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on Cognitive and Behavioural Economics |
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Issue of 2018‒04‒02
eleven papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Morone, Andrea; Nemore, Francesco; Nuzzo, Simone |
| Abstract: | While a basic theoretical principle in public economics assumes that individuals optimize fully with respect to the introduction of a tax, a growing body of research is proving that several heuristics are in place when people take decisions. We re-examine the well-known Liability Side Equivalence principle in the light of the concept of salience. While these two topics have been extensively investigated in isolation, this paper innovates on the previous literature in that it focuses on their joint effects. Is tax incidence dependent on whether the subjects face a salient rather than a non-salient tax? Does the salience of a tax exert a different effect depending on who is legally committed to bear the tax burden? We address these questions through a laboratory experiment in which one unit of a fictitious good is being traded through a double-auction market institution. Based on a panel data analysis, our contribution shows that point of collection matter and determine the economic incidence of tax. Additionally we found that the joint effect of salience and statutory incidence does not alter the informative efficiency, but has a positive effect on buyers’ allocational efficiency when the tax is levied on sellers. |
| Keywords: | Tax incidence, Tax salience, Liability Side Equivalence, choice behaviour, laboratory. |
| JEL: | C91 D41 D44 H22 |
| Date: | 2018–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:85044&r=cbe |
| By: | Morone, Andrea; Nemore, Francesco; Schirone, Dario Antonio |
| Abstract: | Environmental psychologists suggest that people feelings and emotions determine what they do and how they do it. We used the stimulus organism respons model (SOR) as an inspiring theoretical basis for our empirical contribution. We conducted a natural field experiment in six stores, settled in six different Italian cities, of a Swedish-founded Dutch-based multinational group, that designs and sells ready-to-assemble furniture, kitchen appliances and home accessories. We provided empirical evidence about the effects of a rational-functional stimulus, i.e. the availability of a new tool for collecting items that is more comfortable and less cumbersome for consumers. Through both a non-parametric and parametric testing, we found a positive effect of the stimuli in terms of sales. |
| Keywords: | Servicescape; sensorial stimuli; functionality; shopping tool. |
| JEL: | M21 M31 |
| Date: | 2018–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:85042&r=cbe |
| By: | Morone, Andrea; Nemore, Francesco; Schirone, Dario Antonio |
| Abstract: | Environmental psychologists suggest that people feelings and emotions determine what they do and how they do it. According to the stimulus organism respons model (SOR), the environment creates a behavioral/emotional response in individuals that, in turn, induces approach or avoidance behaviors. We conducted survey in six stores, settled in six different Italian cities, of a Swedish-founded Dutch-based multinational group, that designs and sells ready-to-assemble furniture, kitchen appliances and home accessories. Firstly, we apply the SOR model to evaluate loyalty program participation impact on consumers receipts. Subsequently, we provide empirical evidence about the effects of an emotional-sensorial stimulus (i.e. the presence of the restaurant inside the store). Through both a non-parametric and parametric testing, we found that environmental stimuli have a positive effect in terms of sales. |
| Keywords: | Servicescape; sensorial stimuli; functionality; loyalty; restaurant |
| JEL: | M21 M31 |
| Date: | 2018–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:85043&r=cbe |
| By: | Guber, Raphael (Munich Center for the Economics of Aging, Max Planck Society, Germany); Kocher, Martin G. (Department of Economics, University of Vienna, Austria, and Institute for Advanced Studies, Vienna, Austria, and Department of Economics, University of Gothenburg, Sweden); Winter, Joachim (Department of Economics, University of Munich, Germany) |
| Abstract: | Recent research in contract theory on the effects of behavioral biases implicitly assumes that they are stable, in the sense of not being affected by the contracts themselves. In this paper, we provide evidence that this is not necessarily the case. We show that in an insurance context, being insured against losses that may be incurred in a real-effort task changes subjects' self-confidence. Our novel experimental design allows us to disentangle selection into insurance from the effects of being insured by randomly assigning coverage after subjects revealed whether they want to be insured or not. We find that uninsured subjects are underconfident while those that obtain insurance have well-calibrated beliefs. Our results suggest that there might be another mechanism through which insurance affects behavior than just moral hazard. |
| Keywords: | Overconfidence, insurance choice, underplacement |
| JEL: | D84 D82 C91 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:ihs:ihsesp:338&r=cbe |
| By: | Penelope Buckley (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Daniel Llerena (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes) |
| 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. |
| Keywords: | common pool resource, Demand Response, incentives, laboratory experiment, nudge, price |
| Date: | 2018–02–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01704457&r=cbe |
| By: | Kocher, Martin G. (University of Vienna, Austria, and Institute for Advanced Studies, Vienna, Austria, and University of Gothenburg, Sweden); Schindler, David (Tilburg University, The Netherlands); Trautmann, Stefan T. (University of Heidelberg, Germany and Tilburg University, The Netherlands); Xu, Yilong (University of Heidelberg, Germany) |
| Abstract: | Time pressure is a central aspect of economic decision making nowadays. It is therefore natural to ask how time pressure affects decisions, and how to detect individual heterogeneity in the ability to successfully cope with time pressure. In the context of risky decisions, we ask whether a person’s performance under time pressure can be predicted by measurable behavior and traits, and whether such measurement itself may be affected by selection issues. We find that the ability to cope with time pressure varies significantly across decision makers, leading to selected subgroups that differ in terms of their observed behaviors and personal traits. Moreover, measures of cognitive ability and intellectual efficiency jointly predict individuals’ decision quality and ability to keep their decision strategy under time pressure. |
