nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2021‒02‒22
nine papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Emotions and Performance:A Quasi Natural Experiment From the FIFA World Cup By J.D. Tena; Jorge Tovar
  2. Beliefs in Repeated Games By Masaki Aoyagi; Guillaume Frechette; Sevgi Yuksel
  3. Does flood experience modify risk preferences? Evidence from an artefactual field experiment in Vietnam By Arnaud Reynaud; Cécile Aubert
  4. Biases in information selection and processing: Survey evidence from the pandemic By Faia, Ester; Fuster, Andreas; Pezone, Vincenzo; Zafar, Basit
  5. Effective Policy Communication: Targets versus Instruments By Francesco D'Acunto; Daniel Hoang; Maritta Paloviita; Michael Weber
  6. The Banker's Oath And Financial Advice By Utz Weitzel; Michael Kirchler
  7. The corruptive force of AI-generated advice By Margarita Leib; Nils C. K\"obis; Rainer Michael Rilke; Marloes Hagens; Bernd Irlenbusch
  8. Economic Preferences and Personality Traits Among Finance Professionals and the General Population By Martin Holmen; Felix Holzmeister; Michael Kirchler; Matthias Stefan; Erik Wengström
  9. How to Design the Ask? Funding Units vs. Giving Money By Diederich, Johannes; Epperson, Raphael; Goeschl, Timo

  1. By: J.D. Tena; Jorge Tovar
    Abstract: Emotions are intrinsic components of human behavior that have the capacity to affect how individuals perform in their daily activities. Much of the literature has explored the topic using experimental data or, when using sporting events, focusingon pre-competition triggers. This paper uses, granular, event-level data from the 2018 FIFA football World Cup to study for the first time how observed and naturally induced emotions impact performance as measured by each player's passing ability. The quasi-natural experimental set up is rich enough to study the influence of positive and negative emotions and their duration. The paper finds that negative emotions harm performance between 3 to 9 minutes after the trigger. At the same time,there is weak evidence that positive emotions also constrain performance, but only between 6 to 8 minutes after the trigger event.
    Keywords: sports economics, workers performance, emotions
    JEL: D91 Z29 C21
    Date: 2021–01
  2. By: Masaki Aoyagi; Guillaume Frechette; Sevgi Yuksel
    Abstract: This paper uses a laboratory experiment to study beliefs and their relationship to action and strategy choices in finitely and indefinitely repeated prisoners' dilemma games. We find subjects' beliefs about the other player's action are accurate despite some systematic deviations corresponding to early pessimism in the indefinitely repeated game and late optimism in the finitely repeated game. The data reveals a close link between beliefs and actions that differs between the two games. In particular, the same history of play leads to different beliefs, and the same belief leads to different action choices in each game. Moreover, we find beliefs anticipate the evolution of behavior within a supergame, changing in response to the history of play (in both games) and the number of rounds played (in the finitely repeated game). We then use the subjects' beliefs over actions in each round to identify their beliefs over supergame strategies played by the other player. We find these beliefs correctly capture the different classes of strategies used in each game. Importantly, subjects using different strategies have different beliefs, and for the most part, strategies are subjectively rational given beliefs. The results also suggest subjects tend to overestimate the likelihood that others use the same strategy as them, while underestimating the likelihood that others use less cooperative strategies.
    Date: 2021–02
  3. By: Arnaud Reynaud (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Cécile Aubert (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We conducted an artefactual field experiment in Vietnam to investigate whether and how experiencing a natural disaster affects individual attitudes toward risks. Using experimental and real household data, we show that households in villages affected by a flood in recent years exhibit more risk aversion, compared with individuals living in similar but unaffected villages. Interestingly, this result holds for the loss domain, but not the gain domain. In line with Prospect Theory, Vietnamese households distort probabilities. The distortion is related to aid received and social networks participation, but is unrelated to flood experience.
