nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2020‒10‒26
eight papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Extending Social Resource Exchange to Events of Abundance and Sufficiency By Jonas B{\aa}{\aa}th; Adel Daoud
  3. Mental Accounting, Loss Aversion, and Tax Evasion: Theory and Evidence By Sanjit Dhami; Hajimoladarvish
  4. Does the nudge effect persist? Evidence from a fi eld experiment using social comparison message in China By Chen, Haoyan; Qin, Botao
  5. Is Economics An Experimental Science? A Textbook Perspective By Saileshsingh Gunessee; Tom Lane
  6. Time of Day, Cognitive Tasks and Efficiency Gains By Alessio Gaggero; Denni Tommasi
  7. Personal Narratives Build Trust in Ideological Conflict By Hagmann, David; minson, julia; Tinsley, Catherine
  8. Call It a Day: History Dependent Stopping Behavior By Ala Avoyan; Robizon Khubulashvili; Giorgi Mekerishvili

  1. By: Jonas B{\aa}{\aa}th; Adel Daoud
    Abstract: This article identifies how scarcity, abundance, and sufficiency influence exchange behavior. Analyzing the mechanisms governing exchange of resources constitutes the foundation of several social-science perspectives. Neoclassical economics provides one of the most well-known perspectives of how rational individuals allocate and exchange resources. Using Rational Choice Theory (RCT), neoclassical economics assumes that exchange between two individuals will occur when resources are scarce and that these individuals interact rationally to satisfy their requirements (i.e., preferences). While RCT is useful to characterize interaction in closed and stylized systems, it proves insufficient to capture social and psychological reality where culture, emotions, and habits play an integral part in resource exchange. Social Resource Theory (SRT) improves on RCT in several respects by making the social nature of resources the object of study. SRT shows how human interaction is driven by an array of psychological mechanisms, from emotions to heuristics. Thus, SRT provides a more realistic foundation for analyzing and explaining social exchange than the stylized instrumental rationality of RCT. Yet SRT has no clear place for events of abundance and sufficiency as additional motivations to exchange resources. This article synthesize and formalize a foundation for SRT using not only scarcity but also abundance and sufficiency.
    Date: 2020–10
  2. By: Raúl López-Pérez; Eli Spiegelman
    Abstract: A preference reversal (PR) refers to behavior that violates revealed preference or is simply incoherent – i.e., not explainable by a rational ordering. In a classical PR experiment, for instance, participants often exhibit greater risk aversion in a Choice-based revelation procedure than in an Evaluation-based one, i.e., choose the safer of two gambles but express a higher monetary valuation for the riskier. We conjecture that PRs are partly due to the interaction between attention and task mode, and explore three compatible explanations using eye-tracking techniques. Explanation 1 says that difficult tasks require more time to be performed without ‘mistakes’. Those who pay scarcely more attention to Evaluation than Choice, therefore, are more likely to act incoherently. Our data corroborate such a prediction. Explanation 2 assumes that the subjective value of (i) a bet or (ii) any of its attributes (prize and winning probability) depends on the attention paid to it. PRs occur when people allocate attention to different elements across tasks. In line with recent models of drift-diffusion, we find evidence consistent with point (i): a higher focus on the safer bet during Choice predicts PRs. In contrast, little evidence supports the idea (ii) that the share of fixations on probabilities versus prizes influences behavior or PRs. Explanation 3, finally, states that the nature of the tasks may affect the comparisons people make between the options, which are relevant for behavior. For instance, the cognitive difficulty of pricing a bet in Evaluation could distract attention from the relative risk across bets, thus reducing risk aversion. In our design, both bets are visible on the computer screen in both tasks, and subjects make substantially more transitions between bets in Choice. Yet this is observed among all participants, not only the reversers.
    Keywords: Eye-tracking; Limited Attention; Mental Effort; Rationality; Reversals
    JEL: D01 D81 D83 D91
    Date: 2020–04
  3. By: Sanjit Dhami; Hajimoladarvish
    Abstract: The evidence shows source-dependent entitlement to income sources and individuals are reluctant to part with income they feel more entitled to, e.g., earned labor income. Taxpayers may also be more reluctant to part with tax payments (evade more) from income sources they feel more entitled to- a form of mental accounting. We embed two main hypotheses within a rigorous theoretical model based on prospect theory. From incomes sources they feel more entitled to, taxpayers experience (i) greater loss aversion from paying taxes, and (ii) lower moral costs of evasion. We confirm the predictions of our model through MTurk experiments. Evasion is increasing in the tax rate and decreasing in the audit penalty. Moral costs influence taxpayers decisions. Loss aversion, measured “directly” for the first time for each individual in an evasion experiment, reduces evasion, as predicted by our theory. Loss aversion, risk aversion, and their interaction, are critical determinants of evasion.
