nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2018‒08‒20
seven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Bounded Rationality, Satisficing and the Evolution of Economic Thought By Clement A. Tisdell
  2. Risky Choices and Solidarity: Why Experimental Design Matters By Wunsch, Conny; Strobl, Eric
  3. Cognitive Ability and In-group Bias: An Experimental Study By Fabian Paetzel; Rupert Sausgruber
  4. Consumer Interest in a Natural Designation in Food Choice By Goddard, Ellen; Muringai, Violet; Robinson, Amber
  5. Social Innovation and Teamwork Within Organizations: Lab-in-the-Field Evidence on Recognition and Cooperation By Sandra Polania Reyes
  6. When social norms and self-image conflict: A public good experiment with social comparison feedback By Serhiy Kandul; Bruno Lanz
  7. Measuring costly effort using the slider task By Gill, David; Prowse, Victoria

  1. By: Clement A. Tisdell
    Abstract: Provides a sketch of the development of the concept of bounded rationality in economic thought. The concept of rationality has several meanings. These different meanings are taken into account in considering the further development of economic thought. Different views of ecological rationality are critically examined in the light of these concepts. Whether or not various theories of behavioral economics can be classified as exhibiting bounded rationality is discussed. Satisficing behavior is commonly associated with bounded rationality but as demonstrated, it is not the only reason for adopting such behavior. The idea of some authors that optimization models under constraints are of little or no relevance to bounded rationality is rejected. Bounded rationality is an important contributor to the diversity of (economic) behaviors. This is stressed. Whether or not a behavior is rational depends to a considerable extent on the situation (the constraints) that decision-makers or actors face. The time-constraint is very important as an influence on the rationality of decisions. Aspects of this are covered.
    Keywords: Institutional and Behavioral Economics
    Date: 2017–11–13
  2. By: Wunsch, Conny (University of Basel); Strobl, Eric (Aix-Marseille University)
    Abstract: Negative income shocks can either be the consequence of risky choices or random events. A growing literature analyzes the role of responsibility for neediness for informal financial support of individuals facing negative income shocks based on randomized experiments. In this paper, we show that studying this question involves a number of challenges that existing studies either have not been aware of, or have been unable to address satisfactorily. We show that the average effect of free choice of risk on sharing, i.e. the comparison of mean sharing across randomized treatments, is not informative about the behavioural effects and that it is not possible to ensure by the experimental design that the average treatment effect equals the behavioural effect. Instead, isolating the behavioural effect requires conditioning on risk exposure. We show that a design that measures subjects preferred level of risk in all treatments allows isolating this effect without additional assumptions. Another advantage of our design is that it allows disentangling changes in giving behaviour due to attributions of responsibility for neediness from other explanations. We implement our design in a lab experiment we conducted with slum dwellers in Nairobi that measures subjects' transfers to a worse-off partner both in a setting where participants could either deliberately choose or were randomly assigned to a safe or a risky project. We find that free choice matters for giving and that the effects depend on donors' risk preferences but that attributions of responsibility play a negligible role in this context.
    Keywords: solidarity, risk taking, experimental design
    JEL: C91 D63 D81 O12
    Date: 2018–06
  3. By: Fabian Paetzel (Department of Economics & FOR 2104, Helmut-Schmidt-University); Rupert Sausgruber (Department of Economics, Vienna University of Economics and Business)
    Abstract: We study the role of performance differences in a task requiring cognitive effort on in-group bias. We show that the in-group bias is strong in groups consisting of high-performing members, and it is weak in low-performing groups. This holds although high-performing subjects exhibit no in-group bias as members of minimal groups, whereas low-performing subjects strongly do. We also observe instances of low-performing subjects punishing the in-group favoritism of low-performing peers. The same does not occur in high-performing or minimal groups where subjects generally accept that decisions are in-group biased.
