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on Cognitive and Behavioural Economics |
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Issue of 2018‒11‒26
nine papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Jan Hausfeld; Sven Resnjanskij |
| Abstract: | We investigate the trade-off between the opportunity costs of decisions and their quality in a simple model. In a lab experiment, we introduce exogenous variation in the opportunity costs of time. Contrary to claims in the previous literature, we show that using more time when making small-stake decisions does not indicate irrational behavior, and neither does a positive correlation between decision time and the probability of making mistakes. Such behavior is compatible with rational decisionmaking and our causal experimental evidence and, hence, does not imply that people behave fundamentally irrational when making observable decision errors under risk. |
| Keywords: | decision under risk, time constraints, opportunity costs, rational behavior, lab experiment, structural estimation, drift diffusion model |
| JEL: | C91 D01 D81 D83 D91 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ifowps:_269&r=cbe |
| By: | Aislinn Bohren (Department of Economics, University of Pennsylvania); Daniel Hauser (Department of Economics, Aalto University) |
| Abstract: | We explore model misspecification in an observational learning framework. Individuals learn from private and public signals and the actions of others. An agent's type specifies her model of the world. Misspecified types have incorrect beliefs about the signal distribution, how other agents draw inference and/or others' payoffs. We establish that the correctly specified model is robust in that agents with approximately correct models almost surely learn the true state asymptotically. We develop a simple criterion to identify the asymptotic learning outcomes that arise when misspecification is more severe. Depending on the nature of the misspecification, learning may be correct, incorrect or beliefs may not converge. Different types may asymptotically disagree, despite observing the same sequence of information. This framework captures behavioral biases such as confirmation bias, false consensus effect, partisan bias and correlation neglect, as well as models of inference such as level-k and cognitive hierarchy. |
| Keywords: | Social learning, model misspecification, bounded rationality |
| JEL: | D82 D83 |
| Date: | 2017–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:17-007&r=cbe |
| By: | Isamaël Rafaï; Sébastien Duchêne; Eric Guerci; Guerci; Ariane Lambert-Mogiliansky; Fabien Mathy |
| Abstract: | In this paper, we will put forward an original experiment to reveal empirical “anomalies” in the process of acquisition, elaboration and retrieval of information in the context of reading economic related content. Our results support the existence of the memory dual process suggested in the Fuzzy Trace Theory: acquisition of information leads to the formation of a gist representation which may be incompatible with the exact verbatim information stored in memory. We give to subjects complex and complete information and evaluate their cognitive ability. To answer some specific questions, individuals used this gist representation rather than processing verbatim information appropriately. |
| Keywords: | Fuzzy Trace Theory, memory, dual process, cognitive reflection test, bounded rationality |
| JEL: | C91 D83 D89 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpceem:18-25&r=cbe |
| By: | Dvorak, Fabian (University of Konstanz); Fehrler, Sebastian (University of Konstanz) |
| Abstract: | Case studies of cartels and recent theory suggest that repeated communication is key for stable cooperation in environments where signals about others' actions are noisy. However, empirically the exact role of communication is not well understood. We study cooperation under different monitoring and communication structures in the laboratory. Under all monitoring structures - perfect, imperfect public, and imperfect private - communication boosts efficiency. However, under imperfect monitoring, where actions can only be observed with noise, cooperation is stable only when subjects can communicate before every round of the game. Beyond improving coordination, communication increases efficiency by making subjects' play more lenient and forgiving. We further find clear evidence for the exchange of private information - the central role ascribed to communication in recent theoretical contributions. |
| Keywords: | infinitely repeated games, monitoring, communication, cooperation, strategic uncertainty, prisoner's dilemma |
| JEL: | C72 C73 C92 D83 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11897&r=cbe |
| By: | Fatas, E; Miguel A. Meléndez-Jiménez; Hector Solaz |
| Abstract: | We experimentally study punishment patterns across network structures, and their effect on cooperation. In a repeated public goods setting, subjects can only observe and punish their neighbors. Centralized structures (like the star network) outperform other incomplete networks and reach contribution levels like the ones observed in a complete network. Our results suggest that hierarchical network structures with a commonly observed player benefit more from sanctions not because central players punish more, but because they follow, and promote, different punishment patterns. While quasi-central players in other incomplete architectures (like the line network) retaliate, and get trapped in the vicious circle of antisocial punishment, central players in the star network do not punish back, increase their contributions when sanctioned by peripheral players, and sanction other participants in a prosocial manner. Our results illustrate recent field studies on the evolutionary prevalence of hierarchical networks. We document a network-based rationale for this positive effect in an identity-free, fully anonymous environment. |
