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on Cognitive and Behavioural Economics |
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Issue of 2018‒05‒28
nine papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | O'Higgins, Niall (ILO International Labour Organization); Mazzoni, Clelia (University of Campania-Luigi Vanvitelli); Sbriglia, Patrizia (University of Campania-Luigi Vanvitelli) |
| Abstract: | Trust and trustworthiness are important components of social capital and much attention has been devoted to their correct evaluation. In this paper, we argue that individuals' trust and trustworthiness are strongly dependent on the level of trust and trustworthiness of the social group in which subjects operate. Attitudinal indicators which are often used to measure trust and trustworthiness in economic and sociological studies are proxies of the individual's propensity to trust, but are insufficient measures of the effective level of trust since the latter may be strongly affected by the behaviour of the components of the individuals' social groups. In order to test our hypothesis, we use a rich dataset based on two experiments on the Trust Game (Berg et al.; 1995), where subjects also filled a questionnaire containing the main attitudinal questions the EVS (the European Value Survey) uses to measure individuals' trust. We then compare the ex-ante behavioural and attitudinal measures of trust with the ex post relative measures. Our main finding is that trust strongly varies once the individual is informed on the on the level of trustworthiness of the social group to which he\she has been allocated during the experiment. This difference is higher the higher is the family level of income and the parental education status of the subjects. We also find that relative behavioural measures are not correlated to attitudinal measures (Glaeser et al., 2000, Lazzarini, 2005), but they are strongly correlated to groups' trustworthiness. We also find that similar social preferences profiles (between Senders and Recipients) tend to enhance the degree of behavioural trust. |
| Keywords: | social capital, trust, experiments |
| JEL: | C91 C92 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11459&r=cbe |
| By: | Pia Pinger; Sebastian Schäfer; Heiner Schumacher |
| Abstract: | We document that an internal locus of control can be hindering in financial mar- ket situations, where short-term outcomes are determined by chance. The reason is that internally controlled individuals may tend to (over-)react to random out- comes. Our evidence is based on an experiment in which subjects repeatedly invest in two identical, uncorrelated, risky assets and observe previous outcome realiza- tions. Under mild restrictions, the optimal strategy is to make the same choice in each period. Yet, internals are more likely to make inconsistent risk choices. The effect size of locus of control is comparable with that of cognitive ability. Among inconsistent subjects, average switching behavior is in line with the gambler’s fal- lacy. However, choices of very internally controlled individuals tend to correspond to the hot hand fallacy. |
| Keywords: | Locus of Control, Risk Preferences, Investment Decisions, Cognitive Ability |
| JEL: | D03 G02 C91 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_015_2018&r=cbe |
| By: | Merkel, Anna; Lohse, Johannes |
| Abstract: | Evidence from response time studies and time pressure experiments has led several authors to conclude that "fairness is intuitive". In light of conflicting findings we provide theoretical arguments showing under which conditions an increase in "fairness” due to time pressure indeed provides unambiguous evidence in favor of the "fairness is intuitive" hypothesis. Drawing on recent applications of the Drift Diffusion Model (Krajbich et al., 2015a), we demonstrate how the subjective diffculty of making a choice affects decisions under time pressure and time delay, there by making an unambiguous interpretation of time pressure effects contingent on the choice situation. To explore our theoretical considerations and to retest the "fairness is intuitive" hypothesis, we analyze choices in two-person binary dictator and prisoner’s dilemma games under time pressure or time delay. In addition, we manipulate the subjective difficulty of choosing the fair relative to the selfish option. Our main finding is that time pressure does not consistently promote fairness in situations where this would be predicted after accounting for choice difficulty. Hence, our results cast doubt on the hypothesis that "fairness is intuitive". |
| Keywords: | distributional preferences; cooperation; time pressure; response times; cognitive processes; drift diffusion models |
| Date: | 2018–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0647&r=cbe |
| By: | Bouscasse, H. |
| Abstract: | Mode choice depends on observable characteristics of the transport modes and of the decision maker, but also on unobservable characteristics, known as latent variables. By means of an integrated choice and latent variable (ICLV) model, which is a combination of structural equation model and discrete choice model, it is theoretically possible to integrate both types of variables in a psychologically and economically sound mode choice model. To achieve such a goal requires clear positioning on the four dimensions covered by ICLV models: survey methods, econometrics, psychology and economics. This article presents a comprehensive survey of the ICLV literature applied to mode choice modelling. I review how latent variables are measured and incorporated in the ICLV models, how they contribute to explaining mode choice and how they are used to derive economic outputs. The main results are: 1) the latent variables used to explain mode choice are linked to individual mental states, perceptions of transport modes, or an actual performed behaviour; 2) the richness of structural equation models still needs to be explored to fully embody the psychological theories explaining mode choice; 3) the integration of latent variables helps to improve our understanding of mode choice and to adapt public policies. |
| Keywords: | MODE CHOICE;SURVEY;INTEGRATED CHOICE;LATENT VARIABLE MODEL;STRUCTURAL EQUATION MODELLING;BEHAVOURAL THEORIES;ECONOMIC OUTPUTS |
| JEL: | C25 D9 R41 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:2018-07&r=cbe |
| By: | Fehr, Ernst (University of Zurich); Williams, Tony (University of Zurich) |
