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on Cognitive and Behavioural Economics |
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Issue of 2019‒03‒25
twelve papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Alice Solda (Queensland University of Technology; University of Lyon); Changxia Ke (Queensland University of Technology); Lionel Page (Queensland University of Technology; University of Technology Sydney); William von Hippel (University of Queensland) |
| Abstract: | We aim to test the hypothesis that overconfidence arises as a strategy to influence others in social interactions. We design an experiment in which participants are incentivised either to form accurate beliefs about their performance at a test, or to convince a group of other participants that they performed well. We also vary participants’ ability to gather information about their performance. Our results provide, the different empirical links of von Hippel and Trivers’ (2011) theory of strategic overconfidence. |
| Keywords: | Overconfidence; motivated cognition; self-deception; persuasion; information sampling; experiment |
| JEL: | C91 D03 D83 |
| Date: | 2019–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:ecowps:59&r=all |
| By: | Cappelen, Alexander W. (Dept. of Economics, Norwegian School of Economics and Business Administration); Falch, Ranveig (Dept. of Economics, Norwegian School of Economics and Business Administration); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | Abstract The ‘boy crisis’ prompts the question of whether people interpret inequalities differently depending on whether males or females are lagging behind. We study this question in a novel large-scale distributive experiment involving more than 5,000 Americans. Our data provide strong evidence of a gender bias against low-performing males, particularly among female participants. A large set of additional treatments establishes that the gender bias reflects statistical fairness discrimination. The study provides novel evidence on the nature of discrimination and on how males falling behind are perceived by society. |
| Keywords: | Gender bias; boy crisis; statistical fairness discrimination; large-scale experiment |
| JEL: | C91 D63 J16 |
| Date: | 2019–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2019_006&r=all |
| By: | Löfgren, Åsa (Department of Economics, School of Business, Economics and Law, Göteborg University); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | In this paper we develop a theoretical model to clarify the underlying mechanisms that drive individual decision making and responses to behavioral interventions, such as nudges. The contribution of the paper is three-fold: First, the model provides a theoretical framework that comprehensively structures the individual decision-making process applicable to a wide range of choice situations. Second, we reduce the confusion regarding what should be called a nudge by offering a clear classification of behavioral interventions. We distinguish among what we label as pure nudges, preference nudges, and other behavioral interventions. Third, we identify the mechanisms behind the effectiveness of behavioral interventions based on the structured decision-making process. Hence, the model can be used to predict under which circumstances, and in which choice situations, a nudge is likely to be effective. |
| Keywords: | Nudge; decision making; behavioral intervention |
| JEL: | D11 D91 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0754&r=all |
| By: | Albert, Philipp (WZB Berlin); Kübler, Dorothea (WZB Berlin); Silva-Goncalves, Juliana (University of Sydney) |
| Abstract: | Ambition as the desire for personal achievement is an important driver of behavior. Using laboratory experiments, we study the role of social influence on ambition in two distinct domains of achievement, namely performance goals and task complexity. In the first case, participants set themselves a performance goal for a task they have to work on. The goal is associated with a proportional bonus that is added to a piece rate if the goal is reached. In the second case, they choose the complexity of the task, which is positively associated with the piece rate compensation and effort. In both cases we test whether observing peer choices influences own choices. We find strong evidence of peer effects on performance goals. In contrast, we find no support for peer effects on the choice of task complexity. |
| Keywords: | peer effects; ambition; goal setting; task difficulty; laboratory experiment; |
| JEL: | C91 D83 D91 I24 |
| Date: | 2019–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:148&r=all |
| By: | Ambroise Descamps (School of Economics and Finance, Queensland University of Technology; Oxera Consulting LLP); Sebastien Massoni (School of Economics and Finance, Queensland University of Technology); Lionel Page (University of Technology Sydney) |
