nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2018‒04‒09
twelve papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Individual Differences and Contribution Sequences in Threshold Public Goods By Schüssler, Katharina; Schüssler, Michael; Mühlbauer, Daniel
  2. Strategic Reasoning in Persuasion Games: An Experiment By Ying Xue Li; Burkhard Schipper
  3. Empowering the disabled through savings groups: Experimental evidence from Uganda. By Bjorvatn, Kjetil; Tungodden, Bertil
  4. Welfare-Based Altruism By Breitmoser, Yves; Vorjohann, Pauline
  5. The Influence of Overconfidence and Competition Neglect On Entry Into Competition By Schüssler, Katharina
  6. Paternalistic Taxation of Unhealthy Food and the Intensive versus Extensive Margin of Obesity By Zarko Kalamov; Marco Runkel
  7. Loss Aversion, Expectations and Anchoring in the BDM Mechanism By Achilleas Vassilopoulos; Andreas C. Drichoutis; Rodolfo M. Nayga, Jr
  8. Evaluating Intergenerational Persistence of Economic Preferences: A Large Scale Experiment with Families in Bangladesh By Shyamal Chowdhury; Matthias Sutter; Klaus F. Zimmermann
  9. Nudging and environmental corporate responsibility: A natural experiment By Leonardo Becchetti; Francesco Salustri; Pasquale Scaramozzino
  10. Behavioral uncertainty and the dynamics of traders' confidence in their price forecasts * By Nobuyuki Hanaki; Eizo Akiyama; Ryuichiro Ishikawa
  11. Always doing your best? Effort and performance in dynamic settings By Nicolas Houy; Jean-Philippe Nicolaï; Marie Claire Villeval
  12. The Impact of Self-Selection on Performance By Kießling, Lukas; Radbruch, Jonas; Schaube, Sebastian

  1. By: Schüssler, Katharina (LMU Munich); Schüssler, Michael (LMU Munich); Mühlbauer, Daniel (function(HR))
    Abstract: Following the notion that organizations often face public good dilemmas when collective action is needed, we use a real-time provision-point mechanism to experimentally explore the process of achieving cooperative equilibria. Specifically, besides exploring group outcomes, we identify individual antecedents for the timing of the contribution to the public good. In addition, we study the role of different situational factors for sustaining high rates of cooperation: information about others\' actions and the number of individuals necessary for public good provision. We find that contribution and implementation rates are relatively high, with only a moderate decline over time, and that social value orientation as well as several personality traits help to explain the observed contribution sequences.
    Keywords: provision-point mechanism; real-time protocol; personality traits;
    JEL: C92 D70 H41
    Date: 2018–03–26
  2. By: Ying Xue Li; Burkhard Schipper (Department of Economics, University of California Davis)
    Abstract: We study experimentally persuasion games in which a sender (e.g., a seller) with private information provides verifiable but potentially vague information (e.g., about the quality of a product) to a receiver (e.g., a buyer). Various theoretical solution concepts such as sequential equilibrium or iterated admissibility predict unraveling of information. Iterative admissibility also provides predictions for every finite level of reasoning about rationality. Overall we observe behavior consistent with relatively high levels of reasoning. While iterative admissibility implies that the level of reasoning required for unraveling is increasing in the number of quality levels, we find only insignificantly more unraveling in a game with two quality levels compared to a game with four quality levels. There is weak evidence for learning higher-level reasoning in later rounds of the experiments. Participants display difficulties in transferring learning to unravel in a game with two quality levels to a game with four quality levels. Finally, participants who score higher on cognitive abilities in Raven's progressive matrices test also display significantly higher levels of reasoning in our persuasion games although the effect-size is small.
    Keywords: Persuasion games, verifiable information, communication, disclosure, unraveling, iterated admissibility, prudent rationalizability, common strong cautious belief in rationality, level-k reasoning, experiments, cognitive ability.
    JEL: C72 C92 D82 D83
    Date: 2018–02–20
  3. By: Bjorvatn, Kjetil (Dept. of Economics, Norwegian School of Economics and Business Administration); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: We report from the first randomized controlled trial of a development program targeting people with disabilities: a village savings‐ and loans program in rural Uganda. We find that it has had a strong, positive impact on the lives of the disabled participants,through providing access to financial services and strengthening locus of control. Our results suggest that such programs may represent a promising tool to empowering people living with disabilities in developing countries, but also that more comprehensive measures may be needed to overcome taste‐based discrimination against disabled individuals.