    Keywords: cognitive ability, group identity, entitlements, social preferences, minimal groups, punishment, social norms, social status
    JEL: C92 D31 D63
    Date: 2018–08
  4. By: Goddard, Ellen; Muringai, Violet; Robinson, Amber
    Abstract: In this study, the objective is to identify consumers’ willingness to consume different foods and the factors that could drive their food preferences. One hundred non-academic staff and students at the University of Alberta in Edmonton, Canada participated in the study. Data were collected using focus group discussions, a survey questionnaire and a contingent valuation exercise. In the focus groups, participants discussed their preferences for traits in livestock and their products, their interest in natural foods and their perceptions regarding naturalness of food in relation to the different types of farming and technologies. In the survey questionnaire, participants were asked about their food consumption habits, perceptions, attitudes and preferences for different foods and technologies, generalized trust in people and trust in groups or institutions responsible for food in Canada among other issues. In the contingent valuation exercise, participants chose the price they were willing to pay for pork with different information about carnosine and omega-3 fatty acids. We find that there is heterogeneity in terms of consumers’ perceptions, attitudes and behaviour regarding natural foods. In summary, the cost of food, concerns about human and environmental impacts and trustworthiness of information on labels are some of the factors that influence participants’ decisions to buy pork labeled as coming from disease resilient or feed efficient pigs or pigs that are higher in a human or animal health component. Although some people accept genetic modification, other participants were concerned about its use in improving disease resilience, feed efficiency and human or animal health component in pigs. Although there are some variations in the results, generalized trust in people, food technology neophobia and concerns about product leanness, country of origin of the product, nutrition content, use of hormones and antibiotics in livestock production and environmental foot print of livestock production are associated with attitudes, perceptions and behaviour regarding natural foods. Participants are willing to pay more for pork chops with more information about carnosine and omega-3 fatty acids as compared to pork chops with less information. In comparison to carnosine, participants are willing to pay more for pork chops with information about omega-3 fatty acids. Generalized trust in people, trust in advocacy groups, natural product interest, frequency of purchasing products with a health claim and knowledge of sodium content in pork that have a health claim are associated with willingness to pay for enhanced carnosine and omega-3 fatty acids in pork.
    Keywords: Food Consumption/Nutrition/Food Safety
    Date: 2017–09–29
  5. By: Sandra Polania Reyes
    Abstract: This economic lab in the field experiment tests the effects of recognition on voluntary contributions to a public good at the onset of a behavioral intervention. Using a within-subjects design to look at the behavioral differences between no recognition, group and private recognition, three hundred employees of a large Colombian corporation participated in an online public goods game before the intervention. After the intervention, a new selected sample was part of the same design. Recognition has a sizable effect on contributions. The intervention improves the response to private recognition but, strikingly, it has a distributional effect on the cooperative response to the group recognition.
    Keywords: lab in the field experiments, recognition, social innovation, cooperation
    JEL: C92 D70 D78 Z13
    Date: 2018–06–15
  6. By: Serhiy Kandul; Bruno Lanz
    Abstract: Social comparison feedback, i.e. informing people about the behavior of others, has been shown to influence prosocial behavior in many domains, including tax compliance and energy conservation. We argue that heterogeneity in consumers' (un)willingness to consult the corresponding information mitigates the effect of these interventions, and hypothesize that self-image concerns can induce people to deliberately ignore feedback about own behavior. We substantiate this idea by introducing social comparison feedback in a standard public good game, and study conditions in which subjects can elect to consult or deliberately avoid feedback information. Our results show that information avoidance is three times higher for feedback on own contributions as compared to feedback on group-level contributions. Our overall findings suggest that the effectiveness of informational intervention leveraging preferences for conformism with social norms could be enhanced by mitigating self-image costs associated with individual feedback interventions.
    Keywords: Social norms; Social comparison feedback; Deliberate ignorance; Public good game; Self-image concerns; Prosocial behavior; Externalities; Energy use
    JEL: C91 D12 D62 D91 H41 Q41
    Date: 2018–08
  7. By: Gill, David (Department of Economics, Purdue University); Prowse, Victoria (Department of Economics, Purdue University)
    Abstract: Using real effort to implement costly activities increases the likelihood that the motivations that drive effort provision in real life carry over to the laboratory. However, unobserved differences between subjects in the cost of real effort make quantitative prediction problematic. In this paper we present the slider task, which was designed by us to overcome the drawbacks of real-effort tasks. The slider task allows the researcher to collect precise and repeated observations of effort provision from the same subjects in a short time frame. The resulting high-quality panel data allow sophisticated statistical analysis. We illustrate these advantages in two ways. First, we show how to use panel data from the slider task to improve precision by controlling for persistent unobserved heterogeneity. Second, we show how to estimate effort costs at the subject level by exploiting within-subject variation in incentives across repetitions of the slider task. We also provide z-Tree code and practical guidance to help researchers implement the slider task.
    Keywords: Experimental methodology ; real effort ; effort provision ; cost of effort ; slider task ; design of laboratory experiments ; unobserved heterogeneity JEL Classification: C91 ; C13
    Date: 2018

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