nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2018‒06‒25
eleven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Habit formation, obesity, and cash rewards By Augurzky, Boris; Bauer, Thomas K.; Reichert, Arndt R.; Schmidt, Christoph M.; Tauchmann, Harald
  2. Three layers of uncertainty: an experiment By Ilke Aydogan; Loic Berger; Valentina Bosetti; Ning Liu
  3. Present Bias in Renewable Resources Management Reduces Agent’s Welfare By Persichina, Marco
  4. Why People Hate Health Economics – Two Psychological Explanations By Tinghög, Gustav; Västfjäll, Daniel
  5. Lifting the Curtain: Backstage Cognition, Frontstage Behavior, and the Interpersonal Transmission of Culture By Lu, Richard; Chatman, Jennifer A.; Goldberg, Amir; Srivastava, Sameer B.
  6. Status maximization as a source of fairness in a networked dictator game By Jan E. Snellman; Gerardo I\~niguez; J\'anos Kert\'esz; R. A. Barrio; Kimmo K. Kaski
  7. Using Ethical Dilemmas to predict Antisocial Choices with Real Payoff Consequences: an Experimental Study By David L. Dickinson; David Masclet
  8. Altruism and information By Brañas-Garza, Pablo; Bucheli, Marisa; Espinosa, Maria Paz
  9. Risk taking in the market of speculative exchange-traded retail products: Do socio-economic factors matter? By Baller, Stefanie
  10. Peers or Police? Detection and Sanctions in the Provision of Public Goods By DeAngelo, Gregory; Gee, Laura Katherine
  11. Locus of Control and Consistent Investment Choices By Pinger, Pia; Schäfer, Sebastian; Schumacher, Heiner

  1. 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
  2. By: Ilke Aydogan; Loic Berger; Valentina Bosetti; Ning Liu
    Abstract: We experimentally explore decision-making under uncertainty using a framework that decomposes uncertainty into three distinct layers: (1) physical uncertainty, entailing inherent randomness within a given probability model, (2) model uncertainty, entailing subjective uncertainty about the probability model to be used and (3) model misspecification, entailing uncertainty about the presence of the true probability model among the set of models considered. Using a new experimental design, we measure individual attitudes towards these different layers of uncertainty and study the distinct role of each of them in characterizing ambiguity attitudes. In addition to providing new insights into the underlying processes behind ambiguity aversion -failure to reduce compound probabilities or distinct attitudes towards unknown probabilities- our study provides the first empirical evidence for the intermediate role of model misspecification between model uncertainty and Ellsberg in decision-making under uncertainty.Keywords: Ambiguity aversion, reduction of compound lotteries, non-expected utility, model uncertainty, model misspecification JEL Classification: D81
    Date: 2018
  3. By: Persichina, Marco
    Abstract: This study investigates the effects generated by myopic and present-biased preferences in the context of resource harvesting, specifically on the impact that the present bias has on the agent’s welfare when the agent is engaged in an intertemporal harvesting activity from a stock of renewable resources. The harvesting activity, in this context, poses a conflict between the long-run benefit of the agent and the short-run desire. The paper assumes there is evidence of the existence of a dual system of response to short and long-term stimuli. Thus, the study shows and argues that in the decision-making that involves intertemporal choices in renewable resources management, the naive behavior, strongly influenced by the emotional-affective system, leads to a reduction in the lifetime utility enjoyed by the individual because of the present bias.
    Keywords: Present bias, naive agent, intertemporal resource management, dual system discounting, agent’s welfare, instant utility.
    JEL: D03 D90 Q20
    Date: 2016–07–20
  4. By: Tinghög, Gustav (Division of Economics, Department of Management and Engineering, Linköping University); Västfjäll, Daniel (Division of Economics, Department of Management and Engineering, Linköping University)
    Abstract: We will argue that health economics at large has been oblivious to the core aspects of human nature outlined in this paper, and this has limited the use of health economics as a productive input in health policy.
    Keywords: Health Economics; Medical Decision Making; Health Care Priority Setting; Emotions; Psychology
    JEL: I19
    Date: 2018–06–20
  5. By: Lu, Richard (University of California, Berkeley); Chatman, Jennifer A. (University of California, Berkeley); Goldberg, Amir (Stanford University); Srivastava, Sameer B. (University of California, Berkeley)
    Abstract: From the schoolyard to the boardroom, the pressures of cultural assimilation pervade all walks of social life. Yet people vary in the capacity to fit in culturally, and their fit can wax and wane over time. We examine how individual cognition and social influence produce variation and change in cultural fit. We do so by lifting the curtain between the backstage (cognition) and frontstage (behavior) of cultural fit. We theorize that the backstage comprises two analytically distinct dimensions--perceptual accuracy and value congruence--and that the former matters for normative compliance on the frontstage, whereas the latter does not. We further propose that a person's behavior and perceptual accuracy are both influenced by observations of others' behavior, whereas value congruence is less susceptible to peer influence. Drawing on email and survey data from a mid-sized technology firm, we use the tools of computational linguistics and machine learning to develop longitudinal measures of frontstage and backstage cultural fit. We also take advantage of a reorganization that produced quasi-exogenous shifts in employees' peer groups to identify the causal impact of social influence.
