nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2018‒02‒19
eight papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. The Effect of Incentives in Non-Routine Analytical Team Tasks - Evidence From a Field Experiment By Englmaier, Florian; Grimm, Stefan; Schindler, David; Schudy, Simeon
  2. Optimal Illusion of Control and Related Perception Biases By Olivier Gossner; Jakub Steiner
  3. What breaks the chain of unkindness: emotional closure or signaling? By Wendelin Schnedler; Nina Lucia Stephan
  4. Demand response as a common pool resource game: Nudges versus prices By Buckley, P.; Llerena, D.
  5. Behavioral determinants of proclaimed support for environment protection policies By Björn Kauder; Niklas Potrafke; Heinrich Ursprung
  6. Trust behind bars: a longitudinal study of inmates? prosocial preferences By Mario A. Maggioni; Domenico Rossignoli; Simona Beretta; Sara Balestri
  7. Group behaviour in tacit coordination games with focal points: An experimental investigation By Stefania Sitzia; Jiwei Zheng
  8. Biases in Beliefs: Experimental Evidence By Dominik Bauer; Irenaeus Wolff

  1. By: Englmaier, Florian (LMU Munich); Grimm, Stefan (LMU Munich); Schindler, David (Tilburg University); Schudy, Simeon (LMU Munich)
    Abstract: Despite the prevalence of non-routine analytical team tasks in modern economies, little is known about how incentives influence performance in these tasks. In a field experiment with more than 3000 participants, we document a positive effect of bonus incentives on the probability of completion of such a task. Bonus incentives increase performance due to the reward rather than the reference point (performance threshold) they provide. The framing of bonuses (as gains or losses) plays a minor role. Incentives improve performance also in an additional sample of presumably less motivated workers. However, incentives reduce these workers\' willingness to \"explore\" original solutions.
    Keywords: team work; bonus; incentives; loss; gain; non-routine; exploration;
    JEL: C92 C93 J33 D03 M52
    Date: 2018–02–08
  2. By: Olivier Gossner (CREST; CNRS; Ecole polytechnique; Université Paris-Saclay; London School of Economics); Jakub Steiner (University of Edinburgh; Cerge-Ei)
    Abstract: We study perception biases arising under second-best perception strategies. An agent correctly observes a parameter that is payoff-relevant in many decision problems that she encounters in her environment but is unable to retain all the information until her decision. A designer of the decision process chooses a perception strategy that determines the distribution of the perception errors. If some information loss is unavoidable due to cognition constraints, then (under additional conditions) the optimal perception strategy exhibits the illusion of control, overconfidence, and optimism.
    Date: 2017–10–16
  3. By: Wendelin Schnedler (University of Paderborn); Nina Lucia Stephan (University of Paderborn)
    Abstract: Previous experimental studies show that subjects who receive little in a dictator game, pass on less to a third person when they are dictators themselves (they reciprocate negatively to a third party). However, when they can write a letter to their dictator, subjects are less likely to pass on the unkindness. There are two potential explanations for this phenomenon: First, writing the letter may help to emotionally ‘close the case’ (closure explanation). Second, the opportunity to write a letter is a sign that it is not ‘ok’ to imitate the previous dictator (signal explanation). The present study examines with an experiment which explanation is more suitable.\\ The novelty in our design is a domain shift, making imitation impossible: The first subject does not decide on how to split a pot of money but can instead treat the second subject unkindly by assigning her to an annoying instead of a funny task. We find that letter writing nevertheless increases the average amount passed on in the subsequent dictator game. Thus, the closure explanation is perhaps more suitable. There is, however, one caveat: while writing the letter may make people emotionally ‘close the case’, this is not reflected in how happy people rate themselves.
    Keywords: experimental economics, chain of unkindness, imitation, emotional closure, cooling down
    JEL: D91 C91 D03
    Date: 2018–01
  4. By: Buckley, P.; Llerena, D.
    Abstract: The aim of demand response is to make energy consumption more flexible during peak periods. Using a contextualised CPR framework, we study energy consumption choices. Subjects decide the consumption level of five activities during 10 periods. The total consumption of these activities is the CPR contribution, and payoffs depend on own consumption and the amount consumed by the group. In the nudge treatment, subjects are nudged towards the socially optimal level of consumption using injunctive norms. The average consumption observed in the nudge treatment is used to calculate the price implemented in the price treatment. The objective is to quantify the nudge via an equivalent price. The main hypotheses are: consumption choices will be lower in the treatment groups compared to the control groups; when the price level is fixed according to the nudge result, consumption choices in the price treatment will be equivalent to those in the nudge treatment. Across all 10 periods, consumption is significantly lower in the nudge treatment, and higher for control groups. In the price treatment, consumption remains between the two at or slightly above the target. We conclude that the nudge treatment performs as well as an equivalent price without the implied loss of welfare. When comparing decisions under the nudge and price treatments to the control groups, the consumption decisions are significantly different from period 2 for the nudge and, consistently different from period 7 for the price. We conclude that the nudge is understood and integrated into subjects' decision making quicker than an equivalent price.