    Keywords: Uganda; Development program; disabled people
    JEL: J14
    Date: 2018–03–14
  4. By: Breitmoser, Yves (HU Berlin); Vorjohann, Pauline (HU Berlin)
    Abstract: Why do people give when asked, but prefer not to be asked, and even take when possible? We show that standard behavioral axioms including separability, narrow bracketing, and scaling invariance predict these seemingly inconsistent observations. Specifically, these axioms imply that interdependence of preferences (\"altruism\") results from concerns for the welfare of others, as opposed to their mere payoffs, where individual welfares are captured by the reference-dependent value functions known from prospect theory. The resulting preferences are non-convex, which captures giving, sorting, and taking directly. Re-analyzing choices of 981 subjects in 83 treatments covering many variants of dictator games, we find that individual reference points are distributed consistently across studies, allowing us to classify subjects as either non-givers, altruistic givers, or social pressure givers and use welfare-based altruism to reliably predict giving, sorting, and taking across experiments.
    Keywords: social preferences; axiomatic foundation; robustness; giving; charitable donations;
    JEL: C91 D64 D03
    Date: 2018–03–28
  5. By: Schüssler, Katharina (LMU Munich)
    Abstract: I investigate whether two mechanisms leading to biased beliefs about success, overconfidence and competition neglect, influence decisions to enter competitive environments. I use a controlled laboratory setting that allows to elicit belief distributions related to absolute as well as relative overconfidence to study it comprehensively and introduce two treatment variations: First, some participants receive detailed performance feedback addressing absolute and relative overconfidence before making their decision. Second, I vary whether the competition group consists of all potential competitors or only of individuals who also chose to compete. I find that there is systematic heterogeneity in perception biases. In addition, both mechanisms influence individuals\' decisions. However, choices are closely tied to previous performance and assessments, and there are no significant gender differences.
    Keywords: competition neglect; competitive behavior; feedback; overconfidence;
    JEL: C91 D83 J16
    Date: 2018–03–26
  6. By: Zarko Kalamov; Marco Runkel
    Abstract: This paper shows that if an individual’s health costs are U-shaped in weight with a minimum at some healthy weight level and if the individual has both self control problems and rational motives for over- or underweight, the optimal paternalistic tax on unhealthy food mitigates the individual’s weight problem (intensive margin), but does not induce the individual to choose healthy weight (extensive margin). Implementing healthy weight requires a further distortion (e.g. subsidy on other goods), which may render the tax on unhealthy food inferior to the option of not taxing the individual at all. In addition, with heterogeneous individuals the optimal uniform paternalistic tax may have the negative side effect of rendering otherwise healthy individuals underweight.
    Keywords: sin tax, paternalism, obesity, extensive versus intensive margin
    JEL: D03 D11 H21 I18
    Date: 2018
  7. By: Achilleas Vassilopoulos (ICRE8: International Centre for Research on the Environment and the Economy); Andreas C. Drichoutis (Department of Agricultural Economics & Rural Development, Agricultural University of Athens); Rodolfo M. Nayga, Jr (Department of Agricultural Economics & Agribusiness, University of Arkansas)
    Abstract: We present the results of an economic laboratory experiment that tests behavioral biases that have been associated with the BDM mechanism. By manipulating the highest random competing bid, the maximum possible loss, the distribution of prices and the elicitation format, we attempt to disentangle the e ects of reference-dependence, expectations as well as price and loss anchoring on subjects' bids. The results show that bids are a ected by expectations and anchoring on the highest price but not by anchoring on the maximum possible loss. In addition, results are supportive of the no-loss-in-buying hypothesis of Novemsky and Kahneman (2005)
    Keywords: Becker-DeGroot-Marschak (BDM) mechanism; expectations; anchoring; valuation; experiment.
    JEL: C91 D44
    Date: 2018
  8. By: Shyamal Chowdhury; Matthias Sutter; Klaus F. Zimmermann
    Abstract: Economic preferences – like time, risk and social preferences – have been shown to be very influential for real-life outcomes, such as educational achievements, labor market outcomes, or health status. We contribute to the recent literature that has examined how and when economic preferences are formed, putting particular emphasis on the role of intergenerational transmission of economic preferences within families. Our paper is the first to run incentivized experiments with fathers and mothers and their children by drawing on a unique dataset of 1,999 members of Bangladeshi families, including 911 children, aged 6-17 years, and 544 pairs of mothers and fathers. We find a large degree of intergenerational persistence as the economic preferences of mothers and fathers are significantly positively related to their children’s economic preferences. Importantly, we find that socio-economic status of a family has no explanatory power as soon as we control for parents’ economic preferences. A series of robustness checks deals with the role of older siblings, the similarity of parental preferences, and the average preferences within a child’s village.