| Abstract: | We investigate how people make choices when they are unsure about the value of the options they face and have to decide whether to choose now or wait and acquire more information first. We design a laboratory experiment to study whether human behaviour is able to approximate the optimal solution to this problem. We find that participants deviate from it in a systematic manner: they acquire too much information (when costly) or not enough (when cheap). These deviations costs participants between 10% and 25% of their potential payoffs. With time, participants tend to learn to approximate the optimal strategy. |
| Keywords: | search; decision under uncertainty; information; optimal stopping; real option |
| JEL: | C91 D81 D83 |
| Date: | 2019–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:ecowps:58&r=all |
| By: | Sandro Casal; Francesco Guala; Luigi Mittone |
| Abstract: | We investigate the effects that transparency may have on people’s reactions to a simple nudge. Using an incentivized task and eliminating possible confounds due to strategic reasoning, we test two behavioral predictions: (a) that increasing the quantity and quality of information affects significantly the efficacy of nudges; and (b) that people mind about being nudged and reverse their decisions when the behavioral policy is transparent. Our results indicate that transparency does not necessarily trigger reactance (people in general do not mind being nudged), but the quality and quantity of information can have a significant effect on the efficacy of a behavioral policy. |
| Keywords: | Nudge, Overconfidence, Transparency, Reactance |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpce:1902&r=all |
| By: | Irenaeus Wolff |
| Abstract: | Simple game structures like discoordination, hide-and-seek, or Colonel-Blotto games have been used to model a wide range of economically relevant situations. Yet, Nash-equilibrium and its alternatives notoriously fail to explain observed behaviour in these games when alternatives carry descriptive labels. This paper shows that throughout the different games, behavioural patterns resemble `lucky-number' patterns: the choice patterns in related lotteries. Starting from this observation, I adjust standard models to account for the data. The adjusted models outperform the existing models, but they do not outperform a simple benchmark model. In the benchmark model, agents pick according to the `lucky numbers' or, under certain circumstances, choose any of the other options with equal probabilities. Interestingly, this benchmark model predicts two additional general regularities that bear out on the existing data and new data from two additional games: hide-and-seek seekers rely on `lucky numbers' more heavily than any other player role; and the stronger the `lucky-number' pattern deviates from a uniform distribution, the more likely it is observed also in the game data. |
| Keywords: | Bounded Rationality, Level-k, Salience, Heuristic, Hide and Seek, Discoordination, Rock-Paper-Scissors, Colonel Blotto, Representativeness |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0115&r=all |
| By: | Anders Poulsen (University of East Anglia); Axel Sonntag (University of Vienna) |
| Abstract: | We experimentally examine the effects of varying time pressure in a coordination game with a label salient focal equilibrium. We consider both a pure coordination game (payoff symmetry) and a battle of the sexes game with conflict of interest (payoff asymmetry). In symmetric games, there are no effects of time pressure, since the label-salient outcome is highly focal regardless of how much time subjects have to decide. In asymmetric games, less time results in greater focality of the the label-salient action, and it becomes significantly more likely that any coordination is on the focal outcome. |
| Keywords: | Coordination game; focal point; time pressure; response times; social heuristics hypothesis; experiment. |
| JEL: | C70 C72 C92 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:19-01&r=all |
| By: | Astrid Dannenberg (University of Kassel); Corina Haita-Falah (University of Kassel); Sonja Zitzelsberger (University of Kassel) |
| Abstract: | Ostracism is practiced by virtually all societies around the world as a means of enforcing cooperation and excluding members who show anti-social behaviors or attitudes. In this paper, we use a public goods experiment to study whether groups choose to implement an institution that allows for the exclusion of members. We distinguish between a costless exclusion institution and a costly exclusion institution that, if chosen, reduces the endowment of all players. We also provide a comparison with an exclusion institution that is exogenously imposed upon groups. A significant share of the experimental groups choose the exclusion institution, even when it comes at a cost, and the support for the institution increases over time. Average contributions to the public good are significantly higher when the exclusion option is available, not only because low contributors are excluded but also because high contributors sustain a higher cooperation level under the exclusion institution. Subjects who vote in favor of the exclusion institution contribute more than those who vote against it, but only when the institution is implemented. These results are largely inconsistent with standard economic theory but can be better explained by assuming heterogeneous groups in which some players have selfish and others have social preferences. |