    Keywords: mental accounting, tax evasion, loss aversion, morality, prospect theory, risk-aversion
    JEL: C91 C92 D82 D91 G21
    Date: 2020
  4. By: Chen, Haoyan; Qin, Botao
    Abstract: We designed and carried out a field experiment in which we imposed social comparison incentives and technical recommendations on student dormitories through electricity consumption reports and energy-saving suggestions materials, respectively. Our findings are as follows: 1) Regression results on all users show that the effect of social norms is not statistically significant. 2) A social comparison message has a heterogeneous effect on consumers' energy use. Low and high energy users reduced their electricity consumption by 26% and 14%, respectively, in the first week after the treatment. 3) The effect of social norms is time sensitive.
    Keywords: Social norms; Social comparison message; Energy saving behavior
    JEL: C93 D10 Q41
    Date: 2020–06–01
  5. By: Saileshsingh Gunessee (University of Nottingham, Ningbo China); Tom Lane (University of Nottingham, Ningbo China)
    Abstract: Traditionally, students of economics have often been told that it is a non-experimental science. Using a quantitative and qualitative analysis of introductory economics textbooks, we track the historical evolution of this rhetoric from 1970 to the present day. We find that anti-experimental rhetoric was dominant and largely unchanged prior to the turn of the 21st century. Since then, there has been a growing trend towards textbooks making positive statements about the role of experimentation in economics. Remarks that experiments are impossible in economics have been (almost) eliminated only this decade, evidencing a sluggish change in rhetoric. We outline the evolution of statements over revised editions of influential textbooks and show that, while most have become considerably more supportive of experimental economics, there is substantial variation over when this happened. Interviews with key textbook authors confirm the historical trend of increased enthusiasm towards experiments, and suggest they are now accepted within the economic mainstream. Our results hold important implications for the research methodology of our science and how it is understood by current and former students.
    Keywords: Economic Methodology; Experimental Science; Economics Principles Textbooks; History of Economic Thought
    Date: 2020
  6. By: Alessio Gaggero; Denni Tommasi
    Abstract: The link between time-of-day and productivity on cognitive tasks is crucial to understand workplace efficiency and welfare. We study the performance of University students taking at most one exam per day in the final two weeks of the semester. Exams are scheduled at different time-of-day in a quasirandom fashion. We find that peak performance occurs around lunchtime (1.30pm), as compared to morning (9am) or late afternoon (4.30pm). This inverse-U shape relationship between time-of-day and performance (i) is not driven by stress or fatigue, (ii) is consistent with the idea that cognitive functioning is an important determinant of productivity and (iii) implies that efficiency gains of up to 0.14 standard deviations can be achieved through simple re-arrangements of the time of exams. While researchers have shown that biological factors influence changes in productivity between day and night shifts, we establish that such relationship is also important within a standard day-light shift. A simple back of the envelope calculation applied to an external context that is likely to benefit from our results, elective surgeries, suggests that a different sorting of the cognitive tasks performed by surgeons may lead to an increase in the number of patients saved.
    Keywords: time-of-day, cognitive tasks, productivity, efficiency gains, circadian rhythm
    JEL: I20 I24 J22 J24
    Date: 2020
  7. By: Hagmann, David (Harvard University); minson, julia; Tinsley, Catherine
    Abstract: Working with people who hold opposing ideological views can be challenging, as they are often perceived as less capable and less trustworthy than those who share one’s own positions. Across five preregistered experiments (combined n = 3,423), we find that participants view those who share personal stories as more trustworthy than those who share data-driven information or stories about a third party. The perception of trustworthiness is mediated by the extent to which the speaker engages in self-revelation and is greater when the narrative reveals hardship experienced by the author. We further show that people prefer to work on a task relying on trust with someone who shared a personal narrative but prefer the author of a data-driven argument when the task involves cognitive abilities. Finally, we show that greater perceived trustworthiness also emerges in response to naturalistic messages written by untrained authors, as rated by a nationally representative sample.
    Date: 2020–09–29
  8. By: Ala Avoyan; Robizon Khubulashvili; Giorgi Mekerishvili
    Abstract: In this paper, we provide evidence of history-dependent stopping behavior. Using data from an online chess platform, we estimate a dynamic discrete choice model in which an agent may have time non-separable preferences over the stochastic outcomes of their actions. We show that the agent’s decisions cannot be reconciled in a model with time separable preferences and that there is substantial heterogeneity in preferences across players. In particular, there are two types of people: those who get discouraged by a loss and stop, and others, who get encouraged by failure and keep playing until a win. We show how to leverage the information about an agent’s type in market design to achieve various welfare goals. A counterfactual analysis demonstrates that a matching algorithm that incorporates stopping behavior can significantly increase the length of play.
    Keywords: time non-separable preferences, history dependence, stopping behaviour,
    JEL: D90 C50 C13 D40
    Date: 2020

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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