nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2020‒05‒18
eight papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Confidence Snowballing and Relative Performance Feedback By Zahra Murad; Chris Starmer
  2. COVID-19 Crisis Fuels Hostility against Foreigners By Bartos, Vojtech; Bauer, Michal; Cahlíková, Jana; Chytilová, Julie
  3. Nudging the Adoption of Fuel-Efficient Vehicles: Evidence from a Stated Choice Experiment in Nepal By Massimo Filippini; Nilkanth Kumar; Suchita Srinivasan
  4. Innovation and Communication Media in Virtual Teams – An Experimental Study By Grözinger, Nicola; Irlenbusch, Bernd; Laske, Katharina; Schröder, Marina
  5. Three doors anomaly, "should I stay or should I go": an artefactual field experiment By Rocco Caferra; Alessia Casamassima; Alessandro Cascavilla; Andrea Morone; Paola Tiranzoni
  6. Can Information about Energy Costs Affect Consumers Choices? Evidence from a Field Experiment By Nina Boogen; Claudio Daminato; Massimo Filippini; Adrian Obrist
  7. Perceived fairness and consequences of affirmative action policies By Schildberg-Hörisch, Hannah; Trieu, Chi; Willrodt, Jana
  8. The behavioral and neoliberal foundations of randomizations By Jean-Michel Servet; Bruno Tinel

  1. By: Zahra Murad (University of Portsmouth); Chris Starmer (University of Nottingham)
    Abstract: We investigate whether relative performance feedback can create biases in confidence leading it to ‘snowball’. We study elicited confidence about own performance, relative to other group members, in three stages. As subjects move across stages, we change group composition so that new groups contain either only top performers or only bottom performers, from the previous stage. Between treatments, we manipulate whether subjects know about their own past relative performance or that of currently matched group members. In the NoFeedback treatment, they know neither of these things and confidence remains calibrated and stable across the stages. In both of the other two treatments, we provide feedback on own performance and, in both of these treatments, confidence snowballs significantly in the direction of the feedback: confidence consistently rises among top performers and falls among bottom performers. In one of these treatments - the OwnFeedback treatment, which we interpret as inducing full reference group neglect – subjects are not told about how their reference group is changing. In the FullFeedback treatment, however, subjects do have a basis for judging that their own performance feedback is essentially uninformative, yet we still find strong evidence that confidence snowballs and only limited evidence that they are weaker than those arising from full reference group neglect. Hence, the results are broadly consistent with the reference group neglect hypothesis. The results suggest the possibility of confidence biases emerging and snowballing in a potentially wide range of field settings.
    Keywords: overconfidence, relative performance feedback, confidence updating
    JEL: C91 D81
    Date: 2020–05–14
  2. By: Bartos, Vojtech (University of Munich); Bauer, Michal (Charles University, Prague); Cahlíková, Jana (Max Planck Institute for Tax Law and Public Finance); Chytilová, Julie (Charles University, Prague)
    Abstract: Intergroup conflicts represent one of the most pressing problems facing human society. Sudden spikes in aggressive behavior, including pogroms, often take place during periods of economic hardship or health pandemics, but little is known about the underlying mechanism behind such change in behavior. Many scholars attribute it to scapegoating, a psychological need to redirect anger and to blame an out-group for hardship and problems beyond one's own control. However, causal evidence of whether hardship triggers out-group hostility has been lacking. Here we test this idea in the context of the Covid-19 pandemic, focusing on the common concern that it may foster nationalistic sentiments and racism. Using a controlled money-burning task, we elicited hostile behavior among a nationally representative sample (n = 2,186) in a Central European country, at a time when the entire population was under lockdown and border closure. We find that exogenously elevating salience of thoughts related to Covid-19 pandemic magnifies hostility and discrimination against foreigners, especially from Asia. This behavioral response is large in magnitude and holds across various demographic sub-groups. For policy, the results underscore the importance of not inflaming racist sentiments and suggest that efforts to recover international trade and cooperation will need to address both social and economic damage.
    Keywords: COVID-19, pandemic, scapegoating, hostility, inter-group conflict, discrimination, experiment
    JEL: C90 D01 D63 D91 J15
    Date: 2020–05
  3. By: Massimo Filippini (Center of Economic Research (CER-ETH), ETH Zurich, Switzerland and Universita della Svizzera italiana, Switzerland); Nilkanth Kumar (Center of Economic Research (CER-ETH), ETH Zurich, Switzerland); Suchita Srinivasan (Center of Economic Research (CER-ETH), ETH Zurich, Switzerland)
    Abstract: Addressing hazardous levels of air pollution in densely-populated cities in emerging countries requires concerted efforts to reduce fossil fuel use, especially in the transport sector. Given that motorcycles comprise almost 80% of vehicle sales in Nepal, a viable alternative to reduce air pollution is driving more fuel-efficient electric alternatives. However, their adoption has been limited due to a gamut of market failures and behavioral anomalies. In this study, we collect rich data on preferences, socio-economic factors and biases of more than 2,000 potential motorcycle buyers in the Kathmandu valley in Nepal. Using a stated choice experiment with randomized information treatments, we evaluate the role of specific behavioral anomalies in determining the stated-preference of consumers on whether they would be willing to buy an electric motorcycle. We find evidence to suggest that cognitive/skills limitations, framing of information, and the affect heuristic play a role in determining the stated-preference of respondents. In particular, displaying qualitative information on the air pollution impact of their choices, and “priming” them through impactful photographs and texts could have a positive effect. Furthermore, the results also hint at the importance of gender, health status and cognitive skills in determining the effectiveness of these nudges in promoting the adoption of electric alternatives. Implications of this study relate to policy choice in settings similar to Kathmandu, where fuel-inefficient vehicles are preferred and widely used, and the negative externalities due to air pollution are very stark.
