nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2018‒09‒17
nine papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Learned Generosity? An Artefactual Field Experiment with Parents and their Children By Avner Ben-Ner; John List; Louis Putterman; Anya Samek
  2. Deciphering the Cultural Code: Cognition, Behavior, and the Interpersonal Transmission of Culture By Lu, Richard; Chatman, Jennifer A.; Goldberg, Amir; Srivastava, Sameer B.
  3. Second-best fairness under Limited information: The trade-off between false positives and false negatives By Cappelen, Alexander W.; Cappelen, Cornelius; Tungodden, Bertil
  4. Should I wait or should I lie? Path dependency and timing in repeated honesty decisions under frames By Christian Schitter; Stefan Palan
  5. Save the planet or close your eyes? Testing strategic ignorance in a charity context By Lind, Jo Thori; Nyborg, Karine; Pauls, Anna
  6. A Behavioral Approach to Financial Supervision, Regulation, and Central Banking By Ashraf Khan
  7. Measuring time inconsistency using financial transaction data By Gill, Andrej; Hett, Florian; Tischer, Johannes
  8. Residential Real Estate Investments: The Behavioral Impact of Building Aesthetics By Christian Braun
  9. Do Financial Incentives Crowd Out Intrinsic Motivation to Perform on Standardized Tests? By John List; Jeffrey Livingston; Susanne Neckermann

  1. By: Avner Ben-Ner; John List; Louis Putterman; Anya Samek
    Abstract: An active area of research within the social sciences concerns the underlying motivation for sharing resources and engaging in other pro-social actions. In this paper we ask: do parents model social preference behavior to children, and do children emulate this behavior? We develop a theoretical framework to examine this question, and conduct an experiment with 147 3 to 5 year old children and their parents, using dictator games to measure generosity. We find (1) evidence of parental teaching/modeling in the case of fathers and in that of parents of relatively generous children, and (2) an emulation effect such that children who initially share less than half of their endowment subsequently share more the more they see a parent or other adult share. We find little correlation between baseline sharing of children and the parents, with the possible exception of the oldest children.
    Date: 2017
  2. By: Lu, Richard (?); Chatman, Jennifer A. (?); Goldberg, Amir (Stanford University); Srivastava, Sameer B. (?)
    Abstract: From the schoolyard to the boardroom, the pressures of cultural assimilation pervade all walks of social life. Why are some people more successful than others at cultural adjustment? Research on organizational culture has mostly focused on value congruence as the core dimension of cultural fit. We develop a complementary conceptualization of cognitive fit--perceptual accuracy, or the degree to which a person can decipher the group's cultural code. We demonstrate that the ability to read the cultural code, rather than identification with the code, matters for contemporaneous behavioral conformity. We further show 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 cognitive and behavioral cultural fit. We also take advantage of a reorganization that produced quasi-exogenous shifts in employees' interlocutors to identify the causal impact of peer influence. We discuss implications of these findings for research on cultural assimilation, the interplay of structure and culture, and the pairing of surveys with digital trace data.
    Date: 2018–05
  3. By: Cappelen, Alexander W. (Dept. of Economics, Norwegian School of Economics and Business Administration); Cappelen, Cornelius (University of Bergen); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: In many important economic settings, limited information makes it impossible for decision makers to ensure that each individual gets what he or she deserves. Decision makers are then faced with the trade-off between giving some individuals more than they deserve, false positives, and giving some individuals less than they deserve, false negatives. We present the results from a large-scale experimental study of how people trade off these two mistakes in distributive choices. We find that a majority are more concerned with avoiding false negatives than With avoiding false positives, but we also document heterogeneity with respect to how people make this trade-off. The findings shed important light on people’s attitudes to a wide range of policies by providing novel evidence on an important dimension of people’s social preference.
    Keywords: Justice; false positives; false negatives; peoples social preference
    JEL: D63
    Date: 2018–08–28
  4. By: Christian Schitter (Department of Banking and Finance, University of Graz); Stefan Palan (Department of Banking and Finance, University of Graz)
    Abstract: We experimentally investigate time and path dependency in sequences of decisions about whether to be honest under a gain, a lottery and a loss framing. We find only small timing patterns over rounds, but clear evidence for more dishonesty after streaks of unfavorable outcomes. The latter implies a systematic path dependency in repeated honesty decisions. We observe an increase in dishonesty from gain to lottery and from lottery to loss framing. Increased dishonesty generally appears earlier and faster under a loss compared to a gain or a lottery frame. Surprisingly, the most honest participants are also those most clearly exhibiting path dependency in reports, in line with a behavior akin to "moral accounting".
    Date: 2018–09–06
  5. By: Lind, Jo Thori (Dept. of Economics, University of Oslo); Nyborg, Karine (Dept. of Economics, University of Oslo); Pauls, Anna (Dept. of Economics, University of Oslo)
    Abstract: Our lab experiment tests for strategic ignorance about the environmental consequences of one’s actions. In a binary dictator situation based on the design by Dana, Weber, and Kuang (2007), we test whether the option to remain ignorant about the receiver’s payoffs reduces generosity. Our receiver is a charity that engages in carbon offset. Contrary to previous findings by Dana, Weber, and Kuang (2007) and replications, the option to remain ignorant does not decrease generosity. Only 22% of dictators choose ignorance. We test social interaction by allowing another subject to force the dictator to learn the receiver’s payoff, and by allowing the dictator to sanction that subject. When information can be imposed by another subject, almost all dictators choose information themselves, but this does not increase generosity. The possibility of sanctions does not discourage subjects from providing information to dictators.
