nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2018‒05‒07
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Stress and Coping - An Economic Approach By Klaus Wälde
  2. Habit formation, obesity, and cash rewards By Augurzky, Boris; Bauer, Thomas K.; Reichert, Arndt R.; Schmidt, Christoph M.; Tauchmann, Harald
  3. Commitment to pay taxes: Results from field and laboratory experiments By Koessler, Ann-Kathrin; Torgler, Benno; Feld, Lars P.; Frey, Bruno S.
  4. Belief-dependent Preferences and Reputation: Experimental Analysis of a Repeated Trust Game By Giuseppe Attanasi; Pierpaolo Battigalli; Elena Manzoni; Rosemarie Nagel
  5. Rational Heuristics ? Expectations and behaviors in Evolving Economies with Heterogeneous interacting agents By Giovanni Dosi; Mauro Napoletano; Andrea Roventini; Joseph Stiglitz; Tania Treibich
  6. Frustration and Anger in the Ultimatum Game: An Experiment By Chiara Aina; Pierpaolo Battigalli; Astrid Gamba
  7. Bounded-rationality and heterogeneous agents: Long or short forecasters? By Elton Beqiraj; Giovanni Di Bartolomeo; Marco Di Pietro; Carolina Serpieri
  8. Impulsive Behavior in Competition: Testing Theories of Overbidding in Rent-Seeking Contests By Roman Sheremeta
  9. Emotional expressions by sports teams: an analysis of world soccer player portraits By Hopfensitz, Astrid; Mantilla, Cesar
  10. Group Influence in Sharing Experiments By Valeria Faralla; Guido Borà; Alessandro Innocenti; Marco Novarese

  1. By: Klaus Wälde
    Abstract: We present a psychological model of stress. Appraisal translates stressors into subjective stress. Stress reduces instantaneous utility of an individual directly and via cognitive load. Coping can be under the control of the individual or more automatic. We predict the occurrence of uncontrolled coping .emotional outbursts .as a function of an individual’s theory-consistent personality and environment. We explain when stressors reduce income. We also explain under which conditions rising income does not go hand in hand with rising stress. First steps towards a theory of therapy show how stressed individuals can improve their well-being beyond standard coping measures.
    Keywords: stress, coping, personality, controlled vs. automatic reaction, emotional outbursts, income.
    JEL: D03 D91 I12
    Date: 2018
  2. By: Augurzky, Boris; Bauer, Thomas K.; Reichert, Arndt R.; Schmidt, Christoph M.; Tauchmann, Harald
    Abstract: This paper examines weight loss and the formation of healthy habits through cash rewards in the context of a multi-phase randomized controlled trial involving 700 obese individuals. We find effects of monetary incentives for weight loss of up to EUR 300 on body weight during all experimental phases, including a period of a year and a half following the exposure to the financial rewards. We also find effects on healthy behavior during this follow-up phase. After the initial incentive period, we additionally provided participants who had lost a substantial amount of weight with monetary rewards of up to EUR 500. These had only short-term effects on body weight and healthy behavior. We argue that our findings are best explained by monetarily incentivized participants having formed healthy habits by the time the experiment ended and that only the speed of the transition to the new (health) equilibrium was affected by the additional rewards. Contrary to the pessimistic perspective presented in earlier empirical research on habit formation, our results suggest that a simple program relying on weight loss rewards can result in long-term health behavioral change.