| Abstract: | Throughout human history, informal sanctions played a key role in the enforcement of social norms and the provision of public goods. However, a considerable body of evidence suggests that informal peer sanctions often cause large efficiency costs. This raises the question whether alternative (peer) sanctioning systems exist that avoid these costs and will be preferred by the people. Here, we show that welfare-enhancing peer sanctioning without much need for costly punishment emerges quickly if we introduce two relevant features of social life into the experiment: (i) subjects can migrate across groups with different sanctioning institutions and (ii) they have the chance to achieve consensus about normatively appropriate behavior. The exogenous removal of the norm consensus opportunity reduces the efficiency of peer punishment and renders centralized sanctioning by an elected judge the dominant institution. However, if given the choice, subjects universally reject peer sanctioning without a norm consensus opportunity – an institution that has hitherto dominated research in this field – in favor of peer sanctioning with a norm consensus opportunity or an equally efficient institution with centralized punishment by an elected judge. Migration opportunities and normative consensus building are key to the quick emergence of an efficient culture of universal cooperation because the more prosocial subjects populate the two efficient institutions first, elect prosocial judges (if institutionally possible), and immediately establish a social norm of high cooperation. This norm appears to guide subjects' cooperation and punishment choices, including the virtually complete removal of antisocial punishment when judges make the sanctioning decision. |
| Keywords: | cooperation, punishment, endogenous institutions, public goods |
| JEL: | D02 D03 D72 H41 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11457&r=cbe |
| By: | Helen Bao; Haotong Li |
| Abstract: | This paper studies the influence of CEO overconfidence on firms’ financial performance and corporate social responsibility (CSR) in the US real estate investment trust (REIT) market. CEO overconfidence has been shown to have both negative and positive influences on firms. This paper is the first to combine the two sides in a single framework. We find that firms with overconfident CEOs tend to have better CSR performance. In addition, better CSR performance can increase firms’ financial performance, but this positive relationship is undermined by the existence of overconfident CEOs. Our results not only shed light on the two sides of CEO overconfidence in the real estate sector, but also provide a new prospective for research on the CSR–financial performance relationship. |
| Keywords: | CEO overconfidence; Corporate Social Responsibility; Financial Performance; REIT |
| JEL: | R3 |
| Date: | 2017–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2017_157&r=cbe |
| By: | Erik J. Koornneef; Aurelie Dariel; Iffat Elbarazi; Ahmed R. Alsuwaidi; Paul B.M. Robben; Nikos Nikiforakis (Division of Social Science) |
| Abstract: | The degree of altruistic behavior among strangers is an evolutionary puzzle. A prominent explanation is the evolutionary legacy hypothesis according to which an evolved reciprocity-based psychology affects behavior even when reciprocity is impossible, i.e., altruistic behavior in such instances is maladaptive. Empirical support for this explanation comes from laboratory experiments showing that surveillance cues, e.g., photographs of watching eyes, increase altruistic behavior. A competing interpretation for this evidence, however, is that the cues signal the experimenter’s expectations and participants, aware of being monitored, intentionally behave more altruistically to boost their reputation. Here we report the first results from a field experiment on the topic in which participants are unaware they are being monitored and reciprocity is precluded. The experiment investigates the impact of surveillance cues on a textbook example of altruistic behavior – hand hygiene prior to treating a ‘patient’. We find no evidence surveillance cues affect hand hygiene, despite using different measures of hand-hygiene quality and cues that have been previously shown to be effective. We argue that surveillance cues may have an effect only when participants have reasons to believe they are actually monitored. Thus they cannot support claims altruistic behavior between strangers is maladaptive. |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:nad:wpaper:20180017&r=cbe |
| By: | Olaf Hübler; Lukas Menkhoff; Ulrich Schmidt |
| Abstract: | This research integrates a standard “cheating” experiment into a broad household survey and finds relationships between individual characteristics and cheating behavior. We allow for attendance of others at the cheating experiment, addressing the “reputation to be seen as honest,” finding there is indeed less cheating with attendants. Regarding the preference for “honesty,” we find two related attitudes: stronger risk aversion increases the costs of cheating, i.e. behaving against the norm, while affluence makes cheating costly, as it allows behaving honestly. The underlying experiment in rural Thailand reproduces stylized facts of the cheating literature. |
| Keywords: | Cheating, individual characteristics, risk attitude |
| JEL: | D01 D81 D82 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1736&r=cbe |
| By: | Hoon Hong (School of Economics, Yonsei University) |
| Abstract: | In line with Marx¡¯s Zur Kritik der Politischen Okonomie, this paper intends to work towards laying the groundwork for a critique of neoclassical economics (NC). For this goal, this paper attempts at: conceptualization of objects of analysis; revelation of assumptions; concentration on qualitative aspects; systemization; contextualization and socialization. On the basis of the view that NC is built upon two pillars: price mechanism; individuals¡¯ rational choices, this exploration offers preliminary results about NC¡¯s postulate of independence. This postulate can be specified as: (i) independence among individuals as agents; (ii) quasi-independence among goods (and resources); (iii) independence between an individual and goods or things. In refutation of NC¡¯s strong version of methodological individualism, an increasing number of studies advocate the existence of social relations and interdependent self. Moreover, complementarity or interdependence among goods is to be conceded on the basis of behavioral economics. Furthermore, the so-called socio-materiality lays stress on interdependence between an agent and things. Lastly, the significance of social norm and of qualitative aspects of price is demonstrated. |
| Keywords: | Marx, neoclassical economics, independence, interdependence, social relations, dialectics, context, behavioral economics JEL Classification: |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:yon:wpaper:2018rwp-119&r=cbe |