nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2020‒10‒19
seven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Behavioral Biases are Temporally Stable By Victor Stango; Jonathan Zinman
  2. Endogenous Monitoring through Gossiping in an Infinitely Repeated Prisoner’s Dilemma Game: Experimental Evidence By Kenju Kamei; Artem Nesterov
  3. To pay or not to pay: Measuring risk preferences in lab and field By Brañas-Garza, Pablo; Estepa Mohedano, Lorenzo; Jorrat, Diego; Orozco, Víctor; Rascon-Ramirez, Ericka
  4. Promises and Limitations of Nudging in Education By Oreopoulos, Philip
  5. Nudging Demand for Academic Support Services: Experimental and Structural Evidence from Higher Education By Pugatch, Todd; Wilson, Nicholas
  6. Nudging Timely Wage Reporting: Field Experimental Evidence from the United States Social Supplementary Income Program By C. Yiwei Zhang; Jeffrey Hemmeter; Judd B. Kessler; Robert D. Metcalfe; Robert Weathers
  7. Framing and loss aversion in tax reporting behavior: Evidence from German income tax return data By Diller, Markus; Kühne, Daniela

  1. By: Victor Stango; Jonathan Zinman
    Abstract: Social scientists often consider temporal stability when assessing the usefulness of a construct and its measures, but whether behavioral biases display such stability is relatively unknown. We estimate stability for 25 biases, in a nationally representative sample, using repeated elicitations three years apart. Bias level indicators are largely stable in the aggregate and within-person. Within-person intertemporal rank correlations imply moderate stability and increase dramatically when using other biases as instrumental variables. Additional results reinforce three key inferences: biases are stable, accounting for classical measurement error in bias elicitation data is important, and eliciting multiple measures of multiple biases is valuable.
    JEL: C36 C81 D90
    Date: 2020–09
  2. By: Kenju Kamei (Durham University Business School); Artem Nesterov (Durham University Business School)
    Abstract: Exogenously given reputational information is known to improve cooperation. This paper experimentally studies how people create such information through reporting of partner’s action choices, and whether the endogenous monitoring helps sustain cooperation, in an indefinitely repeated prisoner’s dilemma game. The experiment results show that most subjects report their opponents’ action choices, thereby successfully cooperating with each other, when reporting does not involve a cost. However, subjects are strongly discouraged from reporting when doing so is costly. As a result, they fail to achieve strong cooperation norms when the reported information is privately conveyed only to their next-round interaction partner. Costly reporting occurs only occasionally, even when there is a public record whereby all future partners can check the reported information. However, groups can then foster cooperation norms aided by the public record, because reported information gets gradually accumulated and becomes more informative over time. These findings suggest that the efficacy of endogenous monitoring depends on the quality of platforms that store reported information.
    Keywords: experiment, cooperation, prisoner’s dilemma game, reputation, reporting, infinitely repeated game.
    JEL: C92 C73 D70 H41
    Date: 2020–09
  3. By: Brañas-Garza, Pablo; Estepa Mohedano, Lorenzo; Jorrat, Diego; Orozco, Víctor; Rascon-Ramirez, Ericka
    Abstract: Measuring risk preferences in the field is critical for policy, however, it can be expensive and may generate unequal payoffs due to bad luck. For instance, the commonly used measure of Holt and Laury (2002) relies on a dozen of lottery choices and payments which makes it time consuming and costly, but also raises moral concerns as a result of the unequal payments generated by the lotteries. We propose a short version of the Holt and Laury (2002) which produces in the lab (Spain) the same results as the long HL. Using the short HL in the field (Honduras and Nigeria), we observe that paying or not for the measurement of risk preferences produces the same findings. Our low-cost approach makes the measurement of risk preferences simpler, faster and cheaper in the lab and field.
    Keywords: Risk preferences, Holt Laury, Field Experiments, Monetary Payoffs, Incentives.
    JEL: C91 C93 D81
    Date: 2020–09–23
  4. By: Oreopoulos, Philip (University of Toronto)
    Abstract: This article takes stock of where the field of behavioral science applied to education policy seems to be at, which avenues seem promising and which ones seem like dead ends. I present a curated set of studies rather than an exhaustive literature review, categorizing interventions by whether they nudge (keep options intact) or "shove" (restrict choice), and whether they apply a high or low touch (whether they use face-to-face interaction or not). Many recent attempts to test large-scale low touch nudges find precisely estimated null effects, suggesting we should not expect letters, text messages, and online exercises to serve as panaceas for addressing education policy's key challenges. Programs that impose more choice-limiting structure to a youth's routine, like mandated tutoring, or programs that nudge parents, appear more promising.
    Keywords: behavioral economics of education, nudge, shove
    JEL: I2 J24
    Date: 2020–09
  5. By: Pugatch, Todd; Wilson, Nicholas
    Abstract: More than two of every five students who enroll in college fail to graduate within six years. Prior research has identified ineffective study habits as a major barrier to success. We conducted a randomized controlled advertising experiment designed to increase demand for academic support services among more than 2,100 students at a large U.S. public university. Our results reveal several striking findings. First, the intervention shifted proxies of student attention, such as opening emails and self-reported awareness of service availability. However, the experimental variation indicates that approximately one-third of students are never attentive to student services. Second, advertising increased the use of extra practice problems, but did not affect take-up of tutoring and coaching, the other two services. Structural estimates suggest that transaction costs well in excess of plausible opportunity costs explain the differences in service use. Third, the characteristics of advertising messages matter. Several common nudging techniques—such as text messages, lottery-based economic incentives, and repeated messages—either had no effect or in some cases reduced the effectiveness of messaging.
    Keywords: email,higher education,incentives,nudges,text,randomized control trial
    JEL: A22 D91 I23 M31
    Date: 2020
  6. By: C. Yiwei Zhang; Jeffrey Hemmeter; Judd B. Kessler; Robert D. Metcalfe; Robert Weathers
    Abstract: We study a large-scale (n=50,000) natural field experiment implemented by the U.S. Social Security Administration that was aimed at increasing the timely and accurate self-reporting of wages by Supplemental Security Income (SSI) recipients. Sending a letter reminding SSI recipients of their wage reporting responsibilities significantly increased both the likelihood of reporting any earnings and the total amount of earnings reported, though this effect decays slightly over time. However, the specific letter content—providing social information or highlighting the salience of penalties—had no systematic effect. We develop a conservative estimate that the letters generated roughly $5.91 in savings on average per dollar spent for the U.S. government.
    JEL: D04 H2
    Date: 2020–09
  7. By: Diller, Markus; Kühne, Daniela
    Abstract: This paper investigates the presence of framing effects and loss aversion in tax reporting behavior of wage earners using a balanced panel of German income tax return data. Reference dependence and loss aversion suggest that individuals in a perceived loss situation attribute higher value to a given amount of positive change in outcome than individuals in a perceived gain situation do. Applied to tax reporting behavior, taxpayers who perceive their tax situation as unfavorable compared to a given reference point are expected to make greater effort or accept higher costs to prevent or reduce that perceived loss than taxpayers perceiving themselves to be in a favorable situation. Greater effort can in turn be associated with higher reporting aggressiveness. We identify a potential reference point in taxpayers' previous year's outcome and examine whether taxpayers claim higher additional tax deductions in a loss situation than in a gain situation. We use a difference-in-difference approach with a one-on-one matching strategy to analyze reporting behavior. We find that taxpayers in a loss situation claim higher income-related deductions than taxpayers in a gain situation.
    Keywords: loss aversion,framing,tax avoidance,nonbusiness tax
    JEL: D91 H24 H26
    Date: 2020

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