nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2018‒02‒12
fourteen papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Are individuals more generous in loss contexts? By François Cochard; Alexandre Flage; Grolleau Gilles; Sutan Angela
  2. Modelling Human-like Behavior through Reward-based Approach in a First-Person Shooter Game By Makarov, Ilya; Zyuzin, Peter; Polyakov, Pavel; Tokmakov, Mikhail; Gerasimova, Olga; Guschenko-Cheverda, Ivan; Uriev, Maxim
  3. Are Emotionally Intelligent People More Emotionally Stable? An Experience Sampling Study By Dmitry Lyusin; Abdul-Raheem Mohammed
  4. Winner-Take-All and Proportional-Prize Contests: Theory and Experimental Results By Cason, Timothy; Masters, William; Sheremeta, Roman
  5. Defendant Should Have the Last Word – Experimentally Manipulating Order and Provisional Assessment of the Facts in Criminal Procedure By Christoph Engel; Andreas Glöckner; Sinika Timme
  6. Trust and Trustworthiness in College: An Experimental Analysis By Francisco B. Galarza
  7. Confidence and career choices: An experiment By Barron, Kai; Gravert, Christina
  8. Under Risk, Over Time, Regarding Other People: Language and Rationality Within Three Dimensions By Dorian Jullien
  9. Small Differences in Experience Bring Large Differences in Performance By Levine, Sheen S.; Reypens, Charlotte
  10. Hyperbolic discounting can be good for your health By Strulik, Holger; Trimborn, Timo
  11. Simple guilt and cooperation By Ronald Peeters; Marc Vorsatz
  12. Alternative Measures of Noncognitive Skills and Their Effect on Retirement Preparation and Financial Capability By Gema Zamarro
  13. Measuring individual risk-attitudes: an experimental comparison between Holt & Laury measure and an insurance-choices-based procedure By Anne Corcos; François Pannequin; Claude Montmarquette,
  14. Preferences for redistribution in the US, Italy, Norway: An experiment study By Grimalda, Gianluca; Farina, Francesco; Schmidt, Ulrich

  1. By: François Cochard (Université de Bourgogne Franche-Comté, CRESE); Alexandre Flage (Université de Bourgogne Franche-Comté, CRESE); Grolleau Gilles (University Bourgogne Franche-Comté, Burgundy School of Business); Sutan Angela (University Bourgogne Franche-Comté, Burgundy School of Business)
    Abstract: Using a loss-framed variant of the dictator game, we investigate how dictators split a loss between themselves and a recipient. In a loss context, we try to disentangle the effects of a more self-oriented preference from that of a higher social responsibility. We find that in the loss context, individuals offer more, and women offer more than men. This could be attributed to a more responsible response to a powerless recipient in a loss context.
    Keywords: dictator game, loss, loss aversion, own/other-regarding preferences, social responsibility
    JEL: C91 D03
    Date: 2018–01
  2. By: Makarov, Ilya; Zyuzin, Peter; Polyakov, Pavel; Tokmakov, Mikhail; Gerasimova, Olga; Guschenko-Cheverda, Ivan; Uriev, Maxim
    Abstract: We present two examples of how human-like behavior can be implemented in a model of computer player to improve its characteristics and decision-making patterns in video game. At first, we describe a reinforcement learning model, which helps to choose the best weapon depending on reward values obtained from shooting combat situations.Secondly, we consider an obstacle avoiding path planning adapted to the tactical visibility measure. We describe an implementation of a smoothing path model, which allows the use of penalties (negative rewards) for walking through \bad" tactical positions. We also study algorithms of path nding such as improved I-ARA* search algorithm for dynamic graph by copying human discrete decision-making model of reconsidering goals similar to Page-Rank algorithm. All the approaches demonstrate how human behavior can be modeled in applications with significant perception of intellectual agent actions.