| Keywords: | Public good experiments, networks, monitoring, punishment |
| Date: | 2018–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:016946&r=cbe |
| By: | Epper, Thomas; Fehr-Duda, Helga |
| Abstract: | Standard economic models view risk taking and time discounting as two independent dimensions of decision makers’ behavior. However, mounting experimental evidence demonstrates the existence of robust and systematic interaction effects. There are striking parallels in patternsof risk taking and time discounting behavior, which suggests that there is a common underlying force driving these interactions. Here we show that decision makers’ anticipationof something going wrong in the future conjointly with their proneness to probability weighting generates a unifying framework for explaining seven puzzling regularities: delay-dependent risk tolerance, aversion to sequential resolution of uncertainty, preferences for resolution timing, hyperbolic discounting, subadditive discounting, the differential discounting of risky and certain outcomes, and the order dependence of prospect valuation. Finally, we discuss the implications of our framework for understanding real-world behavior, such as the coexistence of underinsuring and overinsuring. |
| Keywords: | Risk preferences, time preferences, time-dependent risk tolerance, decreasing impatience, timing and frequency of uncertainty resolution, probability-dependent risk attitudes, over-/under-insurance. |
| JEL: | D01 D81 D91 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:usg:econwp:2018:12&r=cbe |
| By: | Ivan I. Ivanchei (Russian Academy of National Economy and Public Administrations); Alexey Asvarisch (National Research University Higher School of Economics) |
| Abstract: | This paper investigates the characteristics of the affective component in the structural mere exposure effect (SMEE). Two approaches are considered – fluency attribution approach (FA) and affect as predictive efficiency approach (APE) – within a predictive coding framework. Using the artificial grammar learning and affective priming paradigms, we demonstrate that a violation of implicitly learned regularities elicits an automatic negative affective response. This result suggests that SMEE can be observed without any overtly evaluative judgment. Participants’ decisions on the grammaticality of stimuli did not change this pattern. We conclude that SMEE is based on the affective response to prediction errors made by the cognitive system and may include the fluency attribution process in the later stages of processing. |
| Keywords: | Implicit learning; structural mere exposure; affect; predictive coding; conflict; fluency |
| JEL: | Z |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:99psy2018&r=cbe |
| By: | Christine Laudenbach; Jenny Pirschel; Stephan Siegel |
| Abstract: | We examine the effect of personal, two-way communication on the behavior of borrowers, who have fallen behind on their consumer loan payments. While the lender has informed all borrowers about the delinquency through an automatically generated letter, some borrowers also receive a phone call from a randomly assigned bank agent. We find that borrowers, who speak with a bank agent typically for only a few minutes, are significantly more likely to make timely payments and significantly less likely to default. This finding holds in a subset of hard-to-reach borrowers as well as when we instrument for the call with exogenous variation in borrowers’ reachability. The effect of the call is also persistent. Borrowers, who receive a call, are significantly less likely to become delinquent again. Personal aspects of the call, such as the likeability of the agent’s voice, significantly affect payment behavior, while the surprise element of the call does not. Our results suggest that the form of communication significantly affects borrowers’ payment behavior. |
| Keywords: | Fintech, communication, guilt aversion, prosocial behavior |
| JEL: | D03 D10 D14 G20 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7295&r=cbe |
| By: | Mariotti, Thomas; Schweizer, Nikolaus; Szech, Nora; von Wangenheim, Jonas |
| Abstract: | We study the optimal design of information nudges for present-biased consumers who have to make sequential consumption decisions without exact prior knowledge of their long-term consequences. For arbitrary distributions of risk, there exists a consumer-optimal information nudge that is of cutoff type, recommending consumption or abstinence according to the magnitude of the risk. Under a stronger bias for the present, the target group receiving a credible signal to abstain must be tightened. We compare this nudge with those favored by a health authority or a lobbyist. When some consumers are more strongly present-biased than others, a traffic-light nudge is optimal. |
| Keywords: | Information Design,Information Nudges,Present-Biased Preferences,Self-Control |
| JEL: | C73 D82 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kitwps:119&r=cbe |