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on Cognitive and Behavioural Economics |
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Issue of 2018‒06‒18
nine papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Ekström, Mathias (Department of Economics, NHH – Norwegian School of Economics) |
| Abstract: | The current study provides the first experimental test of the compromise effect, i.e. the tendency to choose middle options, in a naturally occurring setting. Simultaneously, I propose and evaluate a novel nudge intended to stimulate active choice—the (un)compromise effect—a compromise effect without an explicit middle option. 63,494 recipients of a mail fundraiser were randomly assigned to one of three sets of suggested donations: [$10, $50, $100, $__ ]; [$10, $50, $100, $250, $500, $__ ]; or [$10, $500, $__ ]. The results support both the compromise effect and the (un)compromise effect: extending the range increased the fraction donating $100 as well as the average donation—independent of whether the middle suggested donations were present or not. Hence, by only providing informative end points, organizations can affect decision-making and at the same time promote individuality through active choice. The results also shed light on why suggested alternatives affect choice in general: they reduce the cognitive cost of figuring out what actions are appropriate. |
| Keywords: | Choice architecture; Compromise effect; Consumer choice; Field experiment; Philanthropy |
| JEL: | C93 D03 D64 |
| Date: | 2018–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1215&r=cbe |
| By: | Hélène Bouscasse (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: | 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 and latent variable model,Structural equation modelling,Behavioural theories,Economic outputs |
| Date: | 2018–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01795630&r=cbe |
| By: | Bjorn Bartling (University of Zurich); Alexander Cappelen (Norwegian School of Economics); Mathias Ekström (Norwegian School of Economics); Erik Ø. Sørensen (Norwegian School of Economics); Bertil Tungodden (Norwegian School of Economics) |
| Abstract: | The paper reports the first experimental study on people’s fairness views on extreme income inequalities arising from winner-take-all reward structures. We find that the majority of participants consider extreme income inequality generated in winner-take-all situations as fair, independent of the winning margin. Spectators appear to endorse a “factual merit” fairness argument for no redistribution: the winner deserves all the earnings because these earnings were determined by his or her performance. Our findings shed light on the present political debate on redistribution, by suggesting that people may object less to certain types of extreme income inequality than commonly assumed. |
| Keywords: | winner-take-all reward structures, fairness, income inequality |
| JEL: | C91 D63 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2018-031&r=cbe |
| By: | Cardella, Eric (Texas Tech University); Kalenkoski, Charlene M. (Texas Tech University); Parent, Michael (University of Texas at Austin) |
| Abstract: | This paper presents the results of an experiment that is designed to examine how information presentation and complexity impact retirement-savings behavior. The experiment is performed twice, using both a Qualtrics panel of new employees and a sample of business school students. In this experiment, participants first were provided with either a long or short description of a hypothetical employer-sponsored 401(k) plan. Then they were asked whether they would enroll in the hypothetical plan and, if so, what percentage of their salary they would contribute. If they chose to contribute, they were asked how they would like to allocate their contribution between stocks and bonds. Participants were offered the option to stick with pre-assigned default options such as a 4% contribution and a 50-50 stocks and bonds split. The hypothesis is that providing concise information with helpful recommendations would improve choices over providing lengthy and detailed information. However, controlling for demographic and other factors, this hypothesis was not supported by the data, for either the new employees or the business school students. Thus, the data suggest that simplifying the presentation of retirement-plan information to employees is unlikely to result in vastly improved retirement-planning choices. |
| Keywords: | retirement planning, 401(k), information complexity, nudge, choice architecture |
| JEL: | G11 H31 J32 D83 C90 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11538&r=cbe |
| By: | Harin, Alexander |
| Abstract: | A forbidden zones theorem, mathematical approach and model are proposed in the present article. In particular, the approach supposes that people decide as if there were some biases of the expectations of measurement data. The article is motivated by the need of a theoretical support for the practical analysis performed for the purposes of utility and prospect theories, behavioral economics, psychology, decision and social sciences. Possible general consequences and applications of the theorem and approach for a noise and biases of measurement data are preliminary considered as well. |
