nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2018‒07‒30
nine papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. The Heaven Dictator Game: Costless taking or giving By Aurora García-Gallego; Nikolaos Georgantzis; María José Ruiz-Martos
  2. Cultural values and behavior in dictator, ultimatum and trust games: an experimental study By Sun-Ki Chai; Dolgorsuren Dorj; Katerina Sherstyuk
  3. How do bonus cap and malus affect risk and effort choice Insight from a lab experiment By Harris, Qun; Mercieca, Analise; Soane, Emma; Tanaka, Misa
  4. Replication in experimental economics: A historical and quantitative approach focused on public good game experiments By Nicolas Vallois; Dorian Jullien
  5. Ambiguity preferences for health By Arthur E. Attema; Han Bleichrodt; Olivier L'Haridon
  6. Nudging Businesses to Pay Their Taxes: Does Timing Matter? By Gillitzer, Christian; Sinning, Mathias
  7. The Big Robber Game By Carlos Alós-Ferrer; Jaume García-Segarra; Alexander Ritschel
  8. Paying for what kind of performance? Performance pay and multitasking in mission-oriented jobs By Daniel Jones; Mirco Tonin; Michael Vlassopoulos
  9. Inequality, Fairness and Social Capital By Fehr, Dietmar; Rau, Hannes; Trautmann, Stefan; Xu, Yilong

  1. By: Aurora García-Gallego (LEE & Economics Department, Universitat Jaume I, Castellón-Spain); Nikolaos Georgantzis (Burgundy School of Wines and Spirits Business, Dijon, France); María José Ruiz-Martos (Dept. de Teoría e Historia Económica, University of Granada, Spain)
    Abstract: We present experimental data from the Heaven-Dictator game, a generalization of the dictator game that investigates the overstatement of inequality reduction in the motivation of social preferences. In this game, two players start with equal endowments and the heaven-dictator player, without incurring in any pecuniary cost or profit, chooses among increasing, decreasing or maintaining the earnings of the passive player. Thus, any choice except for the status quo generates unequal payoffs. The design avoids the experimenter demand effect of the standard “give only” version while simultaneously allowing participants to manifest antisocial preferences, inequity aversion or retaliation cannot be called for as motives. We find that the overwhelming majority of subjects, 75.4%, choose to increase their partners’ earnings; however, there is a non-negligible 24.6% of subjects that either choose the status quo (11.9%) or to decrease (12.7%) their partners’ earnings. Based on the psychological literature on music as a mood-inducing stimulus and on the effects of mood on helping behavior, we study the effect of exposure to different types of music on the heaven-dictator choices. Overall, observed preferences are independent of the music condition.
    Keywords: experiment, behavior, other-regarding preferences, music, dictator game
    JEL: C72 C91
    Date: 2018
  2. By: Sun-Ki Chai (Department of Sociology, University of Hawaii at Manoa); Dolgorsuren Dorj (Department of Economics, National Academy of Governance); Katerina Sherstyuk (Department of Economics, University of Hawaii at Manoa)
    Abstract: Culture is a central concept broadly studied in social anthropology and sociology. It has been gaining increasing attention in economics in relation to research on discrimination in a labor market, identity, gender, and social preferences. Most experimental economics research on culture studies cross-national or cross-ethnic differences in economic behavior. These studies reveal clear behavioral differences across different ethnic groups, yet do not provide a general deductive framework for specifying the underlying preferences behind these differences. We explain laboratory behavior in the dictator, ultimatum, and trust games based on two cultural dimensions adopted from a prominent general cultural framework in contemporary social anthropology: group commitment and grid control. Group-ness measures the extent to which individual identity is incorporated into group or collective identity; grid-ness measures the extent to which social and political prescriptions intrinsically influence individual behavior. One objective of this paper is to show that the grid-group framework, despite its origins in comparative ethnography, is adaptable to an experimental setting and indeed provides a parsimonious framework for generating testable behavioral predictions across a variety of experimental games. Another is to test the predictions of the grid- group framework on a number of simple games widely employed by experimental economists. Grid-group characteristics are measured for each individual using selected items from the World Values Survey. We find that these attributes allow us to systematically predict behavior in a way that discriminates among multiple forms of social preferences using a simple, parsimonious deductive model. Based on the implications of the theory, we hypothesize that subjects with higher group scores will tend to offer more in dictator and ultimatum games and entrust more in trust games. When responding in ultimatum games, those with high grid scores are hypothesized to reject more often and divide less, and to tie acceptance and amount divided more closely to the amount offered. When responding in trust games, those with low group scores are hypothesized to return less, and those with high grid scores to tie the amount returned more closely to the amount entrusted. These theoretical predictions are confirmed overall for most experimental games, although the strength of empirical support varies across games. We conclude that grid-group cultural theory is a viable predictor of people’s economic behavior, and further discuss potential limitations of the current approach and the ways to improve it.
    Keywords: laboratory experiment, two-person games, survey, culture
    JEL: C72 C91 Z13
    Date: 2018–05
  3. By: Harris, Qun (Bank of England); Mercieca, Analise (Bank of England); Soane, Emma (Bank of England); Tanaka, Misa (Bank of England)
    Abstract: We conducted a lab experiment to examine how bonus caps and malus affect individuals’ choices of risk and effort. We find that a bonus structure that rewards individuals proportionally to realised investment returns, but does not penalise negative returns, encourages risk-taking; while a bonus cap and malus mitigate risk-taking. However, the difference in risk-taking between the bonus cap and malus treatment groups and the proportional bonus group weakened significantly when the participants’ bonus was conditional on hitting an absolute or relative performance target. We also find some evidence that the bonus cap discourages project search effort relative to the proportional bonus, whereas the difference in the levels of effort between the malus treatment group and the proportional bonus group was not statistically significant.