    Date: 2017–10
  6. By: Jan E. Snellman; Gerardo I\~niguez; J\'anos Kert\'esz; R. A. Barrio; Kimmo K. Kaski
    Abstract: Human behavioural patterns exhibit selfish or competitive, as well as selfless or altruistic tendencies, both of which have demonstrable effects on human social and economic activity. In behavioural economics, such effects have traditionally been illustrated experimentally via simple games like the dictator and ultimatum games. Experiments with these games suggest that, beyond rational economic thinking, human decision-making processes are influenced by social preferences, such as an inclination to fairness. In this study we suggest that the apparent gap between competitive and altruistic human tendencies can be bridged by assuming that people are primarily maximising their status, i.e., a utility function different from simple profit maximisation. To this end we analyse a simple agent-based model, where individuals play the repeated dictator game in a social network they can modify. As model parameters we consider the living costs and the rate at which agents forget infractions by others. We find that individual strategies used in the game vary greatly, from selfish to selfless, and that both of the above parameters determine when individuals form complex and cohesive social networks.
    Date: 2018–06
  7. By: David L. Dickinson (Appalachian State University, Department of Economics); David Masclet (Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France)
    Abstract: Anti-social behaviours are costly to organizations, and the ability to identify predictors of such behaviours can be valuable. In this paper, we used a within-subjects laboratory design to study choices in the well-known (hypothetical) Trolley problem as well as in a real payoff money-burning experiment that can inform our understanding of moral preferences and antisocial behavior. Choices in both environments respond to incentives (i.e., the relative price of the ethical decision). Trolley problem decisions are consistent with previously known results—individuals prefer no action over action, and they prefer to avoid direct over indirect responsibility when negative consequences would be similar in either instance. In analyzing the determinants of anti-social money burning, our data identify money burning due to inequality aversion, but we also find evidence of pure nastiness (burning money of others to increase one’s advantageous inequality). Importantly, we find that willingness to commit ethically dubious acts in the Trolley problem significantly predicts money burning and, more specifically, nastiness. We conclude that choices in hypothetical environments can predict consequential and inefficient antisocial behaviours. Also, utilitarian behaviour in the Trolley dilemma is not linked to antisocial money burning, which contrasts with conclusions in the literature.
    Keywords: experiments, money burning, ethical dilemmas, anti-social behavioral, trolley problem
    JEL: C90 C91 Z10
    Date: 2018–06
  8. By: Brañas-Garza, Pablo; Bucheli, Marisa; Espinosa, Maria Paz
    Abstract: Experimental literature has accumulated evidence on the association of personal characteristics to a higher or lower level of prosocial behavior. There is also evidence that donations are affected by the mere provision of information about the recipients, whatever its nature or content. In this paper, we present a unified experimental framework to analyze the impact of social class, political orientation and gender on the level of giving; our experimental design allows us to reveal the effect of providing information by itself, with respect to the baseline treatment of no information, and separately from the effect of the informational content. These results could be relevant to any design intended to measure the impact on altruism of different manipulations of the Dictator Game.
    Keywords: economic experiments, information, wealth, gender, ideology, inequity aversion, giving.
    JEL: C91 D64 I30
    Date: 2018–05–30
  9. By: Baller, Stefanie
    Abstract: When purchasing a financial product, investors may actively decide upon the risk they take. This paper analyzes the impact of investors' personal characteristics, location-based demographic factors and transaction-specific trading surroundings on their risk taking in the market of speculative exchange-traded retail products. Using a large trade dataset of warrants and leverage certificates on an individual investor level, I find evidence that risk taking behavior is strongly determined by the characteristics examined here: (i) Inexperienced young males with little secure status in their lives take more risk than other traders. (ii) Living in socially less desirable environments or encountering less risky trading conditions also supports risk taking. (iii) Risk taking is highly persistent. (iv) Finally, higher risk taking leads to poorer performance.
    Keywords: Leverage Certificate,Warrant,Private Investor,Risk Taking,Performance,Socio-Economic Factors
    JEL: D40 G11 G21 G24 Z10
    Date: 2017
  10. By: DeAngelo, Gregory (West Virginia University); Gee, Laura Katherine (Tufts University)
    Abstract: Sanctions are a common method to discourage free-riding in the provision of public goods. However, we can usually only sanction those who are detected performing the bad act of free-riding. There has been considerable research on the type of sanctions imposed, but this research almost always automatically detects everyone's actions and broadcasts them to the group. This is akin to assuming that a group always has a police force or motivated peer reporting to detect and announce the actions of bad actors. However, in many situations bad acts go undetected and unknown to others. We use a lab experiment to compare public good contribution decisions in an environment where we relax the assumption that detection is automated. The common result that sanctions and the likelihood of detection share an inverse relationship continues to be found in our results. However, free-riders are unwilling to pay for detection when sanctioning is conducted at the group level, because a criminal does not want to fund the police who will catch his bad acts. But, when detection is conducted among peers, free-riders are willing to pay to detect other individuals that free-ride.
    Keywords: public goods, punishment, detection, deterrence
    JEL: C72 C91 C92 D7 H41
    Date: 2018–05
  11. By: Pinger, Pia (University of Bonn); Schäfer, Sebastian (Goethe University Frankfurt); Schumacher, Heiner (KU Leuven)
    Abstract: We document that an internal locus of control can be hindering in financial market situations, where short-term outcomes are determined by chance. The reason is that internally controlled individuals may tend to (over-)react to random outcomes. Our evidence is based on an experiment in which subjects repeatedly invest in two identical, uncorrelated, risky assets and observe previous outcome realizations. 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 fallacy. 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

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