nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2020‒01‒06
seven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Incorporating Conditional Morality into Economic Decisions By David Masclet; David L. Dickinson
  2. Fast then slow: A choice process explanation for the attraction effect By Gaudeul, Alexia; Crosetto, Paolo
  3. Preferences for observable information in a strategic setting: An experiment By Adam Zylbersztejn; Zakaria Babutsidze; Nobuyuki Hanaki
  4. Perceived wealth, cognitive sophistication and behavioral inattention By Assenza, Tiziana; Cardaci, Alberto; Delli Gatti, Domenico
  5. Nudging for tax compliance: A meta-analysis By Antinyan, Armenak; Asatryan, Zareh
  6. A behavioral decomposition of willingness to pay for health insurance By Aurélien Baillon; Aleli Kraft; Owen O'Donnell; Kim van Wilgenburg
  7. Tra i Leoni: Revealing the Preferences Behind a Superstition By Invernizzi, Giovanna; Miller, Joshua Benjamin; Coen, Tommaso; Dufwenberg, Martin; Oliveira, Luiz Edgard R.

  1. By: David Masclet (Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France); David L. Dickinson (Appalachian State University, Department of Economics, USA)
    Abstract: We present a framework that incorporates both moral motivations and fairness considerations into utility. The main idea is that individuals face a preference trade-off between their material individual interest and their desire to follow moral norms. In our model, we assume that moral motivation is conditional and may be influenced by others’ actions. Specifically, in our framework moral obligation is a combination of two main components: an autonomous component and a social influence component that captures the influence of others. Our framework is able to explain many stylized results in the literature and to improve theories of economic behavior.
    Keywords: Fairness; Ethical Decision Making; Moral Motivation; Behavioral Economics
    JEL: B3 D6 D9
    Date: 2019–12
  2. By: Gaudeul, Alexia; Crosetto, Paolo
    Abstract: In this paper we provide choice-process experimental evidence that the attraction effect is a short-term phenomenon, that disappears when individuals are given time and incentives to revise their choices. The attraction (or decoy) effect is the most prominent example of context effects, and it appears when adding a dominated option to a choice set increases the choice share of the now dominant option at the expense of other options. While widely replicated, the attraction effect is usually tested in hypothetical or payoff-irrelevant situations and without following the choice process. We run a laboratory experiment where we incentivize choice, vary the difference in utility between options and track which option participants consider best over time. We find that the effect is a transitory phenomenon that emerges only in the early stages of the choice process to later disappear. Participants are fast then slow: they first choose the dominant option to avoid the dominated decoy and then progressively revise their choices until choice shares come to correspond to price differences only. We expand our analysis by considering differences in utility among options and differences in the presentation of options (numerical or graphical). We also consider differences in the choice processes followed by individuals (intuitive vs. deliberative). This allows us to ascribe more precisely the role of fast and slow cognitive process in the emergence and disappearance of the attraction effect.
    Keywords: asymmetric dominance,attraction effect,induced preferences,choice process,time constraint,rationality,context effects
    JEL: C91 D12 D83
    Date: 2019
  3. By: Adam Zylbersztejn (Univ Lyon, Université Lumière Lyon 2, GATE L-SE UMR 5824, 69130 Ecully, France); Zakaria Babutsidze (SKEMA Business School, Université Côte d'Azur (GREDEG) and OFCE, Sciences Po Paris); Nobuyuki Hanaki (Institute of Social and Economic Research, Osaka University)
    Abstract: We experimentally investigate how much value people put in observable information about others in strategic interactions. The incentivized experimental task is to predict an unknown target player's trustworthiness in an earlier hidden action game. In Experiment 1, we vary the source of information about the target player (neutral picture, neutral video, video containing strategic content). The observed prediction accuracy rates then serve as an empirical measure of the objective value of information. In Experiment 2, we elicit the subjective value of information using the standard stated preferences method ("willingness to accept"). While the elicited subjective values are ranked in the same manner as the objective ones, subjects attach value to information which does not help predict target behavior, and exaggerate the value of helpful information.