| Keywords: | public goods experiment; cooperation; ostracism; institutional choice; social preferences |
| JEL: | C72 C91 C92 D02 D71 H41 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201908&r=all |
| By: | Sheheryar Banuri (University of East Anglia); Stefan Dercon (University of Oxford); Varun Gauri (World Bank) |
| Abstract: | Although the decisions of policy professionals are often more consequential than those of individuals in their private capacity, there is a dearth of studies on the biases of policy professionals: those who prepare and implement policy on behalf of elected politicians. Experiments conducted on a novel subject pool of development policy professionals (public servants of the World Bank and the Department for International Development in the UK) show that policy professionals are indeed subject to decision making traps, including the effects of framing outcomes as losses or gains, and most strikingly, confirmation bias driven by ideological predisposition, despite having an explicit mission to promote evidence-informed and impartial decision making. These findings should worry policy professionals and their principals in governments and large organizations, as well as citizens themselves. A further experiment, in which policy professionals engage in discussion, shows that deliberation may be able to mitigate the effects of some of these biases. |
| Keywords: | Biases, decision making, policy professionals, framing, confirmation bias, behavioural economics |
| JEL: | C90 H83 Z18 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:18-02&r=all |
| By: | Nora Grote (Johannes Gutenberg University Mainz); Tim Klausmann (Johannes Gutenberg University Mainz); Mario Scharfbillig (Johannes Gutenberg University Mainz) |
| Abstract: | Social identity greatly affects behavior. However, less is known about individual’s preference for identification, i.e. how individuals choose their identity and more specifically whether and how subjects invest into belonging to a social group. We design a field experiment that allows us to make effort as an investment into a new group identity salient. The social identity in our treatment is refugee’s identification with the host society. We modified a mailing to 5600 refugees who use an online language-learning platform to learn the host countries’ language. These treatment emails make salient that improving the host country’s language ability increases the belonging to the host society. Our analysis reveals that the treatment has a significant positive effect on the effort exerted on the language-learning platform, leading to more completed exercises and more time spent learning the host country’s language. This suggests that refugees’ value being part of the host country’s society for its social identity component, which in turn reveals a general preference for identification. |
| JEL: | C93 D91 J15 |
| Date: | 2019–03–11 |
| URL: | http://d.repec.org/n?u=RePEc:jgu:wpaper:1905&r=all |
| By: | Mike Brock (University of East Anglia); Natalia Borzino (ETH Zurich) |
| Abstract: | Improving the efficiency with which people consume domestic energy has become a show-piece of how behavioural psychology can be applied to the field of environmental economics. This study builds upon the literature by providing subjects with energy performance information at group-level in a controlled field experiment setting. Its novelty is that it seeks to test the persistence of energy-saving habits, whether extrinsic incentives accentuate or crowd-out a motivation to save energy, and how heterogeneity in environmental attitudes impact upon action. Results suggest that providing relative information does stimulate energy-conserving behaviour, with this being most effective among those who held pre-trial preferences for sustainable living. However, the treatment variations indicate that subjects regularly fail to maintain ‘good habits’ once an intervention stops. Furthermore, we find evidence to imply that rewarding groups in this competitive environment may create perverse long-run effects. This has an important relevance for energy policy: whilst providing relative information could improve both consumer welfare and energy demand forecasting, the timescale, frequency and mechanism by which this is undertaken requires careful scrutiny and planning if these potential benefits are to be maximised and undesirable side effects prevented. |
| Keywords: | Behavioural Nudging, Extrinsic Motivation, Energy Economics, Group Co-ordination, Sustainability, Environmental Economics |
| JEL: | Q4 Q56 H31 L94 |
| Date: | 2018–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:uea:ueaeco:2018_02&r=all |