    Keywords: Human-like Behavior, Game Arti cial Intelligence, Reinforcement Learning, Path Planning, Graph-based Search, Video Game
    JEL: C91
    Date: 2016–07–18
  3. By: Dmitry Lyusin (National Research University Higher School of Economics); Abdul-Raheem Mohammed (National Research University Higher School of Economics)
    Abstract: The temporal dynamic characteristics of mood play an important role in various aspects of our lives including our psychological health and well-being. It is assumed that the individuals with high emotional intelligence (EI) are characterized by more positive and stable moods. However, most studies analyze how EI is related to emotional traits or momentary assessments of mood; there are almost no findings on EI relationships with mood dynamics. The present study fills this gap. Two research questions were asked. How mood dynamics characteristics are related to each other and to what extent are they independent? Which aspects of EI are related to particular characteristics of mood dynamics? Method. To collect data on mood dynamics, an experience sampling procedure was implemented. Twenty-six female participants reported their mood for two weeks, three times a day, using the EmoS-18 questionnaire. Their emotional intelligence was measured with the EmIn questionnaire. Mean mood scores calculated across all measurement points were regarded as static characteristics showing a mood background typical for the participant. Also, three dynamic characteristics of mood were calculated, namely variability, instability, and inertia. Results. Mood variability and instability were found to be very closely related to each other, measuring essentially the same construct. Inertia is relatively independent. EI was not related to mean mood scores which contradicts the results of other studies and can be explained by the use of the experience sampling procedure. EI was positively related to the inertia of a positive mood with high arousal and a negative mood with low arousal. In addition, a negative relationship between EI and the instability of tension was found. Most of the correlations were low. Further studies with higher statistical power are needed for more decisive conclusions. However, the results show that experience sampling provides new important insights on the role of EI in mood
    Keywords: emotional intelligence, mood dynamics, mood variability, mood instability, mood inertia
    JEL: Z
    Date: 2017
  4. By: Cason, Timothy; Masters, William; Sheremeta, Roman
    Abstract: This study provides a unified framework to compare three canonical types of contests: winner-take-all contests won by the best performer, winner-take-all lotteries where probability of success is proportional to performance, and proportional-prize contests in which rewards are shared in proportion to performance. We derive equilibria and observe outcomes from each contest in a laboratory experiment. Equilibrium and observed efforts are highest in winner-take-all contests. Lotteries and proportional-prize contests have the same Nash equilibrium, but empirically, lotteries induce higher efforts and lower, more unequal payoffs. Behavioral deviations from theoretical benchmarks in different contests are caused by the same underlying attributes, such as risk-aversion and the utility of winning. Finally, we find that subjects exhibit consistent behavior across different types of contests, with subjects exerting higher effort in one contest also exerting higher effort in another contest.
    Keywords: contests, rent-seeking, lotteries, incentives in experiments, risk aversion
    JEL: C72 D72 D74 J33
    Date: 2018–01–29
  5. By: Christoph Engel (Max Planck Institute for Research on Collective Goods); Andreas Glöckner (Max Planck Institute for Research on Collective Goods); Sinika Timme (University of Göttingen)
    Abstract: From a normative perspective the order in which evidence is presented should not bias legal judgment. Yet psychological research on how individuals process conflicting evidence sug-gests that order could matter. The evidence shows that decision-makers dissolve ambiguity by forging coherence. This process could lead to a primacy effect: initial tentative interpretations bias the view on later conflicting evidence. Or the process could result in a recency effect: the evidence presented last casts decisive light on the case. In two studies (N1 = 221, N2 = 332) we test these competing hypotheses in a mock legal case. Legal orders sometimes even expect judges to provisionally assess the evidence. At least they have a hard time preventing this from happening. To test whether this creates or exacerbates bias, in the second dimensions, we explicitly demand experimental participants to express their leaning, after having seen half of the evidence. We consistently observe recency effects and no interactions with leanings. If the legal order wants to preempt false convictions, defendant should have the last word.
    Keywords: criminal procedure, presumption of innocence, recency, primacy
    JEL: C91 D01 D02 D91 K41
    Date: 2017–11
  6. By: Francisco B. Galarza (Universidad del Pací fico)
    Abstract: We use experimental data to examine the effect of ethnicity (foreign, indigenous, and mestizo) and gender on trust and trustworthiness in Peru. We find that, compared to the foreign group, the indigenous group is more trusted (positive discrimination), while the mestizo group is less trustworthy (negative discrimination). Likewise, subjects reciprocate more in favor of males. We further analyze whether cognitive ability, the Big Five Personality Traits, and the social dominance orientation scale (SODS) can predict trust and trustworthiness. We find that the Cognitive Reflection Test score is positively correlated with trust, while the cumulative college GPA is negatively correlated with trustworthiness. And neuroticism is correlated with trusting behavior, while the SODS is (negatively) correlated with the trustworthiness ratio.
