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on Cognitive and Behavioural Economics |
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Issue of 2020‒06‒15
seven papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Ronayne, David (University of Oxford and Nuffield College); Sgroi, Daniel (University of Warwick, ESRC CAGE Centre and IZA Bonn); Tuckwell, Anthony (Universityof Warwick, ESRC CAGE Centre and the Alan Turing Institute) |
| Abstract: | We provide experimental evidence of behavior consistent with the sunk cost effect. Subjects who earned a lottery via a real-effort task were given an opportunity to switch to a dominant lottery; yet 23% chose to stick with their dominated lottery. The endowment effect accounts for roughly only one third of the effect. Subjects’ capacity for cognitive reflection is a significant determinant of sunk cost behavior. We also find stocks of knowledge or experience (crystallized intelligence) predict sunk cost behavior, rather than algorithmic thinking (fluid intelligence) or the personality trait of openness. We construct and validate a scale, the “SCE-8”, which encompasses many resources individuals can spend, and offers researchers an efficient way to measure susceptibility to the sunk cost effect. |
| Keywords: | sunk cost effect ; sunk cost fallacy ; endowment effect ; cognitive ability ; fluid intelligence ; crystallized intelligence ; reflective thinking ; online experiment ; online survey ; psychological scales ; scale validation ; Raven’s progressive matrices ; international cognitive ability resource ; cognitive reflection test ; openness. JEL codes: D91 ; C83 ; C90 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1269&r=all |
| By: | Leonhard K. Lades (UCD Environmental Policy & Geary Institute for Public Policy, University College Dublin); Kate Laffan (UCD School of Economics & Geary Institute for Public Policy, University College Dublin); Till O. Weber (Newcastle University Business School, Newcastle University) |
| Abstract: | Understanding the determinants of pro-environmental behaviour is key to address many environmental challenges. Economic theory and empirical evidence suggest that human behaviour is determined by peoples preferences over risk, time, and social consequences. As such, individual differences in these preferences should predict individual differences in pro-environmental behaviour. In a pre-registered study, we measure economic preferences in seven domains (risk taking, patience, present bias, altruism, positive reciprocity, negative reciprocity, and trust) and test whether these preferences predict pro-environmental behaviour in everyday life measured using the day reconstruction method. We find that only altruism is significantly associated with everyday pro-environmental behaviour. This suggests that people recognise everyday pro-environmental behaviours to be beneficial to others, but do not integrate the riskiness, inter-temporal structure, nor other social characteristics of pro-environmental behaviour into their decision-making. We also show in an exploratory analysis that different clusters of everyday pro-environmental behaviours are predicted by patience, positive reciprocity, and altruism, indicating that these considerations are relevant for some, but not other, pro-environmental behaviours. |
| Keywords: | Time preferences, risk preferences, social preferences, pro-environmental behaviour, day reconstruction method |
| Date: | 2020–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:ucd:wpaper:202003&r=all |
| By: | Schildberg-Hörisch, Hannah (Heinrich Heine University Düsseldorf); Trieu, Chi (Düsseldorf Institute for Competition Economics (DICE)); Willrodt, Jana (Düsseldorf Institute for Competition Economics (DICE)) |
| 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: | experiment, fairness ideals, affirmative action, tournament, real effort |
| JEL: | C91 D02 D63 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13202&r=all |
| By: | Elisabeth Gsottbauer; Daniel Müller; Samuel Müller; Stefan T. Trautmann; Galina Zudenkova |
| Abstract: | Are upper class individuals less ethical? Highly popularized research findings support this notion. This paper provides a novel test to evaluate the relationship between social status and ethical behavior. We successfully prime a large heterogeneous sample of the German population as either high or low social status. We then elicit ethical behavior in an incentivized experimental task. Thus, our data allows us to study both correlation (using demographic data) and causality (using the priming). Our study does not support the claim that higher social status individuals are less ethical, as prominently suggested by the literature. This result holds both for a respondent's true social status and for her primed subjective social status. Our findings call for a re-interpretation of the existing evidence. |
| Keywords: | cheating, ethics, mind game, priming, social class |
| JEL: | D63 D31 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2020-10&r=all |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02562758&r=all |
| By: | Elias Bouacida; Daniel Martin |
| Abstract: | When choices are inconsistent due to behavioral biases, there is a theoretical debate about whether the structure of a model is necessary for providing precise welfare guidance based on those choices. To address this question empirically, we use standard data sets from the lab and field to evaluate the predictive power of two “model-free†approaches to behavioral welfare analysis. We find they typically have high predictive power, which means there is little ambiguity about what should be selected from each choice set. We also identify properties of revealed preferences that help to explain the predictive power of these approaches. |
| Keywords: | Welfare economics, behavioral economics, predictive power, revealed preferences |
| JEL: | I30 C91 D12 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:lan:wpaper:296961902&r=all |
| By: | Giuseppe Attanasi (University of Côte d’Azur, Nice); Samuele Centorrino (Stony Brook University); Elena Manzoni (Department of Economics (University of Verona)) |
| Abstract: | We study two well-known electronic markets: an over-the-counter (OTC) market, in which each agent looks for the best counterpart through bilateral negotiations, and a double auc- tion (DA) market, in which traders post their quotes publicly. We focus on the DA-OTC efficiency gap and show how it varies with different market sizes (10, 20, 40, and 80 traders). We compare experimental results from a sample of 6,400 undergraduate students in Economics with zero-intelligent (ZI) agent-based simulations. Simulations with ZI traders show that the traded quantity (with respect to the efficient one) increases with market size under both DA and OTC. Experimental results with human traders confirm the same tendency under DA, while the share of periods in which the traded quantity is higher (lower) than the efficient one decreases (increases) with market size under OTC, ultimately leading to a DA-OTC efficiency gap increasing with market size. We rationalize these results by putting forward a novel game-theoretical model of OTC market as a repeated bargaining procedure under incomplete information on buyers’ valuations and sellers’ costs, showing how efficiency decreases slightly with size due to two counteracting effects: acceptance rates in earlier periods decrease with size, and earlier offers increase, but not always enough to compensate the decrease in acceptance rates. |
| Keywords: | Market Design, Classroom Experiment, Agent-based Modelling, Game-theoretic Modelling. |
| JEL: | C70 C91 C92 D41 D47 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:05/2020&r=all |