    JEL: C91 C92 D62 D91 H21
    Date: 2018
  5. By: Björn Kauder; Niklas Potrafke; Heinrich Ursprung
    Abstract: Using a representative survey of German university students, we confirm that proclaimed support for environment protection policies depends on socio-cultural factors and political ideology. Unlike most related studies for other countries, we find that the environmental policy stance of German partisans does not follow the left-right cleavage. Only about 25% of the social-democratic partisans wholeheartedly support environment protection policies, whereas 50% of the green partisans, who, in Germany, also belong to the political left, do so; and when controlling for socio-cultural influences, social-democratic partisans become undistinguishable from Christian-conservative and market-oriented partisans. Focusing on behavioral influences, we find that some of the respondents’ psychological traits are not filtered through their political ideology but directly influence their proclaimed attitudes towards environment protection policies. We identify as important behavioral determinants the locus of control and psycho-logical traits that capture the respondents’ susceptibility to making use of expressive rhetoric.
    Keywords: Environment protection, political preferences, ideology, identity, expressive behavior.
    JEL: D72 P16 Q51 Q58
    Date: 2018
  6. By: Mario A. Maggioni; Domenico Rossignoli; Simona Beretta; Sara Balestri
    Abstract: The paper presents the results of a Longitudinal Lab-in-the-Field Experiment implemented between September 2015 and July 2016 in two State Prisons in California (USA). A subset of eligible inmates willing to undertake GRIP (Guiding Rage Into Power), an offender accountability program, were randomly assigned to it. The paper tests whether the participation to this program (used as a treatment in the experiments), based on building strong relationships and mutual help, affects prosocial preferences of participants, with specific reference to trust. The results of a Difference-in-Differences (DID) estimation procedure show that trust significantly increased in GRIP participants compared to the control group. This result is robust to alternative estimation techniques and to the inclusion of an endogenous behavioral measure of altruism.
    JEL: C91 C92 D03 Z10
    Date: 2017
  7. By: Stefania Sitzia (University of East Anglia); Jiwei Zheng (Universtiy of East Anglia)
    Abstract: This paper reports an experimental investigation of Schelling's theory of focal points that compares group and individual behaviour. We find that when players' interests are perfectly aligned, groups choose more often the label salient option and achieve higher coordination success than individuals. However, in games with conflict of interest, groups do not always perform better than individuals, especially when the degree of conflict is substantial. We also find that groups outperform individuals in games in which identifying the solution to the coordination problem requires some level of cognitive sophistication (i.e. trade-off games). Finally, players that successfully identify the solution to these games achieve also greater coordination rates in games with a low degree of conflict than other players. This result raises questions of whether finding the focal point is more a matter of logic rather than imagination as instead Schelling argued.
    Keywords: groups, coordination, label cues, cognition
    JEL: C72 C78 C91 C92
    Date: 2018–01–30
  8. By: Dominik Bauer; Irenaeus Wolff
    Abstract: Many papers have reported behavioral biases in belief formation that come on top of standard game-theoretic reasoning. We show that the processes involved depend on the way participants reason about their beliefs. When they think about what everybody else or another ‘unspeci€fied’ individual is doing, they exhibit a consensus bias (believing that others are similar to themselves). In contrast, when they think about what their situation-speci€fic counterpart is doing, they show ex-post rationalization, under which the reported belief is €‹fitted to the action and not vice versa. Our €findings suggest that there may not be an ‘innocent’ belief-elicitation method that yields unbiased beliefs. However, if we ‘debias’ the reported beliefs using our estimates of the di‚fferent e‚ffects, we €find no more treatment e‚ffect of how we ask for the belief. ‘The ‘debiasing’ exercise shows that not accounting for the biases will typically bias estimates of game-theoretic thinking upwards.
    Keywords: Belief Elicitation, Belief Formation, Belief-Action Consistency, Framing E‚ffects, Projection, Consensus E‚ffect, Wishful ‘Thinking, Hindsight Bias, Ex-Post Rationalization
    Date: 2018

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