| Keywords: | Risk, cognitive ability, selection, time pressure |
| JEL: | C91 D81 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:ihs:ihsesp:339&r=cbe |
| By: | Christmann, Robin |
| Abstract: | The plea bargaining mechanism in criminal procedure serves as a favorable screening device, separating between the guilty and the innocent. Previous literature ignored the impact of asymmetric information on prosecutor performance inside the adversarial court, which degrades his bargaining position. This paper presents a sequential prosecution game with endogenous courts, and shows that the successful conviction in court crucially depends on prosecutor´s beliefs and incentives. If the prosecutor is sufficiently convinced of the defendant´s guilt ex-ante, he can commit to trial, and the favorable semiseparating equilibrium is obtained. Applying the first formal model of a hindsight biased prosecutor, we find that the negative impact of uncertainty on prosecutor performance is partly mitigated by hindsight bias, and the self-selection of guilty defendants can even improve. Several caveats, like excessive charges, the nature of the case or the quality of investigations by the police force are discussed. |
| Keywords: | criminal procedure; plea bargainin; screening; courts; limited rationality |
| JEL: | D03 D83 K14 K41 |
| Date: | 2018–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84870&r=cbe |
| By: | William Gilje Gjedrem; Ola Kvaløy |
| Abstract: | Between and within firms, work teams compete against each other and receive feedback on how well their team is performing relative to their benchmarks. In this paper we investigate experimentally how teams respond to relative performance feedback (RPF) at team level. We find that when subjects work under team incentives, then RPF on team performance increases the teams’ average performance by almost 10 percent. The treatment effect is driven by higher top performance, as this is almost 20% higher when the teams receive RPF compared to when the teams only receive absolute performance feedback (APF). The experiment suggests that top performers are particularly motivated by the combination of team incentives and team RPF. In fact, team incentives motivate significantly higher top performance than individual incentives when the team is exposed to RPF. We also find notable gender differences. Females respond negatively to individual RPF, but even more positively than males to team RPF. |
| Keywords: | teams, performance feedback, performance pay, experiment |
| JEL: | C91 M50 M52 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6871&r=cbe |
| By: | Ansuk Jeong (University of Utah Asia Campus) |
| Abstract: | Our contemporary local and global communities face various forms of social issues. As a community psychologist, the author teaches college students in South Korea about the importance of context that shapes people's behaviors, under the title of Behavioral Economics in Our Community. In this presentation, the author wants to share what she learned from the students when they tried to apply the Behavioral Economics principles in the real communities. Students were required to identify one social issue per each to challenge in their communities and to propose an intervention program that nudges people to the desired direction. By paying attention to the social issues that need to be tackled to improve the individual and community well-being, students reflected on the Community Psychology principles. At the same time, by developing a feasible intervention program that borrows the Behavioral Economics principles, students learned how to make real changes in people?s behaviors. Specific examples of the students? successful projects will be shared in the presentation, including holding door for others, Korean spelling-check application for smartphones, and clean dumping of toilette paper. More importantly, the focus will be made on the process of each project as the students were also required to make a real contact with the person in charge, the person who can make decisions, the person who can influence the implementation of the project. In the presentation, therefore, the audience will learn about the contemporary South Korean socio-cultural environment as the context of Behavioral Economics application. |
| Keywords: | Behavioral Economics, Community Psychology, Community Project, Social Issues. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:5908099&r=cbe |
| By: | Fischer, Mira (University of Cologne); Sliwka, Dirk (University of Cologne) |
| Abstract: | Previous research has shown that feedback about past performance has ambiguous effects on subsequent performance. We argue that feedback affects beliefs in different dimensions – namely beliefs about the level of human capital and beliefs about the ability to learn – and this may explain some of the ambiguous effects. We experimentally study the causal effects of an exogenously administered change in beliefs in both of these dimensions on the motivation to learn. We find that confidence in the ability to learn raises incentives, while confidence in the level of human capital lowers incentives for individuals with high levels of human capital. |
| Keywords: | economic experiments, confidence, human capital investment, motivation |
| JEL: | C91 D83 I21 J24 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11327&r=cbe |
| By: | van de Ven, Niels (Tilburg University, School of Economics and Management); Meijs, Maartje (Tilburg University, School of Economics and Management); Vingerhoets, A.J.J.M. (Tilburg University, School of Economics and Management) |
| Abstract: | Earlier research found that the mere sight of tears promotes the willingness to provide support to the person shedding the tears. Other research, however, found that deliberate responses towards tearful persons could be more negative as well. We think this is because tears have ambivalent effects on person perception: we predicted that tearful people are seen as warmer, but also as less competent. In three studies we asked participants (total N = 1042) to form their impression of someone based on a picture. The person either displayed visible tears, or the tears had been digitally removed. Tearful individuals were perceived as being warmer, but also as less competent. In Study 2 we also added a measure of perceived sadness. Seeing a tearful face increased perceived sadness, and this (partially) explained the reduction in perceived competence of the target person. There was no such indirect effect of the tear on perceived warmth via perceived sadness. Study 3 found that people would be more likely to approach a tearful person to offer help than a tearless individual. At the same time, tearful individuals would be more likely to be avoided in situations in which the observer needs assistance for an important task. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:e82a646e-1ca1-46fe-a422-2917bfe24633&r=cbe |