nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2019‒04‒22
six papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Asset Integration, Risk Taking and Loss Aversion in the Laboratory By Morrison, William G.; Oxoby, Robert J.
  2. Anchoring in Project Duration Estimation By Lorko, Matej; Servátka, Maroš; Zhang, Le
  3. Advanced Counter-Biasing By Carpenter, Jeffrey P.; Benscheidt, Kevin
  4. The Effect of Religious Priming in Pro-social and Destructive Behavior By Jipeng Zhang; Elizabeth Brown; Huan Xie
  5. Theory of Mind and Strategic Decision-Making By Bose, Neha; Sgroi, Daniel
  6. What Motivates Tax Compliance By James Alm

  1. By: Morrison, William G. (Wilfrid Laurier University); Oxoby, Robert J. (University of Calgary)
    Abstract: We report on a laboratory experiment testing for the presence of loss aversion, as separate from risk aversion, utilizing an asset integration protocol designed to ensure that a loss of cash provided by the experimenter is viewed as a real loss by experimental participants. Our experimental design augments the Holt-Laury risk preference elicitation methodology to assess how individuals choose between a safe option and a riskier lottery. When the money at stake is viewed as the individual's own money, one of the lottery outcomes is in the domain of losses. Our results confirm that individuals display an additional reluctance to participate in a mixed domain lottery beyond that predicted by risk aversion. We show that only preference functions incorporating loss aversion are able to generate predicted behaviour that matches our results.
    Keywords: risk taking, experiments
    JEL: C91 D81
    Date: 2019–03
  2. By: Lorko, Matej; Servátka, Maroš; Zhang, Le
    Abstract: The success of a business project often relies on the accuracy of its schedule. Inaccurate and overoptimistic schedules can lead to significant project failures. In this paper, we explore whether the presence of anchors, such as relatively uninformed suggestions or expectations of the duration of project tasks, play a role in the project estimating and planning process. Our laboratory experiment contributes to the methodology of investigating the robustness and persistence of the anchoring effect in the following ways: (1) we investigate the anchoring effect by comparing the behavior in low and high anchor treatments with a control treatment where no anchor is present; (2) we provide a more accurate measurement by incentivizing participants to provide their best duration estimates; (3) we test the persistence of the anchoring effect over a longer horizon; (4) we evaluate the anchoring effect also on retrospective estimates. We find strong anchoring effects and systematic estimation biases that do not vanish even after the task is repeatedly estimated and executed. In addition, we find that such persisting biases can be caused not only by externally provided anchors, but also by the planner’s own initial estimate.
    Keywords: project management, project planning, time management, anchors, anchoring effect, task duration, duration estimation, time estimation, anchoring bias
    JEL: C91 D83 D92 O21 O22
    Date: 2019–04–12
  3. By: Carpenter, Jeffrey P. (Middlebury College); Benscheidt, Kevin (Middlebury College)
    Abstract: Viewed through the lens of the prominent two-system model of decision making, behavioral economics is seen as studying the tension between impulses (System 1) and rationality (System 2). In this context, two strategies, "de-biasing" informing agents of their biases and "counter-biasing" using "nudges" to activate biases to positively influence choice, have improved the welfare of behavioral agents. We advance the notion of counter-biasing by demonstrating that one bias (present bias) can be pit against another (choking at high stakes) to counteract the ill effects of the second. Our results demonstrate the potential of counter-biasing as an effective policy tool.
    Keywords: behavioral economics, counter-biasing, present bias, choking, experiment
    JEL: C91 D91 M52
    Date: 2019–03
  4. By: Jipeng Zhang; Elizabeth Brown; Huan Xie
    Abstract: In this paper, we study the behavioural impact of religious priming by showing participants religious words in a scrambled sentence task before a dictator game and a joy-of-destruction game. We also elicited data on individual religiosity and religious affiliation using a questionnaire. Priming religious words significantly increased pro-social behaviour in the dictator game, and the effect was especially striking among those reporting no religion, atheists and agnostics. The religious prime has no significant effect in mitigating destructive behaviour or own expectations of the other's destruction choice, but both destructive behaviour and expectations correlate positively with the multi-dimensional religiosity measure.
    Keywords: Religious Priming,Pro-Social Behaviour,Dictator Game,Joy-of-Destruction Game,
    JEL: D64 C91 Z12
    Date: 2019–04–15
  5. By: Bose, Neha (University of Warwick); Sgroi, Daniel (University of Warwick)
    Abstract: In a laboratory experiment, 338 participants were asked to communicate in pairs and then play two games with their partners: the 11-20 money request game (a tool for assessing level-k reasoning) and a public goods game. The communication occurred prior to any knowledge of what was to follow but played an important rolein allowing them to develop theories or mental models of their partners (“theory of mind”) which proved to be crucial explanatory factors for decision-making. We examine the players’ beliefs about the personality and intelligence of their partner, how they play in the games and analysed the language used during communication. The results indicate that beliefs about partner’s type is biased by own-type. In particular, extraverts, characterised by positive affect, projected their positivity onto their partners. The level-k strategy chosen in the 11-20 game increased with the perceived similarity between players and in the public goods game, players cooperated more when they believed their partners to be extraverted. An analysis of the text used during communication explains how it was possible for participants to draw inferences about other’s type: for instance, use of more words and more dominant words were associated with being an extravert.
    Keywords: theory of mind, cheap talk, communication, level-k reasoning, public goods game, cooperation, extraversion, perceived similarity, self-projection bias, laboratory experiment, text analysis. JEL Classification: D91, D83, C92.
    Date: 2019
  6. By: James Alm (Tulane University)
    Abstract: In this paper, I review and assess what we have learned about what motivates individuals to pay - or to not pay - their legally due tax liabilities. I focus on three specific questions. First, what does theory say about what motivates tax compliance? Second, what does the evidence show? Third, how can government use these insights to improve compliance? I conclude with some suggestions - and some predictions - for future research.
    Keywords: Tax evasion; behavioural economics; controlled field experiments; laboratory experiments.
    JEL: H2 H26 D03 C9
    Date: 2019–04

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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