    Keywords: field experiment,obesity,healthy behavior,habit formation,sustainability,monetary incentives
    JEL: I12 I18 D03 C93
    Date: 2018
  3. By: Koessler, Ann-Kathrin; Torgler, Benno; Feld, Lars P.; Frey, Bruno S.
    Abstract: The ability of a tax authority to collect taxes successfully depends on both its relationship with taxpayers and how strongly these taxpayers are committed to contributing to the common good. We present field and laboratory experimental evidence on a new non-intrusive approach aimed at fostering the commitment to pay taxes. Using a between-subject design in a unique field setting, we analyze whether tax compliance changes if taxpayers receive an offer to promise paying their taxes on time. Taxpayers who complied with the promise entered into a lottery with the chance of winning either a financial or a non-financial reward. Rewards were also offered in response to compliance only (i.e., without being asked to make a formal promise) allowing us to disentangle a pure reward effect from the commitment effect. As potential legal obstacles prevented us from developing a treatment that allowed for identifying whether the promise itself changes behavior, we designed and conducted a laboratory experiment to test this proposition. In the field experiment, taxpayers with a history of being compliant are more likely to make a promise. Similarly, the laboratory experiment indicates that individuals with higher tax morale are more compliant and more likely to make the promise. In addition, for all promise schemes, compliance is significantly higher for the promise-makers as compared to subjects in the control group and to those who did not make a promise. The field experiment indicates that commitment can improve payment behavior. This effect, however, is strongly dependent on the type of reward to which the promise is linked. Compliance increases only if the reward is non-financial. A no compliance effect is observed if cash is offered in return for promise fulfilment. A strong compliance effect for pure non-financial rewards was also obtained in the laboratory experiment.
    Keywords: tax compliance,field experiment,commitment,promise,supportive incentives,psychological contract
    JEL: H26 C93 C91 A13
    Date: 2018
  4. By: Giuseppe Attanasi; Pierpaolo Battigalli; Elena Manzoni; Rosemarie Nagel
    Abstract: We study in a theoretical and experimental setting the interaction between belief-dependent preferences and reputation building in a nitely repeated trust game. We focus mainly on the effect of guilt aversion. In a simple two-types model, we analyze the effect of reputation building in presence of guilt-averse players and derive behavioral predictions. In the experiment, we elicit information on trustees belief-dependent preferences and disclose it to the paired trustor before the repeated game. Our ex- perimental results show that disclosing information on the trustees belief-dependent preferences and thus letting players play the repeated trust game in presence of almost complete information leads to higher trust and cooperation than in the corresponding incomplete information game setting. In particular, disclosure of information on preferences of guilt-averse trustees also enhances the trustorscooperation. Disclosure of information on belief-dependent preferences of reciprocity-concerned trustees, instead, does not lead to higher trust and cooperation. We show that this is theoretically consistent with subjects featuring low reciprocity concerns. JEL classifi cation: C72; C73; C91. Keywords: Repeated psychological game; reputation; guilt; reciprocity; almost complete information.
    Date: 2018
  5. By: Giovanni Dosi (Laboratory of Economics and Management); Mauro Napoletano (Observatoire français des conjonctures économiques); Andrea Roventini (Laboratory of Economics and Management (LEM)); Joseph Stiglitz (Columbia Business School); Tania Treibich (Observatoire français des conjonctures économiques)
    Abstract: We analyze the individual and macroeconomic impacts of heterogeneous expectations and action rules within an agent-based model populated by heterogeneous, interacting firms. Agents have to cope with a complex evolving economy characterized by deep uncertainty resulting from technical change, imperfect information and coordination hurdles. In these circumstances, we find that neither individual nor macroeconomic dynamics improve when agents replace myopic expectations with less naïve learning rules. In fact, more sophisticated, e.g. recursive least squares (RLS) expectations produce less accurate individual forecasts and also considerably worsen the performance of the economy. Finally, we experiment with agents that adjust simply to technological shocks, and we show that individual and aggregate performances dramatically degrade. Our results suggest that fast and frugal robust heuristics are not a second-best option: rather they are “rational” in macroeconomic environments with heterogeneous, interacting agents and changing “fundamentals”.
