nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2018‒09‒10
four papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. When Good Advice is Ignored: The Role of Envy and Stubbornness By Ronayne, David; Sgroi, Daniel
  2. Undermining the Restorative Potential of Compensatory Consumption: A Product’s Explicit Identity Connection Impedes Self-Repair By Rustagi, Nimish; Shrum, L. J.
  3. Risk preferences and the decision to flee conflict By Lidia Ceriani; Paolo Verme
  4. Effects of Poverty on Impatience: Preferences or Inattention? By Vojtech Bartos; Michal Bauer; Julie Chytilova; Ian Levely

  1. By: Ronayne, David; Sgroi, Daniel
    Abstract: We present results from an experiment involving 1,500 participants on whether, when and why good advice is ignored, focusing on envy and stubbornness. Participants performance in skill-based and luck-based tasks generated a probability of winning a bonus. About a quarter ignored advice that would have increased their chance of winning. Good advice was followed less often when the adviser was relatively highly remunerated or the task was skill-based. More envious advisees took good advice more often in the skill-based task, but higher adviser remuneration significantly reduced this effect. Susceptibility to the sunk cost fallacy reduced the uptake of good advice.
    Keywords: Financial Economics
    Date: 2018–01–17
  2. By: Rustagi, Nimish (HEC Paris - Marketing); Shrum, L. J. (HEC Paris)
    Abstract: When people experience threats to important aspects of their self-concept (e.g., power, intelligence, sociability), they often compensate by consuming products that symbolize success, mastery, or competence on the threatened self-domain (within-domain compensatory consumption). Our research examines whether such compensatory consumption is effective in repairing the self-concept. Across seven experiments, we show that whether compensatory consumption is effective depends on the extent to which the connection between the compensatory products and the threatened domains is made explicit. When the connections are made explicit (e.g., through product names and marketing slogans), self-repair is impeded, but when the connections are only implicit (product is inherently symbolic of self-threat domain), self-repair can be successful. We further show that these differential effects of product connection explicitness are mediated by rumination: explicit connections induce rumination about the self-threat, which undermines self-repair, whereas implicit connections cause no rumination, facilitating self-repair. Our research provides a reconciliation of conflicting findings on self-repair in previous research, and also shows that despite the differences in efficacy, consumers compensate regardless of whether product connections are implicit or explicit, which has implications for consumer well-being.
    Keywords: Self-concept; compensatory consumption; materialism; self-threat; self-discrepancy
    JEL: M31
    Date: 2018–08–20
  3. By: Lidia Ceriani (Georgetown University, USA); Paolo Verme (The World Bank, USA)
    Abstract: Despite the growing numbers of forcibly displaced persons worldwide, many people living under conflict choose not to flee. Individuals face two lotteries - staying or leaving- characterized by two distributions of potential outcomes. This paper proposes to model the choice between these two lotteries using quantile maximization as opposed to expected utility theory. We posit that risk-averse individuals aim at minimizing losses by choosing the lottery with the best outcome at the lower end of the distribution, whereas risk-tolerant individuals aim at maximizing gains by choosing the lottery with the best outcome at the higher end of the distribution. Using a rich set of household and conflict panel data from Nigeria, we find risk-tolerant individuals to have a significant preference for staying and risk-averse individuals to have a significant preference for fleeing in line with the predictions of the quantile maximization model. This is contrary to findings on economic migrants and calls for separate policies towards economic and forced migrants.
    Keywords: Conflict, migration, expected utility, forced displacement, quantile maximization.
    JEL: D01 D1 D3 D6 D7 D8 I3
    Date: 2018–03
  4. By: Vojtech Bartos; Michal Bauer; Julie Chytilova; Ian Levely
    Abstract: We study two psychological channels how poverty may increase impatient behavior – an effect on time preference and reduced attention. We measured discount rates among Ugandan farmers who made decisions about when to enjoy entertainment instead of working. We find that experimentally induced thoughts about poverty-related problems increase the preference to consume entertainment early and delay work. The effect is equivalent to a 27 p.p. increase in the intertemporal rate of substitution. Using monitoring tools similar to eye tracking, a novel feature for this subject pool, we show this effect is not due to a lower ability to sustain attention.
    Keywords: poverty; scarcity; time discounting; preferences; inattention; decision-making process;
    Date: 2018–08

This nep-cbe issue is ©2018 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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