nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2020‒08‒31
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Psychological pressure and the right to determine the moves in dynamic tournaments – Evidence from a natural field experiment By Mark Kassis; Sascha L. Schmidt; Dominik Schreyer; Matthias Sutter
  2. Present Bias for Monetary and Dietary Rewards: Evidence from Chinese Teenagers By Cheung, Stephen L.; Tymula, Agnieszka; Wang, Xueting
  3. Aspirations and Behaviour: Future in the Mindset The Link between Aspiration Failure and the Poverty Trap By Omer Siddique; Durr-e-Nayab
  4. Public discourse and socially responsible market behavior By Björn Bartling; Vanessa Valero; Roberto A. Weber; Lan Yao
  5. The Power of Focal Points is Strong: Coordination Games with Labels and Payoffs By Bodoff, David
  6. Savage's response to Allais as Broomean reasoning By Franz Dietrich; Antonios Staras; Robert Sugden
  7. Are Personality Traits Really Fixed and Does It Matter? By Steven Stillman; Malathi Velamuri
  8. Inequality and Fairness: A Networked Experiment By Yildirim, Ugur; Feehan, Dennis
  10. How can neuroscience contribute to the science of intergenerational sustainability? By Ryuta Aoki; Ayahito Ito; Keise Izuma; Tatsuyoshi Saijo

  1. By: Mark Kassis (Center for Sports and Management (CSM), WHU Otto Beisheim School of Management, Erkrather Str. 224a, 40233, Düsseldorf, Germany); Sascha L. Schmidt (Center for Sports and Management (CSM), WHU Otto Beisheim School of Management, Erkrather Str. 224a, 40233, Düsseldorf, Germany); Dominik Schreyer (Center for Sports and Management (CSM), WHU Otto Beisheim School of Management, Erkrather Str. 224a, 40233, Düsseldorf, Germany); Matthias Sutter (Max Planck Institute for Research on Collective Goods, Kurt-Schumacher-Straße 10, 53113 Bonn, Germany; University of Cologne and University of Innsbruck)
    Abstract: In this paper, we show that the right to determine the sequence of moves in a dynamic team tournament improves the chances of winning the contest. Because studying dynamic team tournaments – like R&D races – with interim feedback is difficult with company data, we examine decisions of highly paid professionals in soccer penalty shootouts and show that teams whose captains can decide about the shooting sequence are more likely to win the shootout. So, managerial decisions matter for outcomes of dynamic tournaments and we discuss potential reasons for this finding.
    Keywords: Dynamic tournament, sports professionals, psychological pressure, value of decision rights, penalty shoot-outs, behavioral economics
    JEL: C93 D00 D81 D91 Z20
    Date: 2020–08
  2. By: Cheung, Stephen L. (University of Sydney); Tymula, Agnieszka (University of Sydney); Wang, Xueting (University of Sydney)
    Abstract: Economists model self-control problems through time-inconsistent preferences. Empirical tests of these preferences largely rely on experimental elicitation methods using monetary rewards, with several recent studies failing to find present bias for money. In this paper, we compare estimates of present bias for money with estimates for healthy and unhealthy foods. In a within-subjects longitudinal experiment with 697 low-income Chinese high school students we find strong present bias for both money and food, and that individual measures of present bias are moderately correlated across reward types. Our experimental measures of time preferences over money predict field behaviours better than preferences elicited over foods.
    Keywords: self-control, quasi-hyperbolic discounting, present bias, adolescents, food rewards
    JEL: C91 D12 D80 D91
    Date: 2020–06
  3. By: Omer Siddique (Pakistan Institute of Development Economics, Islamabad.); Durr-e-Nayab (Pakistan Institute of Development Economics, Islamabad.)