| Keywords: | probability; variance; noise; bias; measurement; utility theory; prospect theory; behavioral economics; psychology; decision sciences; social sciences; |
| JEL: | C02 C1 D8 D81 |
| Date: | 2018–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86650&r=cbe |
| By: | Alexander W. Cappelen; Varun Gauri; Bertil Tungodden |
| Abstract: | A large-scale economic experiment, conducted on a representative sample of the US popula- tion, shows that cooperation creates special moral obligations. Participants in the experiment, acting as impartial spectators, transferred significantly more money to an unlucky worker when two individuals had cooperated than when they had worked independently. We further show that the effect of cooperation is strongly associated with political affiliation, with Democrats attaching significantly more importance to cooperation as a source of moral obligation than Republicans. Our findings shed light on the foundations of redistributive preferences and may contribute to explain the often observed asymmetry in moral concern for different groups of individuals, both nationally and internationally. |
| Keywords: | cooperation, distributive justice, redistribution |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7052&r=cbe |
| By: | Belmi, Peter (University of Virginia); Pfeffer, Jeffrey (Stanford University) |
| Abstract: | Competence and sociability (warmth) are fundamental dimensions of social judgment in organizations. However, these qualities are frequently seen as negatively related, with mixed evidence on which is more important. In three studies (N = 993) we investigated the effects of reward interdependence on the preference for sociability versus competence. We predicted that reward interdependence would elicit a more instrumental, calculative mindset, which in turn, would lead individuals to value competence more. Study 1 surveyed working adults who were in actual work groups and found that those who worked in more (vs. less) reward interdependent environments were more likely to think instrumentally and calculatively when considering potential colleagues. This mindset, in turn, was associated with a greater tendency to value competence over sociability. Studies 2 and 3 used an experimental design and found that when people imagined or anticipated working in a situation in which their economic outcomes depended in part on others, they were more likely to adopt an instrumental focus and choose a "competent jerk" over a "lovable fool". These results call into question a vast social judgment literature that has made claims about the importance of sociability and related constructs without considering the context, and particularly the reward interdependence, often inherent in organizational contexts. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:repec:ecl:stabus:3640&r=cbe |
| By: | Giovanni Di Bartolomeo (University La Sapienza); Carolina Serpieri (European Commission - JRC) |
| Abstract: | This paper introduces model uncertainty into a behavioral New Keynesian DSGE framework and derives robust optimal monetary policies. We build a heterogeneous agents DSGE model, where a fraction of agents behave according to some forms of bounded rationality (boundedly rational agents), while the reminder operate on the basis of expectations that are corrected on average (rational agents). We consider two potential mechanisms of expectations formation to generate beliefs. The central bank observes the aggregate economic dynamics, but it ignores the fraction of boundedly rational agents and/or the mechanism they use to form their expectations. Non-Bayesian robust control techniques are then adopted to minimize a welfare loss derived from the second-order approximation of agents’ utilities. We account of model uncertainty considering both commitment and discretion regime. |
| Keywords: | robust techniques, optimal policy, New Keynesian DSGE models, bounded rationality. |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc111603&r=cbe |
| By: | Bartling, Björn (Department of Economics, NHH – Norwegian School of Economics); Cappelen, Alexander W (Department of Economics, NHH – Norwegian School of Economics); Ekström, Mathias (Department of Economics, NHH – Norwegian School of Economics); Sørensen, Erik Ø. (Department of Economics, NHH – Norwegian School of Economics); Tungodden, Bertil (Department of Economics, NHH – Norwegian School of Economics) |
| Abstract: | The paper reports the first experimental study on people’s fairness views on extreme income inequalities arising from winner-take-all reward structures. We find that the majority of participants consider extreme income inequality generated in winner-take-all situations as fair, independent of the winning margin. Spectators appear to endorse a “factual merit” fairness argument for no redistribution: the winner deserves all the earnings because these earnings were determined by his or her performance. Our findings shed light on the present political debate on redistribution, by suggesting that people may object less to certain types of extreme income inequality than commonly assumed. |
| Keywords: | Winner-take-all reward structures; Fairness; Income inequality |
| JEL: | C91 D63 |
| Date: | 2018–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1214&r=cbe |