nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2019‒02‒11
eight papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Crumbling morals? An experimental study on how a social framing can affect embezzlement By Nina Lucia Stephan
  2. How everyday ethics becomes a moral economy, and vice versa By Keane, Webb
  3. Learning about One's Self By Yves Le Yaouanq; Peter Schwardmann
  4. Social Influence and Position Effects By Marisa Hidalgo-Hidalgo; Natalia Jiménez; Dunia López-Pintado
  5. The Effects of Status Mobility and Group Identity on Trust By Suchon, Rémi; Villeval, Marie Claire
  6. Delegation and coordination with multiple threshold public goods: experimental evidence By Luca Corazzini; Christopher Cotton; Tommaso Reggiani
  7. Whither the evolution of the contemporary social fabric? New technologies and old socio-economic trends By Dosi, Giovanni; Virgillito, Maria Enrica
  8. Emotion and reasoning in human decision-making By Rolls, Edmund T.

  1. By: Nina Lucia Stephan (Paderborn University)
    Abstract: With data from a laboratory experiment we show that the interpersonal experience can either encourage or reduce subsequent immoral decision-making; in this case the immoral decision to engage in embezzlement. In the experiment, subjects first received initial endowments, either as a share from a previous dictator (social framing treatment) or by random determination (neutral framing treatment). Next, subjects could increase their payoff by embezzling, i.e. taking away part of a donation that they are entrusted with, before forwarding the rest. We find that after receiving a less-than-half share in the social framing treatment, in comparison to receiving an equally large amount in the neutral framing treatment, subjects are significantly more likely to embezzle. Thus, depending on the height of endowment, the social framing encourages forfeiting moral behavior. We argue that this effect is driven by self-deception: observing the dictator's decision to share less than half facilitates excusing one's own immoral choice. We conclude that socially framing a moral decision situation, even though this may remind individuals of what is socially acceptable, does not have an unanimously beneficial effect on the moral decision to embezzle.
    Keywords: social framing, donations, immoral behavior, embezzlement, experimental economics
    JEL: C91 D91 D63
    Date: 2019–01
  2. By: Keane, Webb
    Abstract: Unrealistic assumptions underlying neo-classical economic theory have been challenged by both behavioral economics and studies of moral economy. But both challengers share certain features with neo-classical theory. Complementing them, recent work in the anthropology of ethics shows that economic behavior is not reducible to either individual psychology or collective norms. This approach is illustrated with studies of transactions taking place at the borders between market rationality and relationships among persons - organ donation and sex work. The paper argues that the inherent value accorded to social relations tends to resist instrumentalization and that the biases that dealing with other people introduce into reasoning are not flaws but part of the core functions of rationality.
    Keywords: ethics,moral economy,behavioral economics,organ donation,sex work,gifts,social interaction,rationality
    JEL: A10 D01 D63 D91 Z13
    Date: 2019
  3. By: Yves Le Yaouanq; Peter Schwardmann
    Abstract: How can naiveté about present bias persist despite experience? To answer this question, our experiment investigates participants’ ability to learn from their own behavior. Participants decide how much to work on a real effort task on two predetermined dates. In the week preceding each work date, they state their commitment preferences and predictions of future effort. While we find that participants are present biased and initially naive about their bias, our methodology enables us to establish that they are Bayesian in how they learn from their experience at the first work date. A treatment in which we vary the nature of the task at the second date further shows that learning is unencumbered by a change in environment. Our results suggest that persistent naiveté cannot be explained by a fundamental inferential bias. At the same time, we find that participants initially underestimate the information that their experience will provide - a bias that may lead to underinvestment in experimentation and a failure to activate self-regulation mechanisms.
    Keywords: naiveté, present bias, learning
    JEL: D83
    Date: 2019
  4. By: Marisa Hidalgo-Hidalgo (Universidad Pablo de Olavide); Natalia Jiménez (Universidad Pablo de Olavide & Middlesex University); Dunia López-Pintado (Universidad Pablo de Olavide)
    Abstract: Online search companies use a default ranking to present alternatives to consumers. The salience of an alternative can be described by its position in the presentation order and its popularity, derived from the opinion of others. We perform a lab experiment to study social influence and position effects in a stylized and controlled environment where alternatives have an objective value, common to all participants. Nevertheless, due to time constraints, finding the optimal choice is complex. We consider three different settings: (i) social influence is not present, (ii) social influence and the presentation order go in the same direction and, (iii) social influence is not aligned with the presentation order. We find that, although position effects are stronger than social influence (or popularity) effects for the searching behavior, social influence effects are more relevant for predicting the actual choice. We also find strong evidence of nonlinearity regarding both social influence and position effects. From an individual perspective, we obtain that those subjects who recognize their own errors or come from less wealthy families have a higher sensibility to social influence when it is reinforced by position, whereas overconfident and reflexive individuals are more influenceable when position and social influence are confronted. Interestingly, we do not find any gender effects.
