laboratory experiment subjects are matched in pairs and interact in an Ultimatum Game. In the Entitlement treatment, the right to be the proposer is allocated to the personin the pair who performed better in a previously conducted math task. Compared to behavior in the control treatment, where the roles are randomly allocated, the proposers increase their strategic demands and offer a smaller share of the pie to the responder in the Entitlement treatment. This result is drivenentirely by female proposers; when earning their role, they significantly lower their offers, whereas male proposers do not behave differently than when roles are randomly allocated. This is in line with previous research suggesting that women are more sensitive to contextual factors and social cues, meaning that strengthening feelings of entitlement could be a way to decrease gender differences innegotiation behavior.
    Date: 2017
  8. By: Angelova, Vera (TU Berlin); Giebe, Thomas (Linnaeus University); Ivanova-Stenzel, Radosveta (TU Berlin)
    Abstract: If agents are exposed to continual competitive pressure, how does a short-term variation of the severity of the competition affect agents\' performance? In a real-effort laboratory experiment, we study a one-time increase in incentives in a sequence of equally incentivized contests. Our results suggest that a short-term increase in incentives induces a behavioral response but does not boost total performance.
    Keywords: contest; tournament; real-effort; experiment; contract theory; forward-looking;
    JEL: C91 D91 J22 J33
    Date: 2017–12–28
  9. By: Ryan W. Buell (Harvard Business School, Technology and Operations Management Unit)
    Abstract: This paper investigates whether people exhibit last place aversion in queues and its implications for their experiences and behaviors in service environments. An observational analysis of customers queuing at a grocery store, and three online field experiments in which participants waited in virtual queues, revealed that waiting in last place diminishes wait satisfaction while increasing the probabilities of switching and abandoning queues. After controlling for other factors, people in last place were more than twice as likely to switch queues, which increased the duration of their wait and diminished their overall satisfaction. Moreover, people in last place were more than four times more likely to renege from queues, altogether giving up on the service for which they were queuing. The results indicate that this behavior is partially explained by the inability to make a downward social comparison; namely, when no one is behind a queuing individual, that person is less certain that continuing to wait is worthwhile. Furthermore, this paper provides evidence that queue transparency is an effective service design lever that managers can use to reduce the deleterious effects of last place aversion in queues. When people can't see that they're in last place, the behavioral effects of last place aversion are nullified, and when they can see that they're not in last place, the tendency to renege is greatly diminished.
    Keywords: Behavioral operations, queues, reference effects, last place aversion, transparency
    Date: 2017–12
  10. By: Thomas Garcia (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-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Sébastien Massoni (QuBE - School of Economics and Finance, Queensland University of Technology, Australian Centre for Entrepreneurship Research)
    Abstract: When making a decision under uncertainty, individuals aim to achieve opti-mality. In general, an accurate decision is optimal. However, in real life situations asymmetric stakes induce an unusual divergence between optimality and accuracy. We highlight this optimality-accuracy trade-off and study its origins using two experiments on perceptual decision making. We use Signal Detection Theory as a normative benchmark. The first experiment confirms the existence of an optimality-accuracy trade-off with a leading role of accuracy. The second experiment explains this trade-off by the concern of people for being right. Abstract When making a decision under uncertainty, individuals aim to make the best
    Keywords: Optimality, accuracy, signal detection theory, incentives, experiment
    Date: 2017–11–09
  11. By: Gonzalez Jimenez, Victor (Tilburg University, School of Economics and Management)
    Abstract: This dissertation consists of four chapters in behavioral economics. Chapters 2 and 3 study the psychological effects of poverty and low social status, and their influence on individual attainment and economic performance. The main message of these chapters is that disadvantaged individuals in the society, may exhibit suboptimal economic performance due to the psychological component associated to their position in the society, rather than for their abilities or their material constraints. Chapters 4 and 5, study incentive schemes that exploit behavioral biases to motivate the individual. The idea is to design cost-efficient contracts, whose novelty does not rely on the monetary incentives that they deliver, but on the usage of psychological regularities at the benefit of the employer. The contract studied in Chapter 4 features the formation of reference points through the elicitation of a production threshold. This contract takes advantage of the psychological loss that the individual feels from falling short of her target. The contract studied in Chapter 5, exploits the regularity that individuals overweight small probabilities, by implementing random performance evaluations. These incentives deliver higher economic outcomes, than standard pay-for-performance contracts.
    Date: 2017

This nep-cbe issue is ©2018 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.