    Keywords: Trust, trustworthiness, cognitive reection, personality traits, social dominance, discrimination, experiments
    JEL: C72 C91 J15
    Date: 2018–01
  7. By: Barron, Kai; Gravert, Christina
    Abstract: Confidence is often seen as the key to success. Empirical evidence about whether such beliefs causally map into actions is, however, sparse. In this paper, we experimentally investigate the causal effect of an increase in confidence about one's own ability on two central choices made by workers in the labor market: choosing between jobs with different incentive schemes, and the subsequent choice of how much effort to exert within the job. Using a hard-easy task manipulation to shift beliefs, we find that beliefs can be shifted, which in turn shifts decisions. In our setting, the beliefs of low ability individuals are more malleable than those of high ability individuals. Therefore, the treatment induces an increase in confidence and detrimental decision making by low ability workers but does not affect the outcomes of high ability workers. Men and women react similarly to the treatment. However, men hold higher baseline beliefs, implying that women make better incentive choice decisions. Policy implications regarding pre-labor market confidence development by means of feedback and grade inflation are discussed.
    Keywords: overconfidence,experiment,beliefs,real-effort,grade inflation
    JEL: C91 D03 M50 J24
    Date: 2018
  8. By: Dorian Jullien (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur)
    Abstract: This paper conducts a systematic comparison of behavioral economics's challenges to the standard accounts of economic behaviors within three dimensions: under risk, over time and regarding other people. A new perspective on two underlying methodological issues, i.e., interdisciplinarity and the positive/normative distinction, is proposed by following the entanglement thesis of Hilary Putnam, Vivian Walsh and Amartya Sen. This thesis holds that facts, values and conventions have interdependent meanings in science which can be understood by scrutinizing formal and ordinary language uses. The goal is to provide a broad and self-contained picture of how behavioral economics is changing the mainstream of economics.
    Keywords: behavioral economics, economic rationality, expected utility, prospect the-,ory, exponential discounting, hyperbolic discounting, self-interest, other-regarding behav-,iors, economic methodology, history of economics, philosophy of economics, economics and,language,JEL: A12, B21, B41, D01, D03, D81, D90, D64
    Date: 2017
  9. By: Levine, Sheen S.; Reypens, Charlotte
    Abstract: In many life situations, people choose sequentially between repeating a past action in expectation of a familiar outcome (exploitation), or choosing a novel action whose outcome is largely uncertain (exploration). For instance, in each quarter, a manager can budget advertising for an existing product, earning a predictable boost in sales. Or she can spend to develop a completely new product, whose prospects are more ambiguous. Such decisions are central to economics, psychology, business, and innovation; and they have been studied mostly by modelling in agent-based simulations or examining statistical relationships in archival or survey data. Using experiments across cultures, we add unique evidence about causality and variations. We find that exploration is boosted by three past experiences: When decision-makers fall below top performance; undergo performance stability; or suffer low overall performance. In contrast, individual-level variables, including risk and ambiguity preferences, are poor predictors of exploration. The results provide insights into how decisions are made, substantiating the micro-foundations of strategy and assisting in balancing exploration with exploitation.
    Keywords: Exploration, Exploitation, Decision Making, Experiment, Protocol Analysis, Cross-culture
    JEL: C93 M14
    Date: 2016–07–18
  10. By: Strulik, Holger; Trimborn, Timo
    Abstract: It has been argued that hyperbolic discounting of future gains and losses leads to time-inconsistent behavior and thereby, in the context of health economics, not enough investment in health and too much indulgence of unhealthy consumption. Here, we challenge this view. We set up a life-cycle model of human aging and longevity in which individuals discount the future hyperbolically and make time-consistent decisions. This allows us to disentangle the role of discounting from the time consistency issue. We show that hyperbolically discounting individuals, under a reasonable normalization, invest more in their health than they would if they had a constant rate of time preference. Using a calibrated life-cycle model of human aging, we predict that the average U.S. American lives about 4 years longer with hyperbolic discounting than he would if he had applied a constant discount rate. The reason is that, under hyperbolic discounting, experiences in old age receive a relatively high weight in life time utility. In an extension we show that the introduction of health-dependent survival probability motivates an increasing discount rate for the elderly and, in the aggregate, a u-shaped pattern of the discount rate with respect to age.