    Abstract: The paper looks into how low aspirations are linked to low achievement levels. Supported by evidence from economics, sociology, behavioural psychology, and anthropology, it is premised that aspiration failure among the poor results in their getting caught in the poverty trap. This aspiration failure is a product of the mindset, and the resulting internal constraints, that an individual in a specific socioeconomic and cultural environment has. These constraints are based on the person’s cognitive window, which allows for certain behavioural choices and disallows for others. Looking at the notion of economic rationality, the paper questions its applicability in real life, especially those of the poor having low aspiration levels, narrow cognitive window and bounded rationality. The paper presents a justification for initiatives, embedded in societal norms and values, that aim at empowering the poor by improving their aspirations.
    Keywords: Aspiration Failure, Poverty Trap, Bounded Rationality, Cognitive Window, Behavioural Choices
    Date: 2020
  4. By: Björn Bartling; Vanessa Valero; Roberto A. Weber; Lan Yao
    Abstract: We investigate the causal impact of public discourse on socially responsible market behavior. We conduct laboratory market experiments with products that differ in their production costs and social impact, and provide market actors and impacted third parties with the opportunity to discuss appropriate market behavior. Across two studies that vary characteristics of the discourse, the external impact and the participants, we find that public discourse substantially increases market social responsibility. Our findings suggest that discussions and campaigns focusing on appropriate market behavior can be powerful tools for shaping responsible norms governing market conduct and addressing inefficiencies due to market failures.
    Keywords: Public discourse, market failure, externalities, social responsibility, social norms, experiment, communication
    JEL: C92 D62 D83 M14
    Date: 2020–08
  5. By: Bodoff, David
    Abstract: People’s ability to coordinate on salient labels has been widely reported since Schelling. However, it is not known how players behave when label salience conflicts with payoff dominance. We consider such games by independently varying the two elements, focusing especially on cases where the two criteria conflict. We also introduce a new form of the game, in which players choose labeled strategies in response to a stimulus. In games with no reference stimulus, behavior is consistent with a simple model, according to which strategic players assume their naïve counterparts choose the higher payoff. In games with a reference stimulus, behavior is consistent with a model in which strategic players assume their naïve counterparts choose the label that is more salient to them, except perhaps where the two labels’ salience are very similar, in which case the higher payoff is chosen. A key finding is that in the presence of a stimulus, play is best explained by a model in which players choose according to label salience, even against the combination of payoff and risk dominance.
    Keywords: coordination games; focal points; cognitive hierarchy;
    JEL: C70 C72
    Date: 2020–08–03
  6. By: Franz Dietrich (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, CNRS - Centre National de la Recherche Scientifique); Antonios Staras (Cardiff University); Robert Sugden (UEA - University of East Anglia [Norwich])
    Abstract: Leonard Savage famously contravened his own theory when first confronting the Allais Paradox, but then convinced himself that the had made an error. We examine the formal structure of Savage's ‘error-correcting' reasoning in the light of (i) behavioural economists' claims to identify the latent preferences of individuals who violate conventional rationality requirements and (ii) John Broome's critique of arguments which presuppose that rationality requirements can be achieved through reasoning. We argue that Savage's reasoning is not vulnerable to Broome's critique, but does not provide support for the view that behavioural scientists can identify and counteract errors in people's choices.
    Keywords: Savage,Allais Paradox,Broome,rationality,reasoning,behavioural economics
    Date: 2020–05
  7. By: Steven Stillman; Malathi Velamuri
    Abstract: A nascent but burgeoning literature examines the importance of non-cognitive skills in determining success across many facets of life. The majority of these papers treat these skills as fixed traits for adults. We estimate the impact of a number of life events on the Big Five personality traits and locus of control. A subset of life events have large impacts on these non-cognitive skills, especially on locus of control. For some events, these impacts persist in the medium-run. We then demonstrate that treating personality traits as fixed can lead to biased estimates of their relationship with socioeconomic outcomes.