    Keywords: Bonus cap; bonus regulation; incentive pay
    JEL: C91 G28 J33 M52
    Date: 2018–07–06
  4. By: Nicolas Vallois (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Dorian Jullien (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)
    Abstract: We propose a historical perspective on replication in experimental economics focused on public good games. Our intended contribution is twofold: in terms of method and in terms of object. Methodologically, we blend traditional qualitative history of economics with a less traditional quantitative approach using basic econometric tools to detect unnoticed historical patterns of replication. In terms of our object, we highlight a type of replication that we call " baseline replication " , which is not present in explicit methodological discussions, yet central in the specificity of experimental economics regarding replication in economics.
    Keywords: Experimental Economics, Replication, History of Economic Thought,Methodology, Public Good Experiments
    Date: 2017–11–28
  5. By: Arthur E. Attema (Erasmus School of Economics - Erasmus University Rotterdam); Han Bleichrodt (Erasmus School of Economics - Erasmus University Rotterdam); Olivier L'Haridon (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In most medical decisions probabilities are ambiguous and not objectively known.Empirical evidence suggests that people's preferences are affected by ambiguity. Health economic analyses generally ignore ambiguity preferences and assume that they are the same as preferences under risk. We show how health preferences can be measured under ambiguity and we compare them with health preferences under risk. We assume a general ambiguity model that includes many of the ambiguity models that have been proposed in the literature. For health gains, ambiguity preferences and risk preferences were indeed the same. For health losses they differed with subjects being more pessimistic in decision under ambiguity. Utility and loss aversion were the same for risk and ambiguity .
    Keywords: ambiguity, health
    Date: 2018
  6. By: Gillitzer, Christian (University of Sydney); Sinning, Mathias (Australian National University)
    Abstract: This paper provides theoretical and empirical evidence on the implications of the timing of reminders by studying the effect of varying the timing of reminder letters to taxpayers on their payment behavior. The collection of unpaid tax debts constitutes a considerable challenge for tax authorities. We show that varying the timing of a reminder letter has a theoretically ambiguous effect on tax payments. We study the payment behavior of business taxpayers in a field experiment in Australia and find that a simple reminder letter increases the probability of payment by about 25 percentage points relative to a control group that does not receive a letter from the tax authority. However, variation over a three-week period in the timing of the reminder letter has no effect on the probability of payment within seven weeks of the due date. Our findings indicate that sending reminders early results in faster payment of debts with no effect on the ultimate probability of payment.
    Keywords: tax compliance, business taxation, natural field experiment, behavioral insights
    JEL: C93 H25 H26
    Date: 2018–06
  7. By: Carlos Alós-Ferrer; Jaume García-Segarra; Alexander Ritschel
    Abstract: We present a novel design measuring a correlate of social preferences in a high-stakes setting. In the Big Robber Game, a "robber" can obtain large personal gains by appropriating the gains of a large group of "victims" as seen in recent corporate scandals. We observed that more than half of all robbers take as much as possible. At the same time, participants displayed standard, prosocial behavior in the Dictator, Ultimatum, and Trust games. That is, prosocial behavior in the small is compatible with highly selfish actions in the large, and the essence of corporate scandals can be reproduced in the laboratory even with a standard student sample. We show that this apparent contradiction is actually consistent with received social-preference models. In agreement with this view, in the experiment more selfish robbers also behaved more selfishly in other games and in a donation question. We conclude that social preferences are compatible with rampant selfishness in high-impact decisions affecting a large group.
    Keywords: Big Robber Game, social preferences, corporate scandals, incentives
    JEL: C72 C92 D03
    Date: 2018–06
  8. By: Daniel Jones (University of Pittsburgh, Graduate School of Public and International Affairs); Mirco Tonin (Free University of Bolzano‐Bozen, Faculty of Economics and Management); Michael Vlassopoulos (University of Southampton)
    Abstract: How does pay-for-performance (P4P) impact productivity, multitasking, and the composition of workers in mission-oriented jobs? These are central issues in sectors like education or healthcare. We conduct a laboratory experiment, manipulating compensation and mission, to answer these questions. We find that P4P has positive effects on productivity on the incentivized dimension of effort and negative effects on the non-incentivized dimension for workers in non-mission-oriented treatments. In mission-oriented treatments, P4P generates minimal change on either dimension. Participants in the non-mission sector – but not in the mission-oriented treatments – sort on ability, with lower ability workers opting out of the P4P scheme.
    Keywords: Prosocial motivation, Performance pay, Multitasking, Sorting
    JEL: C91 M52 J45
    Date: 2018–07
  9. By: Fehr, Dietmar; Rau, Hannes; Trautmann, Stefan (Tilburg University, Center For Economic Research); Xu, Yilong (Tilburg University, Center For Economic Research)
    Abstract: We study the impact of unjust inequality on social trust and trustworthiness, and its separate effect on the economically successful and the unsuccessful, in a controlled economic experiment. We find evidence for a negative effect of unfair economic inequality on social interactions. Probing the boundaries of this effect, we document that this erosion of social capital critically depends on the context: if a well-off person is not directly responsible for the outcome of the worse-off person, then we observe no negative effects on trust and trustworthiness in the aggregate. Moreover, our data do not support the view that higher status or wealth leads to an erosion of pro-social attitudes: the successful are always more generous; groups of unsuccessful persons are least efficient and least generous in the trust game.
    Keywords: inequality; fairness; social capital
    JEL: C91 D31 D63
    Date: 2018

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