    Keywords: discount rates,present bias,health behavior,aging,longevity
    JEL: D03 D11 D91 I10 I12
    Date: 2018
  11. By: Ronald Peeters (Department of Economics, University of Otago, New Zealand); Marc Vorsatz (Departamento de An´alisis Econ´omico, Universidad Nacional de Educaci´on a Distancia, Calle Senda del Rey, Madrid, Spain)
    Abstract: We introduce simple guilt into a generic prisoner’s dilemma (PD) game and solve for the equilibria of the resulting psychological game. It is shown that for all guilt parameters, it is a pure strategy equilibrium that both players defect. But, if the guilt parameter surpasses a threshold, a mixed strategy equilibrium and a pure strategy equilibrium in which both players cooperate emerge. We implement three payoff constellations of the PD game in a laboratory experiment and find in line with our equilibrium analysis that first- and second-order beliefs are highly correlated and that the probability of cooperation depends positively on these beliefs. Finally, we provide numerical evidence on the degree of guilt cooperators experience
    Keywords: Psychological game theory, Guilt, Prisoner’s dilemma
    JEL: C72 C91
    Date: 2018–01
  12. By: Gema Zamarro (University of Arkansas & University of Southern California)
    Abstract: Social science, more than ever, is drawing upon the insights of personality psychology. Though researchers now know that noncognitive skills and personality traits, such as conscientiousness, grit, self-control, or a growth mindset could be important for life outcomes, they struggle to find reliable measures of these skills. Self-reports are often used for analysis, but these measures have been found to be affected by important biases. We study the validity of innovative, more robust measures of noncognitive skills based on performance tasks. Our first proposed measure is an adaptation, for the adult population, of the Academic Diligence Task (ADT) developed and validated among students by Galla et al. (2014). For our second type of performance task measures of noncognitive skills, we argue that questionnaires themselves can be seen as performance tasks, such that measures of survey effort, e.g. item non-response rates and degree of carelessness in answering, could lead to meaningful measures of noncognitive skills. New measures along with self-reports are then used to study the role of noncognitive skills and personality traits on an individual’s preparation for retirement and financial capability. In a world where individuals are increasingly asked to take responsibility for retirement preparations and when available financial products to do so are growing in sophistication, a better understanding of how noncognitive skills influence retirement preparation could help effective policy design.
    Date: 2017–09
  13. By: Anne Corcos (CURAPP-ESS UMR 7319; CNRS; Université de Picardie); François Pannequin (CREST; ENS Paris-Saclay; Université Paris-Saclay); Claude Montmarquette, (CIRANO; Université de Montréal)
    Abstract: This paper compares the Holt and Laury’s risk attitude elicitation with a risk attitude classification associated with insurance behavior. The standard Holt and Laury’s procedure (2002) is implemented in the loss domain, while the second tool is based on contextualized experimental hedging choices for insurance and loss reduction (secondary prevention). Our findings highlight the high consistency between the two procedures for more than two-thirds of the subjects, both measures leading to the same risk-attitude assignment. Interestingly, cases where the two measures do not coincide concern the only subjects whose Holt and Laury’s risk aversion coefficient is borderline. For these participants, using both measures allows for a more accurate assessment. Finally, the HL-irrational behavior of participants uncovers specific risk-averse behavior signature, while contextualized-irrational behavior reveals a risk-loving behavior.
    Keywords: risk-attitude classification, insurance demand, self-insurance demand, loss reduction, secondary prevention, multiple price list method, experimental study
    JEL: C91 D81
    Date: 2017–12–01
  14. By: Grimalda, Gianluca; Farina, Francesco; Schmidt, Ulrich
    Abstract: We examine experimentally individual preferences for redistributions in the US, Italy, and Norway. Twenty-one subjects were assigned initial earnings from a discrete uniform distribution. The source of earnings was manipulated and depended either on luck or on individual relative performance in some tasks. All subjects chose a redistribution rate to be applied to group members' earnings. One choice was then randomly selected to determine final earnings. Four different experimental decisions altered whether subjects' choice applied only to others, thus making self-interest irrelevant (impartial decision), and the degree of information over one's earnings. Norwegian subjects demanded significantly higher levels of redistribution both in the impartial decision and when self-interest offered the most clear-cut prescription, as uncertainty over one's earnings was removed. The demands for redistributions by US and Italian participants were instead similar. Conversely, country differences disappeared in decisions where earnings were uncertain. Contrary to widely held views, no evidence was found that US subjects were more "meritocratic" than others. Italian subjects reacted the most to the source of inequality, decreasing demand for redistribution in Performance treatments compared to Luck treatments. While behaviour of subjects whose earnings were above the median level (the "rich") did not differ significantly across countries, large differences emerged for people below the median level (the "poor") in the fourth decision. Italian "poor" were agreeable to let the "rich" receive a large share of their earnings, particularly so in Performance treatments. Conversely, Norwegians "poor" demanded full earnings equalisation. The behaviour of US subjects fell between these two extremes. This evidence shows the existence of relevant cross-country difference in demand for redistribution and opens new perspectives on what may be considered "fair" or "unfair" inequality in Western countries.
    Keywords: inequality,Redistribution,individual merit,cross-country experiments
    JEL: D63 D71 C92
    Date: 2018

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