nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2019‒01‒28
eight papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. A dual process in memory: how to make an evaluation from complex and complete information? — An experimental study By Isamaël Rafaï; Sébastien Duchêne; Eric Guerci; Ariane Lambert-Mogiliansky; Fabien Mathy
  2. Forbidden zones for the expectations of measurement data and problems of behavioral economics By Harin, Alexander
  3. A Dual System Model of Risk and Time Preferences By Mark Schneider
  4. Communication and Hidden Action: Evidence from a Person-to-Person Lending Experiment By Martin Brown; Jan Schmitz; Christian Zehnder;
  5. Measuring costly effect using the slide task By David Gill; Victoria Prowse
  6. Choosing Who You Are: The Structure and Behavioral Effects of Revealed Identiffication Preferences By Florian Hett; Markus Kröll; Mario Mechtel
  7. Dynamic effects of enforcement on cooperation By Roberto Galbiati; Emeric Henry; Nicolas Jacquemet
  8. Do Health Shocks Modify Personality Traits? Evidence from Locus Of Control By Antoine Marsaudon

  1. By: Isamaël Rafaï (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); Sébastien Duchêne (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Eric Guerci (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); Ariane Lambert-Mogiliansky (PSE - Paris School of Economics); Fabien Mathy (BCL, équipe Langage et Cognition - BCL - Bases, Corpus, Langage (UMR 7320 - UNS / CNRS) - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique)
    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,Bounded rationality,Dual Process,Cognitive reflection test
    Date: 2018
  2. By: Harin, Alexander
    Abstract: A theorem, applied mathematical method and qualitative mathematical models are introduced in the present article. The method and models are based on the forbidden zones of the theorem and suppose that people decide as if there were some biases of the expectations of measurement data, e.g., under influence of noise. The article is motivated by the need for theoretical support for the practical analysis that was performed for the purposes of behavioral economics.
    Keywords: variance; expectation; noise; bias; measurement; utility; prospect theory; behavioral economics; psychology; social sciences;
    JEL: C02 C1 D8 D81 D84
    Date: 2019–01–09
  3. By: Mark Schneider (University of Alabama)
    Abstract: Discounted Expected Utility theory has been a workhorse in economic analysis for over half a century. However, it cannot explain empirical violations of `dimensional independence' demonstrating that risk interacts with time preference and time interacts with risk preference, nor does it explain present bias or magnitudedependence in risk and time preferences, or correlations between risk preference, time preference, and cognitive reection. We demonstrate that these and other anomalies are explained by a dual system model of risk and time preferences that unies models of a rational economic agent, models based on prospect theory, and dual process models of decision making.
    Keywords: Risk; Time; Dimensional Independence
    JEL: D01 D03 D81 D90
    Date: 2018
  4. By: Martin Brown; Jan Schmitz; Christian Zehnder;
    Abstract: We conduct a laboratory experiment to study whether pre-play communication mitigates opportunistic behavior in a person-to-person lending context. We implement a trust game in which the investment income of the borrower (second-mover) is uncertain and not revealed to the lender (first mover). In this "hidden action" condition lenders cannot distinguish strategic defaults from forced defaults. We compare a treatment in which the borrower can send pre-play text messages to the lender to a treatment without such communication. We find that communication does not have a significant positive effect on credit volumes or repayment rates in this hidden action condition. We compare these findings to the effect of communication in a baseline condition in which borrower income is deterministic and strategic defaults cannot be hidden from lenders. In this baseline condition, communication leads to higher credit volumes and repayment rates implying higher payoffs for both lenders and borrowers. Comparing borrower communication and behavior in the hidden action condition to the baseline condition we find that borrowers are much more likely to renege on promises to repay in the hidden action treatment.
    Keywords: Strategic Default, Communication, Trust Game, Relationship Lending
    JEL: G01 G02 C91
    Date: 2018–08
  5. By: David Gill; Victoria Prowse
    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: C91 C13
    Date: 2018–12
  6. By: Florian Hett (Johannes Gutenberg University Mainz); Markus Kröll (Goethe University Frankfurt); Mario Mechtel (Leuphana University Lüneburg)
    Abstract: Social identity is an important driver of behavior. But where do differences in social identity come from? We use a novel laboratory experiment to measure individual identification preferences as a potential source of behavioral heterogeneity. Facing a trade-off between monetary payments and belonging to different groups, individuals are willing to forego significant earnings to avoid certain groups and thereby reveal their identification preferences. We then show that these identification preferences are systematically related to behavioral heterogeneity in groupspecific social preferences. These results illustrate the importance of identification as a choice and its relevance for explaining individual behavior.
    Keywords: Social Identity, Identification Preferences, Social Preferences, Outgroup Discrimination, Behavioral Heterogeneity
    JEL: C91 C92 D03 D91
    Date: 2019–01–10
  7. By: Roberto Galbiati (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Emeric Henry (ECON - Département d'économie - Sciences Po); Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In situations where social payoffs are not aligned with private incentives, enforcement with fines can be a way to sustain cooperation. In this paper we show, by the means of a lab experiment , that past fines can have an effect on current behavior even when no longer in force. We document two mechanisms: a) past fines affect directly individuals' future propensity to cooperate; b) when fines for non cooperation are in place in the past, individuals experience higher levels of cooperation from partners and, consistent with indirect reciprocity motives, are in turn nicer towards others once these fines have been removed. This second mechanism is empirically prevalent and, in contrast with the first, induces a snowball effect of past enforcement. Our results can inform the design of costly enforcement policies.
    Keywords: experiments,Laws,social values,cooperation,learning,spillovers,persistence of institutions,repeated games
    Date: 2018
  8. By: Antoine Marsaudon (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper analyzes whether a personality trait, that is, locus of control, is stable after the occurrence of a health shock, namely a hospital stay. To do so, we use the German Socio-Economics Panel dataset. To identify the causal effect of such a shock on locus of control, we rely on a fixed-effects model. Results suggest that individuals facing health shocks are more likely to decrease their locus of control. That is, they tend to believe that their future outcomes are more determined by external factors than their own will. This decrease is attributable to individuals that had, prior to the shock, lower values of locus of control. Further, individuals facing severe hospital stays (i.e., measured by the number overnights) and those with chronic diseases (i.e., measured by the number of hospital stays within a year), have a higher LOC decline than others. This provides evidence that perception of control is not constant over time and could change after experiencing a traumatic health event.
    Keywords: Health shocks,Locus of control,Hospital stays,Panel data,Fixed-effect model
    Date: 2019–02

This nep-cbe issue is ©2019 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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