    Keywords: intergenerational transmission of preferences, time preferences, risk preferences, social preferences, children, parents, Bangladesh, socio-economic status, experiment
    JEL: C90 D10 D90 D81 D64 J13 J24 J62
    Date: 2018
  9. By: Leonardo Becchetti (DEF & CEIS, University of Rome "Tor Vergata"); Francesco Salustri (DEF,University of Rome "Tor Vergata" and University of Turin); Pasquale Scaramozzino (DEF & CEIS,University of Rome "Tor Vergata" and SOAS)
    Abstract: We devise a ‘nudging’ natural experiment to test the impact of a simple form of advertising on environmentally responsible products with/without the increase of the responsible product price. We find that the simple use of a small shelf-poster explaining the importance of buying a green product (with/without a concurring price increase) generates significant changes in market shares for some of the product classes for both food and non-food products. Part of the effect is generated by the reduced price elasticity of consumers to the poster-plus-price-increase treatment.
    Keywords: nudging, environmental sustainability, randomised field experiment
    JEL: C93 D12 M14 Q56
    Date: 2018–04–03
  10. By: Nobuyuki Hanaki (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); Eizo Akiyama (Faculty of Engineering, Information and Systems, University of Tsukuba - University of Tsukuba); Ryuichiro Ishikawa (School of International Liberal Studies, Waseda University)
    Abstract: By how much does the presence of behavioral uncertainty in an experimental asset market reduce subjects' confidence in their price forecasts? An incentivized interval forecast elicitation method is employed to answer this question. Each market consists of six traders, and the value of dividends is known. Two treatments are considered: six human traders (6H), and one human interacting with five computer traders whose behavior is known (1H5C). We find that while the deviation of the initial price forecasts from fundamental value is smaller in the 1H5C treatment than in the 6H treatment, albeit not statistically significantly, the average confidence regarding the forecasts is not. We further analyze the relationships between subjects' confidence in their forecasts and their trading behavior, as well as their trading performance, in the 6H treatment. While subjects' high confidence in their short-term forecasts shows a negative correlation with their trading performance, high confidence in their long-term forecasts shows a positive correlation with trading performance.
    Keywords: D84,Price forecasts,interval elicitation,experimental asset markets,behavioral uncertainty JEL Code: C90
    Date: 2018–01–08
  11. By: Nicolas Houy (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 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Jean-Philippe Nicolaï (ETH Zürich - Eidgenössische Technische Hochschule [Zürich]); Marie Claire Villeval (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 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Achieving an ambitious goal frequently requires succeeding in a sequence of intermediate tasks, some being critical for the final outcome, and others not. However, individuals are not always able to provide a level of effort sufficient to guarantee success in all such intermediate tasks. The ability to manage effort throughout the sequence of tasks is therefore critical when resources are limited. In this paper we propose a criterion that defines the importance of a task and identifies how an individual should optimally allocate a limited stock of exhaustible efforts over tasks. We test this importance criterion in a laboratory experiment that reproduces the main features of a tennis match. We show that our importance criterion is able to predict the individuals’ performance and it outperforms the Morris importance criterion that defines the importance of a point in terms of its impact on the probability of achieving the final outcome. We also find no evidence of choking under pressure and stress, as proxied by electrophysiological measures.
    Keywords: Critical ability, choking under pressure, Morris-importance, Skin Conductance Responses, experiment
    Date: 2017
  12. By: Kießling, Lukas (University of Bonn); Radbruch, Jonas (IZA); Schaube, Sebastian (University of Bonn)
    Abstract: In many natural environments, carefully chosen peers influence individual behavior. In this paper, we examine how self-selected peers affect performance in contrast to randomly assigned ones. We conduct a field experiment in physical education classes at secondary schools. Students participate in a running task twice: first, the students run alone, then with a peer. Before the second run,we elicit preferences for peers. We experimentally vary the matching in the second run and form pairs either randomly or based on elicited preferences. Self-selected peers improve individual performance by .14-.15 SD relative to randomly assigned peers. While self-selection leads to more social ties and lower performance differences within pairs, this altered peer composition does not explain performance improvements. Rather, we provide evidence that self-selection has a direct effect on performance and provide several markers that the social interaction has changed.
    Keywords: field experiment, self-selection, peer effects, social comparison, peer assignment
    JEL: C93 D01 I20 J24 L23
    Date: 2018–02

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