nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2018‒03‒12
eleven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Does Birth Weight Influence Grit or Can Grit Be Learned After Birth? By Leah Gillion
  2. A Social Heuristics Hypothesis for the Stag Hunt: Fast- and Slow-Thinking Hunters in the Lab By Marianna Belloc; Ennio Bilancini; Leonardo Boncinelli; Simone D'Alessandro
  3. Discriminating between Models of Ambiguity Attitude: A Qualitative Test By Robin Cubitt; Gijs van de Kuilen
  4. The effects of physical activity on social interactions: The case of trust and trustworthiness By Di Bartolomeo Giovanni; Stefano Papa
  5. Risk Aversion, Prudence and Temperance in Gain and Loss: are we all Schizophrenics? By Marielle Brunette; Julien Jacob
  6. Signaling Probabilities in Ambiguity: on the impact of vague news By Dmitri Vinogradov; Yousef Makhlouf
  7. Be close to me and I will be honest: How social distance influences honesty By Hermann, Daniel; Ostermaier, Andreas
  8. Mindfulness and Stress - a Randomised Experiment By Alem, Yonas; Behrendt, Hannah; Belot, Michele; Bíró, Anikó
  9. "Framing Game Theory" By Hitoshi Matsushima
  10. Motivational crowding out effects in charitable giving: Experimental evidence By Müller, Stephan; Rau, Holger A.
  11. Bounded-rationality and heterogeneous agents: Long or short forecasters? By Beqiraj Elton; Di Bartolomeo Giovanni; Di Pietro Marco; Serpieri Carolina

  1. By: Leah Gillion (Princeton University)
    Abstract: In recent studies, scholars have come to view grit as an essential component for success. This field has gained attention because it crosses the social economic spectrum and it is considered to be a learned characteristic. In this paper, I investigate the link between birth endowments and grit and the role parental investment plays in the development of non-cognitive skills. Using data from the Fragile Families Study, I find mixed results. Birth weight is associated with grit, when measured by teachers, but there is little association when measured by parents and the child. Furthermore, parental investment is associated with grit when measured by parents and the child, but there is no association when measured by teachers. This paper suggests that grit is a behavior that can be learned through parental investment, but the returns to parental investment in elementary school are not realized in the academic environment.
    JEL: I12 J13
    Date: 2017
  2. By: Marianna Belloc; Ennio Bilancini; Leonardo Boncinelli; Simone D'Alessandro
    Abstract: In this paper, we analyze the role of intuitive versus deliberative thinking in stag hunt games. To do so we, first, provide a conceptual framework predicting that, under the assumption that stag is the ruling social convention in real life interactions, players who make their choices fast and intuitively, relying on social heuristics, choose stag more often than other players. Second, we run a lab experiment and use a time pressure treatment to induce fast and intuitive thinking. We find that: (i) players under the time pressure treatment are more likely to choose stag than individuals in the control group; (ii) individual choices under the time pressure treatment are less sensitive to the size of the basin of attraction of stag; (iii) these results are largely driven by less experienced participants. Overall, our findings provide support to the Social Heuristics Hypothesis (Rand et al., 2012) applied to stag hunt interactions.
    Keywords: social heuristics hypothesis, stag hunt, intuition, deliberation, lab experiments
    JEL: C91 D01
    Date: 2017
  3. By: Robin Cubitt (University of Nottingham); Gijs van de Kuilen (Tilburg University)
    Abstract: During recent decades, many new models have emerged in pure and applied economic theory according between Epstein (2010) and Klibanoff et al. (2012) identified a notable behavioral issue that distinguishes sharply between two classes of models of ambiguity sensitivity that are importantly different. The two classes are exemplified by the -MEU model and the smooth ambiguity model, respectively; and the issue is whether or not a desire to hedge independently resolving ambiguities contributes to an ambiguity averse preference for a randomized act. Building on this insight, we implement an experiment whose design provides a qualitative test that discriminates between the two classes of models. Among subjects identified as ambiguity sensitive, we find greater support for the class exemplified by the smooth ambiguity model; the relative support is stronger among subjects identified as ambiguity averse. This finding has implications for applications which rely on specific models of ambiguity preference.