    Keywords: strategic ignorance; dictator game; experiment; social sanctions; carbon offset
    JEL: C92 D63 Q50
    Date: 2018–09–04
  6. By: Ashraf Khan
    Abstract: This paper describes how behavioral elements are relevant to financial supervision, regulation, and central banking. It focuses on (1) behavioral effects of norms (social, legal, and market); (2) behavior of others (internalization, identification, and compliance); and (3) psychological biases. It stresses that financial supervisors, regulators, and central banks have not yet realized the full potential that these behavioral elements hold. To do so, they need to devise a behavioral approach that includes aspects relating to individual and group behavior. The paper provides case examples of experiments with such an approach, including behavioral supervision. Finally, it highlights areas for further research.
    Keywords: Governance;Central banks and their policies;Remuneration;Central banking;behavior, culture, financial supervision, financial regulation, risk management, behavioral economics, Microeconomic Behavior: Underlying Principles, General, Government Policy and Regulation, General, Illegal Behavior and the Enforcement of Law, Marketing and Advertising: Government Policy and Regulation, General, Religion
    Date: 2018–08–02
  7. By: Gill, Andrej; Hett, Florian; Tischer, Johannes
    Abstract: Improving financial conditions of individuals requires an understanding of the mechanisms through which bad financial decision-making leads to worse financial outcomes. From a theoretical point of view, a key candidate inducing mistakes in financial decision-making are so called present-biased preferences, which are one of the cornerstones of behavioral economics. According to theory, present-biased households should behave systematically different when it comes to consumption and saving decisions, as they should be more prone to spending too much and saving too little. In this policy letter we show how high frequency financial transaction data available in digitized form allows to precisely categorize individual financial-decision making to be present-biased or not. Using this categorization, we find that one out of five individuals in our sample exhibits present-bias and that this present-biased behavior is associated with a stronger use of overdrafts. As overdrafts represent a particularly expensive way of short-term borrowing, their systematic use can be interpreted as a measure of suboptimal financial-decision making. Overall, our results indicate that the combination of economic theory and Big Data is able to generate valuable insights with applications for policy makers and businesses alike.
    Keywords: financial decision-making,financial transaction data,present bias,time inconsistency
    Date: 2018
  8. By: Christian Braun
    Abstract: This is the first paper to examine the behavioral value impact of residential real estate aesthetics on investments. The unique feature of this study is the combination of cognitive science, aesthetics and behavior in the field of real estate. The results have a potential impact on the way professionals should evaluate investment options as well as on the way investments should be presented in order to get the highest possible price.Real Estate, in contrast to most other investments, has a clear physical component. On the one hand the physical appearance of a building transports lots of information that can be directly evaluated on a financial basis, for example structural integrity or maintenance backlog. On the other hand every building has certain aesthetic properties that cannot be directly linked to the buildings value or price. In general the design of a product can induce psychological reactions with cognitive and emotional content (see Bloch 1995) and can also influence the consumer’s quality of life (see Crilly et al. 2004). Therefore product evaluation from a consumer’s point of view should also be affected. In theory an investor who was able to include aesthetic aspects into his financial considerations should be unaffected in his decision if shown pictures of the product in question. That means under the assumption of certainty two buildings with identical cashflows and location (only possible in theory) should have the exact same value no matter their aesthetics. If investors are willing to pay more for one building than the other in the presence of pictures it would be proof that building aesthetics not only affect consumers but also investors. In addition it would either suggest irrational behavior in the presence of building pictures or the transportation of implicit information through building pictures that goes beyond basic financial data. In order to get reliable results this paper distinguishes between different categories of real estate professionals and professional and private investors. Each individual’s inclination towards aesthetics will be taken into account as well. Since every person necessarily has at least some connection with residential real estate and therefore a certain form of experience, this asset class seems to be the ideal research object.
    Keywords: Aesthetic Value; Behavioral Real Estate; Building Aesthetics
    JEL: R3
    Date: 2018–01–01
  9. By: John List; Jeffrey Livingston; Susanne Neckermann
    Abstract: In the face of worryingly low performance on standardized test, offering students financial incentives linked to academic performance has been proposed as a potentially cost-effective way to support improvement. However, a large literature across disciplines finds that extrinsic incentives, once removed, may crowd out intrinsic motivation on subsequent, similar tasks. We conduct a field experiment where students, parents, and tutors are offered incentives designed to encourage student preparation for a high-stakes state test. The incentives reward performance on a separate low-stakes assessment designed to measure the same skills as the high-stakes test. Performance on the high-stakes test, however, is not incentivized. We find substantial treatment effects on the incented tests but no effect on the non-incented test; if anything, the incentives result in worse performance on the non-incented test. We also find evidence supporting the conclusion that the incentives crowd out intrinsic motivation to perform well on the non-incented test, but this effect is only temporary. One year later, students who had been in the incentives treatments perform better than those in the control on the same non-incented test.
    Date: 2018

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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