nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2021‒02‒01
seven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Incentives for Conformity and Anticonformity By Fabian Dvorak; Urs Fischbacher; Katrin Schmelz
  2. When Bonuses Backfire: Evidence from the Workplace By Jakob Alfitian; Dirk Sliwka; Timo Vogelsang
  3. Parenting Types By Rauh, C.; Renée, L.
  4. Parental Paternalism and Patience By Lukas Kiessling; Shyamal Chowdhury; Hannah Schildberg-Hörisch; Matthias Sutter
  5. The Lottery Player’s Fallacy Why Labels Predict Strategic Choices By Irenaeus Wolff
  6. Risk taking, preferences, and beliefs: Evidence from Wuhan By Bu, Di; Hanspal, Tobin; Liao, Yin; Liu, Yong
  7. Exploring Narrative Economics: An Agent-Based-Modeling Platform that Integrates Automated Traders with Opinion Dynamics By Kenneth Lomas; Dave Cliff

  1. By: Fabian Dvorak; Urs Fischbacher; Katrin Schmelz
    Abstract: We study how social evaluation affects conformity and anticonformity in theory and in an experiment. In theory, we show that negative social evaluation, i.e., potential punishment, creates incentives for conformity. Positive social evaluation, i.e., potential reward, creates incentives for anticonformity. In a laboratory experiment, we investigate the effect of these incentives in three domains: judgments in the knowledge domain, subjective arts preferences, and decisions in a creativity-related task. We rely on a new design in which we compare choices under social influence with predictions based on choices without social influence using transitivity. The experimental results confirm the theoretical predictions.
    Keywords: conformity, creativity, social learning, institutions
    Date: 2020
  2. By: Jakob Alfitian; Dirk Sliwka; Timo Vogelsang
    Abstract: Monetary incentives are widely used to align employees' actions with the objectives of employers. We conduct a field experiment in a retail chain to evaluate whether an attendance bonus reduces employee absenteeism. The RCT assigned 346 apprentices for one year to either a monetary attendance bonus, a time-off bonus or a control group. We find that neither form of the bonus reduced absenteeism, but the monetary bonus increased absence by around 45%. This backfiring effect is persistent and driven by the most recently hired apprentices. Survey results reveal that the bonus shifted the perception of absenteeism as acceptable behavior.
    Date: 2021
  3. By: Rauh, C.; Renée, L.
    Abstract: In this paper we measure parenting behavior through unsupervised machine learning in a panel following children from age 5 to 29 months. The algorithm classifies parents into two distinct behavioral types: "active" and "laissez-faire". Parents of the active type tend to respond to their children's expressions and describe to children features of their environment, while parents of the laissez-faire type are less likely to engage with their children. We find that parents' types are persistent over time and are systematically related to socio-economic characteristics. More-over, children of active parents see their human capital improve relative to children of parents of the laissez-faire type.
    Keywords: Parenting styles, human capital, latent Dirichlet allocation, inequality, machine learning
    Date: 2021–01–22
  4. By: Lukas Kiessling (Max Planck Institute for Research on Collective Goods); Shyamal Chowdhury (University of Sydney and IZA); Hannah Schildberg-Hörisch (Institute for Competition Economics (DICE) and IZA); Matthias Sutter (Max Planck Institute for Research on Collective Goods, University of Cologne, University of Innsbruck, IZA, and CESifo)
    Abstract: We study whether and how parents interfere paternalistically in their children’s intertemporal decision-making. Based on experiments with over 2,000 members of 610 families, we find that parents anticipate their children’s present bias and aim to mitigate it. Using a novel method to measure parental interference, we show that more than half of all parents are willing to pay money to override their children’s choices. Parental interference predicts more intensive parenting styles and a lower intergenerational transmission of patience. The latter is driven by interfering parents not transmitting their own present bias, but molding their children’s preferences towards more time-consistent choices.
    Keywords: Parental paternalism, Time preferences, Convex time budgets, Present bias, Intergenerational transmission, Parenting styles, Experiment
    JEL: C90 D1 D91 D64 J13 J24 O12
    Date: 2021–01
  5. By: Irenaeus Wolff
    Abstract: This paper examines games with non-neutral option labels (such as “A†, “B†, “A†, “A†) and finds surprisingly invariant behaviour across games. The behaviour closely resembles the choices people make when they have to bet on one of the options in individual lotteries. An option’s ‘representativeness’ (lack of distinguishing features) and ‘reachability’ (physical centrality, salience, and va- lence) determine choice behaviour in both the lotteries and the highly strategic games. There is no evidence of people best-responding to others’ betting(-like) behaviour. This is in line with the idea that once people decide that strategic reasoning would not take them any further, they pick an alternative as if they were betting on one of their ‘current best-responses’. The ￿ndings explain the well-documented seeker advantage in hide-and-seek games, as well as why par- ticipants often display behaviour that could be exploited by others. On top, they help understand why in national lotteries, people also tend to bet on identical subsets of the available numbers.
    Keywords: Bounded Rationality, Level-k, Salience, Strategic Behaviour, Hide & Seek, Discoordination, Rock-Paper-Scissors, Representativeness.
    Date: 2021
  6. By: Bu, Di; Hanspal, Tobin; Liao, Yin; Liu, Yong
    Abstract: We study risk taking in a panel of subjects in Wuhan, China - before, during the COVID-19 crisis, and after the country reopened. Subjects in our sample traveled for semester break in January, generating variation in exposure to the virus and quarantine in Wuhan. Higher exposure leads subjects to reduce planned risk taking, risky investments, and optimism. Our findings help unify existing studies by showing that aggregate shocks affect general preferences for risk and economic expectations, while heterogeneity in experience further affect risk taking through beliefs about individuals' own outcomes such as luck and sense of control.
    Keywords: COVID-19,Risk taking,Beliefs,Formative experiences,Expectations,China
    JEL: G50 G51 G11 D14 G41
    Date: 2021
  7. By: Kenneth Lomas; Dave Cliff
    Abstract: In seeking to explain aspects of real-world economies that defy easy understanding when analysed via conventional means, Nobel Laureate Robert Shiller has since 2017 introduced and developed the idea of Narrative Economics, where observable economic factors such as the dynamics of prices in asset markets are explained largely as a consequence of the narratives (i.e., the stories) heard, told, and believed by participants in those markets. Shiller argues that otherwise irrational and difficult-to-explain behaviors, such as investors participating in highly volatile cryptocurrency markets, are best explained and understood in narrative terms: people invest because they believe, because they have a heartfelt opinions, about the future prospects of the asset, and they tell to themselves and others stories (narratives) about those beliefs and opinions. In this paper we describe what is, to the best of our knowledge, the first ever agent-based modelling platform that allows for the study of issues in narrative economics. We have created this by integrating and synthesizing research in two previously separate fields: opinion dynamics (OD), and agent-based computational economics (ACE) in the form of minimally-intelligent trader-agents operating in accurately modelled financial markets. We show here for the first time how long-established models in OD and in ACE can be brought together to enable the experimental study of issues in narrative economics, and we present initial results from our system. The program-code for our simulation platform has been released as freely-available open-source software on GitHub, to enable other researchers to replicate and extend our work
    Date: 2020–12

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