    Keywords: Market failures, Behavioral anomalies, Electric vehicles, Stated-choice experiment, Nepal
    JEL: D1 D8 Q4 Q5
    Date: 2020–05
  4. By: Grözinger, Nicola; Irlenbusch, Bernd; Laske, Katharina; Schröder, Marina
    Abstract: In a novel real-effort setting, we experimentally study the effects of different communication media on creative performance in a collaborative tasks. We find that creative performance significantly decreases when group members communicate via chat instead of face-to-face. However, we find no significant difference between performances of groups that communicate via video conferences as compared to face-to-face. Thus, we provide evidence that barriers to creativity in virtual teams can be mitigated by real-time video conference communication.
    Keywords: Creativity, Communication, Laboratory Experiment, Real-effort, Complex Problem Solving, Innovation
    JEL: C91 J30 M52 O30
    Date: 2020–05
  5. By: Rocco Caferra; Alessia Casamassima; Alessandro Cascavilla; Andrea Morone; Paola Tiranzoni
    Abstract: This work aims to identify and quantify the biases behind the anomalous behavior of people when they deal with the Three Doors dilemma, which is a really simple but counterintuitive game. Carrying out an artefactual field experiment and proposing eight different treatments to isolate the anomalies, we provide new interesting experimental evidence on the reasons why subjects fail to take the optimal decision. According to the experimental results, we can quantify the size and the impact of three main biases that explain the anomalous behavior of participants: Bayesian updating, illusion of control, and status quo bias.
    Date: 2020
  6. By: Nina Boogen (Center of Economic Research (CER-ETH), ETH Zurich, Switzerland); Claudio Daminato (Center of Economic Research (CER-ETH), ETH Zurich, Switzerland); Massimo Filippini (Center of Economic Research (CER-ETH), ETH Zurich, Switzerland and Universita della Svizzera italiana, Switzerland); Adrian Obrist (Center of Economic Research (CER-ETH), ETH Zurich, Switzerland)
    Abstract: There is an ongoing debate in the literature about whether consumers are fully informed when investing in energy effciency. We experimentally evaluate the role of imperfect informa- tion or limited attention about energy costs of home appliances and light bulbs on households' choices. Using in-home visits, we collect information on the energy effciency of home appliances and light bulbs that households own. Exploiting these unique data, the intervention provided treated households with customized information about the potential of monetary savings from the adoption of new comparable efficient durables. We find a substantial impact of our informa- tion treatment on both the energy efficiency of the newly purchased durables and the intensity of utilization of existing home appliances. Our findings suggest that individuals are not fully informed about or pay attention to energy costs when purchasing and utilizing home appliances.
    Keywords: Imperfect information, Limited attention, Consumers durable choices, Energy efficiency, Field experiment.
    JEL: C93 D12 D83 Q40
    Date: 2020–05
  7. By: Schildberg-Hörisch, Hannah; Trieu, Chi; Willrodt, Jana
    Abstract: Debates about affirmative action often revolve around fairness. Accordingly, we document substantial heterogeneity in the fairness perception of various affirmative action policies. But do these differences translate into different consequences? In a laboratory experiment, we study three different quota rules that favor individuals whose performance is low, either due to bad luck (discrimination), low productivity, or choice of a short working time. Higher fairness perceptions coincide with a higher willingness to compete and less retaliation against winners. No policy harms overall efficiency or post-competition teamwork. Furthermore, individuals seem to internalize the normbehind the policies that are perceived as fairest.
    Keywords: affirmative action,fairness ideals,experiment,tournament,real effort
    JEL: C91 D02 D63
    Date: 2020
  8. By: Jean-Michel Servet (IHEID - Institut de hautes études internationales et du développement - University of Geneva [Switzerland]); Bruno Tinel (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: One-sentence summary : Randomized controlled trials by behavioural economists pretend to be pragmatic and only interested in what really works to solve practical problems but in reality they have notorious normative and ideological aspects. Key points: Behavioural RCTs ignore contexts and composition effects and reflect the biases of those who perform assessments. Behavioural randomizers presume without demonstrating that market exchanges are the most effective form of regulation for societies in all situations of social life. The positive or negative incentives ("nudges") offered by behavioural economics aim to normalize the behaviour of consumers, users, employees or small/independent producers. They are part of a set of power devices by which individual behaviours are shaped and forced, without their knowledge, to conform to dominant class interests.
    Date: 2020–05

This nep-cbe issue is ©2020 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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