    Keywords: Complexity; Expectations; Heterogeneity; Heuristics; Learning; Agent based model; Computational economics
    JEL: C63 E32 E6 G1 G21 O4
    Date: 2017–12
  6. By: Chiara Aina; Pierpaolo Battigalli; Astrid Gamba
    Abstract: In social dilemmas, choices may depend on belief-dependent motivations, which enhance the credibility of promises or threats at odds with personal gain maximization. We address this issue theoretically and experimentally in the context of the Ultimatum Minigame, assuming that the choice of accepting or rejecting an unfair proposal is affected by a combination of frustration, due to unfulfilled expectations, and inequity aversion. We increase the responder's payoff from the default allocation (the proposer's outside option) with the purpose of increasing the responder's frustration due to the unfair proposal, and thus his willingness to reject it. In addition, we manipulate the method of play, with the purpose of switching on (direct response method) and off (strategy method) the responder's experience of anger. We found overwhelming evidence in support of belief-dependent preferences: in the direct method, the higher the responders' initial expectations of the default allocation, the more likely they are to reject the unfair proposal. In line with our predictions, the direct method increases the conditional frequency of rejections. Instead, against our predictions, the payoff increase does not have such effect. Interestingly, the distribution of actions of male subjects is in line with the theory, but not that of females. Keywords: Experiments, psychological games, ultimatum minigame, frustration, anger, rationalizability. JEL classification: C72, C91, D03.
    Date: 2018
  7. By: Elton Beqiraj (University La Sapienza); Giovanni Di Bartolomeo (University La Sapienza); Marco Di Pietro (University La Sapienza); Carolina Serpieri (European Commission - JRC)
    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.
    Keywords: monetary policy, bounded rationality, heterogeneous expecta- tions
    Date: 2018–04
  8. By: Roman Sheremeta (Weatherhead School of Management, Case Western Reserve University and Economic Science Institute, Chapman University)
    Abstract: Contests are commonly used in the workplace to motivate workers, determine promotion, and assign bonuses. Although contests can be very effective at eliciting high effort, they can also lead to inefficient effort expenditure (overbidding). Researchers have proposed various theories to explain overbidding in contents, including mistakes, systematic biases, the utility of winning, and relative payoff maximization. Using an eight-part experiment, we test and find significant support for the existing theories. Also, we discover some new explanations based on cognitive ability and impulsive behavior. Out of all explanations examined, we find that impulsivity is the most important factor explaining overbidding in contests.
    Keywords: contest, overbidding, impulsive behavior, experiments
    JEL: C72 C91 D01 D72
    Date: 2018
  9. By: Hopfensitz, Astrid; Mantilla, Cesar
    Abstract: Emotion display serves as incentives or deterrents for others’ in many social interactions. We study the portrayal of anger and happiness, two emotions associated with dominance, and its relationship to team performance in a high stake environment. We analyze 4,318 pictures of players from 304 participating teams in twelve editions (1970-2014) of the FIFA Soccer World Cup, and use automated face-reading (FaceReader 6) to evaluate the display of anger and happiness. We observe that the display of both anger and happiness is positively correlated with team performance in the World Cup. Teams whose players display more anger, an emotion associated with competitiveness, concede fewer goals. Teams whose players display more happiness, an emotion associated with confidence, score more goals. We show that this result is driven by less than half the players in a team.
    Keywords: emotions; facial expressions; anger; happiness; contests
    JEL: D91 L83
    Date: 2018–04
  10. By: Valeria Faralla; Guido Borà; Alessandro Innocenti; Marco Novarese
    Abstract: We assess in the laboratory the impact of promises on group decision-making. The gift-exchange game provides the testing ground for our experiment. When played between groups, inter-group cooperation and reciprocity represent a condition for efficiency in overall decision making. We find that promises have a significant positive effect on aggregate profits. We interpret these findings as if promises act as a trigger of social conformity, according to which groups adopt socially more desirable behavior even without face-to-face communication or discussion.
    Keywords: group decision, promise, gift-exchange game, efficiency, social conformity.
    JEL: D81 D83
    Date: 2018–05

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