    Keywords: prediction, observable information, individual characteristics, stated preferences, willingness to accept, experiment
    JEL: C72 D83
    Date: 2019
  4. By: Assenza, Tiziana; Cardaci, Alberto; Delli Gatti, Domenico
    Abstract: By means of a laboratory experiment, we show that, contrary to standard consumer theory, financially equivalent balance sheet profiles may be perceived as non fungible in a controlled frictionless environment with no probabilistic attributes. A large majority of subjects indeed have a bias in the perception of wealth, such that balance sheet composition matters: for a given net worth with values of assets and debt that are financially certain and risk-free, a greater asset-debt ratio implies greater perceived wealth. The predominance of this bias is explained by low cognitive sophistication and great inattention. Moreover, biased subjects are less patient, less debt averse, more likely to increase spending out of unexpected gains and report greater propensities to consume. A standard optimal consumption choice model, enriched with a rational but inattentive agent a la Gabaix (2014, 2019), aligns our key experimental findings.
    Keywords: perceived wealth,cognitive sophistication,behavioral inattention,laboratory experiment,household debt,consumption
    JEL: C91 D91
    Date: 2019
  5. By: Antinyan, Armenak; Asatryan, Zareh
    Abstract: Taxpayer nudges - behavioral interventions that aim to increase tax compliance without changing the underlying economic incentives of taxpayers - are used increasingly by governments because of their potential cost-effectiveness in raising tax revenue. We collect about a thousand treatment effect estimates from over 40 randomized controlled trials, and in a meta-analytical framework show that non-deterrence nudges - interventions pointing to elements of individual tax morale - are on average ineffective in curbing tax evasion, while deterrence nudges - interventions emphasizing traditional determinants of compliance such as audit probabilities and penalty rates - are potent catalysts of compliance. These effects are, however, fairly small in magnitude. Deterrence nudges increase the probability of compliance by only 1.5-2.5 percentage points more than non-deterrence nudges, while the effects are likely to be bound to the short-run, and are somewhat inflated by selective reporting of results.
    Keywords: Tax compliance,Randomized control trials,Nudging,Meta-analysis
    JEL: C93 D91 H26
    Date: 2019
  6. By: Aurélien Baillon (Erasmus University Rotterdam); Aleli Kraft (University of the Philippines Diliman); Owen O'Donnell (Erasmus University Rotterdam); Kim van Wilgenburg (Erasmus University Rotterdam)
    Abstract: Despite widespread exposure to substantial medical expenditure risk in low-income populations, health insurance enrollment is typically low. This is puzzling from the perspective of expected utility theory. To help explain it, this paper introduces a decomposition of the stated willingness to pay (WTP) for insurance into its fair price and three behavioral deviations from that price due to risk perception and risk attitude consistent with prospect theory, plus a residual. To apply this approach, we elicit WTP, subjective distributions of medical expenditures and risk attitude (utility curvature and probability weighting) from Filipino households in a nationwide survey. We find that the mean stated WTP of the uninsured is less than both the actuarially fair price and the subsidized price at which public insurance is offered. This is not explained by downwardly biased beliefs: both the mean and the median subjective expectation are greater than the subsidized price. Convex utility in the domain of losses pushes mean WTP below the fair price and the subsidized price, and the transformation of probabilities into decision weights depresses the mean further, at least using one of two specific decompositions. WTP is reduced further by factors other than risk perception and attitude.
    Keywords: Health insurance, willingness to pay, subjective probability, prospect theory, medical expense
    JEL: I13 D84
    Date: 2019–11–17
  7. By: Invernizzi, Giovanna; Miller, Joshua Benjamin (The University of Melbourne); Coen, Tommaso; Dufwenberg, Martin; Oliveira, Luiz Edgard R.
    Abstract: We investigate a superstition for which adherence is nearly universal. Using a combination of field interventions that involve unsuspecting participants and a lab-style value elicitation, we measure the strength of peoples' underlying preferences, and to what extent their behavior is driven by social conformity rather than the superstition itself. Our findings indicate that both mechanisms influence behavior. While a substantial number of people are willing to incur a relatively high individual cost in order to adhere to the superstition, for many, adherence is contingent on the the behavior of others. Our findings suggest that it is the conforming nature of the majority that sustains the false beliefs of the minority.
    Date: 2019–01–16

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