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on Cognitive and Behavioural Economics |
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Issue of 2019‒10‒14
five papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Nicolas Jacquemet (PSE - Paris School of Economics); Stéphane Luchini (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Antoine Malezieux; Jason Shogren (UW - University of Wyoming) |
| Abstract: | Why do people pay taxes? Rational choice theory has fallen short in answering this question. Another explanation, called "tax morale", has been promoted. Tax morale captures the behavioral idea that non-monetary preferences (like norm-submission, moral emotions and moral judgments) might be better determinants of tax compliance than monetary trade-offs. Herein we report on two lab experiments designed to assess whether norm-submission, moral emotions (e.g. affective empathy, cognitive empathy, propensity to feel guilt and shame) or moral judgments (e.g. ethics principles, integrity, and moralization of everyday life) can help explain compliance behavior. Although we find statistically significant correlations of tax compliance behavior with empathy and shame, the economic significance of these correlations are low–—more than 80% of the variability in compliance remains unexplained. These results suggest that tax authorities should focus on the institutional context, rather than individual preference characteristics, to handle tax evasion. |
| Keywords: | tax evasion,tax morale,morality,personality traits,psychometrics |
| Date: | 2019–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02290402&r=all |
| By: | Ahmet Ak; Oner Gumus |
| Abstract: | In economics literature, it is accepted that all people are rational and they try to maximize their utilities as possible as they can. In addition, economic theories are formed with the assumptions not suitable to real life. For instance, indifference curves are drawn with the assumptions that there are two goods, people are rational, more is preferred to less and so on. Hence, the consumer behaviors are guessed according to this analysis. Nevertheless, these are invalid in real life. And this inconsistencey are examined by behavioral economics and neuroeconomics. Behavioral economics claims that people can behave what they are not expected since people can be irrational, their willpower is limited and altruistic behaviors can be seen and they can give more value to what they own. As a result of these, consumer behaviors become more different than that of economic theory. In addition to behavioral economics, neuroeconomics also examines consumer behaviors more differently than mainstream economic theory. It emphasizes the people using prefrontial cortex of the brain are more rational than the people using hippocampus of the brain. Therefore, people can make illogical choices compared to economic theory. In these cases, levying taxes such as personal income tax or value added tax can be ineffective or effective. In other words, the effect becomes ambigious. Hence,the hypothesis that if government desires to levy personal income tax or value added tax, it makes a detailed research in terms of productivity of taxes forms the fundamental of this study. |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1910.03141&r=all |
| By: | David Masclet (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, CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal); Claude Montmarquette (CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal); Nathalie Viennot-Briot (CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal) |
| Abstract: | There are many ways of tackling tax evasion. The traditional strategies implemented by tax authorities fight fiscal fraud through audits and penalties. However, there also exist a plethora of unconventional methods, such as whistleblower programs. Although there is rich economic literature on tax evasion, auditing and penalties, tax agencies‘ heavy reliance on whistleblower programs has mostly been ignored. We ran an experiment in which taxpayers can punish tax evaders by reporting them to the authorities, even though it is costly for them to do so and despite the lack of any material benefit from doing so. Information on other taxpayers' compliance rates together with the opportunity to report tax evaders have a positive and very significant effect on the level of income reported. Observing the compliance rates of other participants alone does not suffice to increase tax revenues. |
| Keywords: | fiscal fraud,whistleblowers,ambiguous risk,laboratory experiment. |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02301968&r=all |
| By: | Samuel Shye; Ido Haber |
| Abstract: | Challenge Theory (CT), a new approach to decision under risk departs significantly from expected utility, and is based on firmly psychological, rather than economic, assumptions. The paper demonstrates that a purely cognitive-psychological paradigm for decision under risk can yield excellent predictions, comparable to those attained by more complex economic or psychological models that remain attached to conventional economic constructs and assumptions. The study presents a new model for predicting the popularity of choices made in binary risk problems. A CT-based regression model is tested on data gathered from 126 respondents who indicated their preferences with respect to 44 choice problems. Results support CT's central hypothesis, strongly associating between the Challenge Index (CI) attributable to every binary risk problem, and the observed popularity of the bold prospect in that problem (with r=-0.92 and r=-0.93 for gains and for losses, respectively). The novelty of the CT perspective as a new paradigm is illuminated by its simple, single-index (CI) representation of psychological effects proposed by Prospect Theory for describing choice behavior (certainty effect, reflection effect, overweighting small probabilities and loss aversion). |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1910.04487&r=all |
| By: | Susara Johanna Ferreira (North West University) |
| Abstract: | Financial risk tolerance refers to the degree of uncertainty an investor is willing to accept, and can often be influenced by individual characteristics. However, personal psychological preferences play a prominent role in an investor?s judgement and relationship with their finances. Limited research has been done on investors to see whether their type of personality will influence the level of risk they are willing to tolerate and ultimately the performance of their asset portfolios. Therefore, this article aids toward the contribution in understanding how personality traits can influence financial decision-making. The secondary data for this article was purposefully collected by an investment company using a quantitative questionnaire, which was electronically distributed to 600 investors within the South African market. The results of this study indicated that different personalities prefer different levels of risk. Individuals who are more open to experience, indicated a significant difference in risk tolerance levels compared to other personality types. The results for this article were comparable to previous research where only some of the personality traits play a role in investment decisions. |
| Keywords: | Risk tolerance, personality traits, gender, investment decisions |
| JEL: | G11 D14 D81 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:9511451&r=all |