nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2019‒09‒16
five papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Lying under self-control depletion and time pressure By Serhiy Kandul; Apshara Naguleswaran
  2. Laws and Norms: Experimental Evidence with Liability Rules By Bruno Deffains; Romain Espinosa; Claude Fluet
  3. The risk elicitation puzzle revisited: Across-methods (in)consistency? By Felix Holzmeister; Matthias Stefan
  4. Mental Temporal Accounting By Julia M. Puaschunder
  5. Behavioral learning equilibria in the New Keynesian model By Cars Hommes; Kostas Mavromatis; Tolga Ozden; Mei Zhu

  1. By: Serhiy Kandul; Apshara Naguleswaran
    Abstract: Dealing with temptations requires self-control. If lying for money constitutes a temptation, restricting people's self-control resources would enhance unethical behavior. We argue that the effect of the self-control on lying depends on two things: 1) easiness to grasp the opportunity to lie, and 2) the amount of time available to decide. In an incentivized online experiment, we manipulate participants' self-control resources through an ego depletion task and allow participants to misreport the outcome of a dice-roll with and without time pressure. We find evidence that ego depletion increases the fraction of truth-tellers under time pressure. Our findings suggest that when discovering the opportunities to lie is not trivial and people are constrained with the time, self-control depletion enhances people's ethical behavior.
    Keywords: Lying, Ego depletion, Self-control, Ethical behavior,Time pressure.
    JEL: C91 D91
    Date: 2019–09
  2. By: Bruno Deffains (Centre de Recherches en Droit et Economie (CRED) - Université Panthéon Assas (Paris 2)); Romain Espinosa (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Claude Fluet (Laval University [Québec])
    Abstract: We conduct an experiment where participants choose between actions that provide private benefits but may also impose losses on others. Three legal environments are compared: no law, strict liability for harm caused to third parties, and an efficiently designed negligence rule where damages are paid only when the harmful action generates a net social loss. Legal obligations are either perfectly enforced (Severe Law) or only weakly so (Mild Law), i.e., expected sanctions are then nondeterrent. We find that behavior can be rationalized in terms of individuals trading-off private benefits, net of legal liability, against the net uncompensated losses caused to others. The weight associated with non incentivized efficiency concerns is increased by the introduction of a liability rule, whether deterrent or not, and there is evidence that the effect is stronger under strict liability than under the negligence rule.
    Keywords: Behavioral law and economics,liability rules,social norms,social preferences,legal norms
    Date: 2019
  3. By: Felix Holzmeister; Matthias Stefan
    Abstract: With the rise of experimental research in the social sciences, numerous methods to elicit and classify people's risk attitudes in the laboratory have evolved. However, evidence suggests that people's attitudes towards risk may change considerably when measured with different methods. Based on a with-subject experimental design using four widespread risk preference elicitation methods, we find that different procedures indeed give rise to considerably varying estimates of individual and aggregate level risk preferences. Conducting simulation exercises to obtain benchmarks for subjects' behavior, we find that the observed heterogeneity in risk preference estimates across methods looks qualitatively similar to the heterogeneity arising from independent random draws from choices in the experimental tasks, despite significantly positive correlations between tasks. Our study, however, provides evidence that subjects are surprisingly well aware of the variation in the riskiness of their choices. We argue that this calls into question the common interpretation of variation in revealed risk preferences as being inconsistent.
    Keywords: Risk preference elicitation, inconsistent behavior, risk attitudes
    JEL: C91 D81
    Date: 2019
  4. By: Julia M. Puaschunder (The New School, Department of Economics)
    Abstract: This paper introduces Mental Temporal Accounting – the behavioral economics application of mental accounting in the time domain. While most discounting studies are in the finance domain, social and environmental components have not gotten as much attention as appearing to require based on the novel perspectives this research grants. Theoretically we may also derive conclusions for contact theory and point at opening monetary gains focuses to social and environmental cues that may nudge people to perceive time differently and act on it accordingly. As mental accounting was successfully introduced to be extendable onto time, traditional mental accounting theory (Thaler 1999) should be revisted for attention to time discounting in the social and environmental spheres alongside the economic attention. Elucidating how contexts and experiencing critical life stages of parenthood influence temporal activity allocation choices promises to improve manifold decisions on education, health, asset management, career paths and common goods preservation throughout life for this generation and the following.
    Keywords: discounting, economic time, environmental time, mental temporal discounting, social time, time
    Date: 2019–07
  5. By: Cars Hommes; Kostas Mavromatis; Tolga Ozden; Mei Zhu
    Abstract: We introduce the concept of behavioral learning equilibrium (BLE) into a high dimensional linear framework and apply it to the standard New Keynesian model. For each endogenous variable, boundedly rational agents use a simple, but optimal AR(1) forecasting rule with parameters consistent with the observed sample mean and autocorrelation of past data. The main contributions of our paper are fourfold: (1) we derive existence and stability conditions of BLE in a general linear framework, (2) we provide a general method for Bayesian likelihood estimation of BLE, (3) we estimate the baseline NK model based on U.S. data and show that the relative model fit is better under BLE than REE, (4) we analyze optimal monetary policy under BLE and show that it differs from REE. In particular, we find that the transmission channel of monetary policy is stronger under BLE at the estimated parameter values.
    Keywords: Bounded rationality; Behavioral learning equilibrium; Adaptive learning; behavioral New Keynesian macro-model; Monetary Policy
    JEL: C11 E62 D83 D84
    Date: 2019–09

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