    Keywords: Ambiguity sensitivity; ambiguity attitude; testing models of ambiguity sensitive preference
    JEL: C91 D01 D03 D81 G02
    Date: 2017–08–18
  4. By: Di Bartolomeo Giovanni; Stefano Papa
    Abstract: There is no doubt that physical activity improves health conditions; however, does it also affect the way people interact? Beyond the obvious effects related to team games or sharing common activities such as attending a gym, we wonder whether physical activity has in itself some effect on social behavior. Our research focuses on the potential effects of physical activity on trust and trustworthiness. Specifically, we compare the choices of subjects playing an investment game who were previously exposed to short-time physical activity to others who are not exposed to it, but involved in different simple tasks. On average, we find that subjects exposed to physical activity exhibit more trust and pro-social behaviors than those who are not exposed. These effects are not temporary.
    Date: 2017–11
  5. By: Marielle Brunette (UMR INRA – AgroParisTech, Laboratoire d’Economie Forestière, 54042 Nancy Cedex, France); Julien Jacob (BETA, University of Lorraine, 13 Place Carnot – CO n°70026. 54035 NANCY Cedex – France)
    Abstract: In this paper, our aims are of three orders: i) to characterize the individuals’ preferences towards risk, prudence and temperance in the gain and loss domain; ii) to analyze potential correlations between domains, for a given feature of preferences, and between features, for a given domain; iii) to identify potential determinants of these individual preferences. For that purpose, we conducted a lab experiment eliciting risk aversion, prudence and temperance in the two domains and collected information about individuals’ characteristics. First, our results indicate that participants are risk averse, prudent and temperate in the gain domain while risk averse, imprudent and temperate in the loss domain. Second, we observed that risk aversion in the gain and loss domains is positively and significantly correlated. The same result applies for prudence and temperance. We also identified that behaviors in terms of risk aversion, prudence and temperance are all bilaterally correlated in the gain and loss domains, except for risk aversion and temperance in the gain domain. Finally, we found that the determinants of the individual’s preferences generally depend on the domain and the feature.
    Keywords: risk aversion, prudence, temperance, experiment, correlations, determinants
    JEL: C91 D81
    Date: 2017–07
  6. By: Dmitri Vinogradov; Yousef Makhlouf
    Abstract: Vague, or imprecise, news may affect decisions by changing either the funda- mentals, or the associated uncertainty, or both. We show response to vague news is shaped by ambiguity attitudes, yet with qualitative differences for dif- ferent levels of risk, on top of ambiguity, conveyed. The decision functional con- sists of a probabilistic term and an ambiguity premium; the latter depends on both risk and ambiguity, implying differential responses of ambiguity-neutral, -averse and -seeking subjects to probabilistic, as well as non-probabilistic news. In a two-color Ellsberg experiment with signals we obtain ambiguity attitudes matter more for non-probabilistic and less for probabilistic, though still impre- cise news. For vague news conveying a relatively high probability of success, subjects exhibit insensitivity to the ambiguity component, unless explicitly facing similar news of di§erent degrees of precision. Possible explanation is in either flat ambiguity premiums, or the cognitive inability to process the risky and the ambiguous components simultaneously.
    Keywords: ambiguity-aversion, ambiguity premium, Ellsberg experi- ment, vague news.
    JEL: C90 D01 D81
    Date: 2017–12
  7. By: Hermann, Daniel; Ostermaier, Andreas
    Abstract: We conducted a laboratory experiment to examine how honesty depends on social distance. Participants cast dice and reported the outcomes to allocate money between themselves and fellow students or the socially distant experimenter. They could lie about outcomes to earn more money. We found that dishonesty increases with social distance. However, responsiveness to social distance depends on personal preferences about inequity and honesty as a moral value. We observed selfish "black lies" but not altruistic "white lies" (outcomes were not understated to reduce inequality). Our results suggest that the reduction of social distance can promote honesty in social interactions.