    Keywords: personality, non-cognitive skills, life events, fixed traits
    JEL: J24 C18
    Date: 2020
  8. By: Yildirim, Ugur; Feehan, Dennis
    Abstract: Why do humans cooperate? Lab experiments have found that cooperation may emerge in part because humans have intrinsically egalitarian motives, meaning that they resist inequality even at some personal cost. But outside the lab, economic inequality is high and on the rise, yet survey data suggest that people do not prioritize policies intended to address inequality. If people are intrinsically egalitarian, why are dramatic increases in inequality not a bigger concern? One possibility is that most people care more about unfairness than inequality per se. Here, we report the results of a networked, online experiment designed to unpack the relationship between fairness and inequality. In our experiment, we create fair and unfair wealth allocations by experimentally manipulating two factors: wealth distribution (i.e., whether starting wealth is equal vs unequal) and wealth source (i.e., the specific mechanism through which wealth (in)equality comes about, earned vs random). Our results show that the source of subjects’ wealth has important effects on their attitudes and behavior: when subjects “earned” their endowments, they perceived their wealth regimes to be more fair, and they were less likely to cooperate. These findings suggest that it can be misleading to study inequality without accounting for subjects’ understanding of how that inequality arose.
    Date: 2020–07–10
  9. By: Vincenzo Scoppa (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria)
    Abstract: Social pressure may have relevant consequences in many contexts but it is hard to evaluate it empirically. In this paper we exploit a natural experiment in soccer to provide clear evidence of its effects. We aim to study how social pressure from the crowd in a stadium affects both players and referees. While in normal matches crowd support may be correlated to a host of variables affecting the outcome of interest, we exploit the fact that after the health emergency for the Covid-19 pandemic in 2020, soccer matches in top European Leagues have been allowed only behind closed doors, that is, without spectators in the stadiums. We use data of first and second division of 5 major European Leagues (Germany, Spain, England, Italy and Portugal) for the last 10 championships and compare several outcomes (determined by players’ performance and referees’ decisions) of matches played with crowd support to the same outcomes when matches were played without crowd. We find considerable effects of the pressure from the crowd: while with the support of the crowd a considerable home advantage emerges in various measures of performance (points, goals, shots, etc.), this advantage is almost halved when matches are behind closed doors. Similar effects are found for the behavior of referees: decisions of fouls, yellow cards, red cards and penalties that tend to favor home teams in normal matches, are much more balanced without crowd pressing on referees. The evidence we provide strongly supports the idea that social pressure has intense effects on agents’ behavior.
    Keywords: Social Pressure, Crowd Support, Emotional Factors, Social Approval, Performance, Home Advantage, Referee’s Favoritism
    JEL: D91 M50 L83 Z2
    Date: 2020–08
  10. By: Ryuta Aoki (Tokyo Metropolitan University); Ayahito Ito (Research Institute for Future Design, Kochi University of Technology,); Keise Izuma (School of Economics and Management, Kochi University of Technology); Tatsuyoshi Saijo (Research Institute for Future Design, Kochi University of Technology)
    Abstract: Intergenerational sustainability is an existential problem for humans, and coping with this issue requires large-scale cooperation extended across generations. However, recent empirical evidence suggests that people’s concern for future generations is typically low, which is rooted from human’s cognitive biases (e.g., temporal discounting and bounded empathy) and possibly exacerbated by modern social systems depreciating future generations’ rights and voices. To achieve sustainable society, we need to design and implement novel social institutions that leverage our concern for future generations. In this paper, we discuss how neuroscience can tackle this fundamental challenge in collaboration with other disciplines. We review psychological factors and neural substrates that may underlie decision-making regarding intergenerational sustainability. We also propose empirical approaches to study neural bases of intergenerationally-sustainable decision-making. Notably, neuroimaging research has potential to unveil “hidden†neurobiological processes that are difficult to identify by behavioral observations alone. In addition, neural data can be used to predict real-world outcomes, which complements behavioral and self-report measures that may not always reflect true motives behind decisions. Understanding the neurocognitive mechanisms would provide insights into effective institutions that promote concern for future generations. We prospect that future neuroscience research will accumulate evidence from both laboratory and field experiments, thereby contributing to policy making and the transformation toward sustainable society.
    Keywords: intergenerational sustainability, neuroscience, transdisciplinary approach
    Date: 2020–08

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