    Keywords: social influence, ranking, online searching, lab experiments.
    JEL: C91 D03 D81
    Date: 2019–01
  5. By: Suchon, Rémi (University of Lyon 2); Villeval, Marie Claire (CNRS, GATE)
    Abstract: In a laboratory experiment we test the interaction effects of status and group identity on interpersonal trust. Natural group identity is generated by school affiliation. Status (expert or agent) is awarded based on relative performance in a math quiz that is ex ante less favorable to the subjects from one group. We find that "promoted" trustors (individuals from the disadvantaged group that nevertheless achieve the status of expert) trust less both in-group and out-group trustees, compared to the other members of their group. Rather than playing against the effects of natural group identity, status promotion singles-out individuals. In contrast, trustworthiness is not affected by status and there is no evidence that interacting with promoted individuals impacts trust or trustworthiness.
    Keywords: trust, status, group identity, social mobility, experiment
    JEL: C92 D91 J62
    Date: 2019–01
  6. By: Luca Corazzini (University of Venice); Christopher Cotton (Queen's University); Tommaso Reggiani (Masaryk University)
    Abstract: When multiple charities, social programs and community projects simultaneously vie for funding, donors risk miscoordinating their contributions leading to an inefficient distribution of funding across projects. Community chests and other intermediary organizations facilitate coordination among donors and reduce such risks. We explore such considerations by extending the threshold public goods framework to allow donors to contribute to an intermediary rather than directly to the public goods. We experimentally study the effects of the intermediary on contributions and successful public good funding. Results show that delegation increases overall contributions and public good success, but only when the intermediary is formally committed to direct funding received from donors to socially beneficial goods. Without such a restriction, the presence of an intermediary is detrimental, resulting in lower contributions, a higher probability of miscoordination, and lower payoffs.
    Keywords: Delegation, threshold public goods, public goods experiment, fundraising, charitable giving, donor strategy
    JEL: C91 C92 H40 H41 L31
    Date: 2019–02
  7. By: Dosi, Giovanni; Virgillito, Maria Enrica
    Abstract: The reflections which follow build on two interrelated questions, namely, first, whether we are witnessing another “industrial revolution”, and second, what is the impact of technological transformations upon the current dynamics of the socio-economic fabric, especially with respect to employment, income distribution, working conditions and labour relations. We argue that the processes of innovation and diffusion of what we could call “intelligent automation” are likely to change, or more likely reinforce, the patterns of distribution of income and power, which have been there well before the arrival of the technologies we are concerned about: some are indeed intrinsic features of capitalism since its inception, while others are features of the last thirtyforty years. First, we shall offer a fresco of such tendencies which certainly preceded any potential “Fourth Industrial Revolution” but are going to be amplified by the latter. Second, we discuss the features of such possible new techno-economic paradigms. Third, we examine the relationships between technology, productivity and growth, and the ensuing impact on jobs, division of labour, distribution of knowledge, power, and control. Finally, we address some policy implications.
    Keywords: Social fabric,technology,macroeconomic development,division of labour,knowledge,inequality
    JEL: O10 E6 D63
    Date: 2019
  8. By: Rolls, Edmund T.
    Abstract: Two systems in the brain that are involved in emotional and economic decision-making are described. The first is an evolutionarily old emotion-based system that operates on rewards defined by the genes such as food, warmth, social reputation, and having children. Such decisions are often based on heuristics, such as being highly sensitive to losses, because a single loss might influence one's reproductive success. This is a multidimensional system with many rewards and punishers, all of which cannot be simultaneously optimized. The second route to decision-making involves reasoning, in which it is assumed that utility can be accurately assessed and logical reason can be applied, though the human brain is not naturally computationally good at logical assessment. When decisions are taken, all those factors apply, and in addition there is noise introduced into the system by the random firing times of neurons for a given mean firing rate. The implications for economic decision-making are described. In macroeconomics, it is assumed that the economy behaves like one "representative" agent who can take rational and logical decisions, and who can maximize utility over a constraint. Given the neuroscience of decision-making, the situation is more complex. The utility function may be multidimensional, the reward value along each dimension may fluctuate, the reasoning may be imperfect, and the decision-making process is subject to noise in the brain, making it somewhat random from occasion to occasion. Moreover, each individual has a different set of value functions along each dimension, with different sensitivities to different rewards and punishers, which are expressed in the different personalities of different individuals. These factors underlying the neuroscience of human decision-making need to be taken into account in building and utilizing macroeconomic theories.
    Keywords: decision-making,brain mechanisms,probabilistic choice,attractor network,reward value,economic value,macroeconomics,microeconomics,orbitofrontal cortex
    JEL: D01 D87 D91
    Date: 2019

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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