    Keywords: cheating,honesty,social distance,experiment
    JEL: C91 D63 D64
    Date: 2018
  8. By: Alem, Yonas (Department of Economics, School of Business, Economics and Law, Göteborg University); Behrendt, Hannah (Department of Economics, University of Edinburgh); Belot, Michele (Department of Economics, University of Edinburgh); Bíró, Anikó (Department of Economics, University of Edinburgh, Corvinus University of Budapest and Hungarian Academy of Sciences)
    Abstract: We conduct a randomised controlled trial of an online course in mindfulness. Previous research has found evidence that mindfulness reduces stress; however, few studies have been carried out on non-clinical populations that have not self-selected into or paid for treatment. Our sample consists of 139 students with no pre-existing medical conditions and no prior information on the experiment and treatments. Half of them are asked to follow a four-week mindfulness training, while the other half are asked to watch a four-week series of historical documentaries. We follow participants for five consecutive weeks, with an additional post-intervention session five months later. We evaluate the effects of the mindfulness program on measures of chronic stress, and on the response to stressful situations, measured by cortisol and self-reports. We find strong evidence that mindfulness training reduces perceived stress, as measured by the Perceived Stress Scale. However, the physiological responses to an acutely stressful situation do not differ significantly between the treatment and control groups.
    Keywords: Stress; Mindfulness; Experiment
    JEL: C81 C91 I10
    Date: 2018–03
  9. By: Hitoshi Matsushima (Faculty of Economics, The University of Tokyo)
    Abstract: A real player sometimes fails to practice hypothetical thinking, which increases the occurrence of anomalies in various situations. This study incorporates psychology into game theory and demonstrates a cognitive method to encourage bounded-rational players to practice correct hypothetical thinking in strategic interactions with imperfect information. We introduce a concept termed “frame†as a description of a synchronized cognitive procedure through which each player decides multiple actions in a step-by-step manner, shaping his (or her) strategy selection. We could regard a frame as the supposedly irrelevant factors from the viewpoint of full rationality. However, this paper theoretically shows that in a multi-unit trading with private values, the ascending proxy auction has a significant advantage over the second-price auction in terms of the bounded-rational players' incentive to practice hypothetical thinking, because of the difference, not in physical rule, but in background frame. By designing a frame appropriately, we generally show that any static game that is solvable in iteratively undominated strategies is also solvable, even if players cannot practice hypothetical thinking without the help of a well-designed frame. We further investigate the possibility that even a detail-free frame design serves to overcome the difficulty of hypothetical thinking. We extend this investigation to the Bayesian environments.
  10. By: Müller, Stephan; Rau, Holger A.
    Abstract: This paper tests motivational crowding out in the domain of charitable giving. A novelty is that our experiment isolates alternative explanations for the decline of giving such as strategic considerations of decision makers. Moreover, preference elicitation allows us to focus on the reaction of donors characterized by different degrees of intrinsic motivation. In the charitable-giving setting subjects donate money to the German "Red Cross" in two consecutive stages. The first dictator game is modified, i.e., donors face with equal probability an ex post reimbursement or a subsequent pay. The second game is a standard dictator game where we control for the decline of giving. We find that subjects with a high degree of intrinsic motivation, who received a reimbursement, reduce their donations more than four times as much as equally motivated individuals who did not experience a payment.
    Keywords: Altruism,Dictator Game,Experiment,Motivational Crowd Out
    JEL: D02 D03 C91
    Date: 2018
  11. By: Beqiraj Elton; Di Bartolomeo Giovanni; Di Pietro Marco; Serpieri Carolina
    Abstract: Our paper estimates and compares behavioral New-Keynesian DSGE models derived under two alternative ways to introduce heterogeneous expectations. We assume that agents may be either short-sighted or long-horizon forecasters. The difference does not matter when agents have rational expectations, but it does when a fraction of them form beliefs about the future according to some heuristics. Bayesian estimations show that a behavioral model based on short forecasters fits the data better than one based on long forecasters. Long-horizon predictors exhibit very poor predictive ability, whereas the short forecasters' model also outperforms the rational expectation framework. We show that the superiority is due to its ability to capture heterogeneous consumers' expectations. Finally, by Monte-Carlo-filtering mapping, we investigate the indeterminacy regions to complement existing literature.
    Date: 2017–11

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