    Keywords: Field experiment,Vietnam,Flood,Non-expected utility,Risk preferences
    Date: 2020
  4. By: Faia, Ester; Fuster, Andreas; Pezone, Vincenzo; Zafar, Basit
    Abstract: How people form beliefs is crucial for understanding decision-making under uncertainty. This is particularly true in a situation such as a pandemic, where beliefs will affect behaviors that impact public health as well as the aggregate economy. We conduct two survey experiments to shed light on potential biases in belief formation, focusing in particular on the tone of information people choose to consume and how they incorporate this information into their beliefs. In the first experiment, people express their preferences over pandemic-related articles with optimistic and pessimistic headlines, and are then randomly shown one of the articles. We find that respondents with more pessimistic prior beliefs about the pandemic are substantially more likely to prefer pessimistic articles, which we interpret as evidence of confirmation bias. In line with this, respondents assigned to the less preferred article rate it as less reliable and informative (relative to those who prefer it); they also discount information from the article when it is less preferred. We further find that these motivated beliefs end up impacting incentivized behavior. In a second experiment, we study how partisan views interact with information selection and processing. We find strong evidence of source dependence: revealing the news source further distorts information acquisition and processing, eliminating the role of prior beliefs in article choice.
    Keywords: Belief updating,confirmatory biases,endogenous information acquisition,media polarization,source dependence,COVID-19
    JEL: D84 D91 E71 I12
    Date: 2021
  5. By: Francesco D'Acunto (Boston College - Carroll School of Management); Daniel Hoang (Karlsruhe Institute of Technology - Department for Finance and Banking); Maritta Paloviita (Bank of Finland); Michael Weber (University of Chicago - Booth School of Business; NBER)
    Abstract: Communication targeting households and ï¬ rms has become a stand-alone policy tool of many central banks. But which forms of communication, if any, can reach ordinary people and manage their economic expectations effectively? In a large-scale randomized control trial, we show that communication manages expectations when it focuses on policy targets and objectives rather than on the instruments designed to reach such objectives. It is especially the least sophisticated demographic groups, which central banks typically struggle to reach, who react more to target-based communication. When exposed to target-based communication, these groups are also more likely to believe that policies will beneï¬ t households and the economy. Target-based communication enhances policy effectiveness and contributes to strengthen the public’s trust in central banks, which is crucial to guarantee the credibility of their policies.
    Keywords: Behavioral macroeconomics, heterogeneous beliefs, limited cognition, expectations formation, household finance
    JEL: D12 D84 D91 E21 E31 E32 E52 E65
    Date: 2020
  6. By: Utz Weitzel; Michael Kirchler
    Abstract: Financial misbehavior is widespread and costly. The Dutch government legally requires every employee in the financial sector to take a Hippocratic oath, the so-called "banker's oath." We investigate whether moral nudges that directly and indirectly remind financial advisers of their oath affect their service. In a large-scale audit study, professional auditors confronted 201 Dutch financial advisers with a conflict of interest. We find that when auditors apply a moral nudge, referring to the banker's oath, advisers are less likely to prioritize bank's interests. In additional prediction tasks, we find that Dutch regulators expect stronger effects of the oath than observed.
    Keywords: experimental finance, audit study, banker?s oath, moral nudges, financial advice
    JEL: C92 D84 G02 G14
    Date: 2021–04
  7. By: Margarita Leib; Nils C. K\"obis; Rainer Michael Rilke; Marloes Hagens; Bernd Irlenbusch
    Abstract: Artificial Intelligence (AI) is increasingly becoming a trusted advisor in people's lives. A new concern arises if AI persuades people to break ethical rules for profit. Employing a large-scale behavioural experiment (N = 1,572), we test whether AI-generated advice can corrupt people. We further test whether transparency about AI presence, a commonly proposed policy, mitigates potential harm of AI-generated advice. Using the Natural Language Processing algorithm, GPT-2, we generated honesty-promoting and dishonesty-promoting advice. Participants read one type of advice before engaging in a task in which they could lie for profit. Testing human behaviour in interaction with actual AI outputs, we provide first behavioural insights into the role of AI as an advisor. Results reveal that AI-generated advice corrupts people, even when they know the source of the advice. In fact, AI's corrupting force is as strong as humans'.
    Date: 2021–02
  8. By: Martin Holmen; Felix Holzmeister; Michael Kirchler; Matthias Stefan; Erik Wengström
    Abstract: Since the financial crisis, the behavior and personality traits of finance professionals have come under scrutiny. As comprehensive scientific findings are lacking, we run artefactual field experiments with finance professionals and a random sample of the working population to investigate differences across industry-relevant economic preferences and personality traits. We report that finance professionals are more risk tolerant, more selfish, less trustworthy, and show higher levels of narcissism, psychopathy, and Machiavellianism. However, we find that many of these differences disappear after adjusting for socioeconomic characteristics, indicating that finance professionals are similar to employees in other industries with a comparable socio-economic background.
    Keywords: experimental finance, economic preferences, personality traits, finance professionals, general working population
    JEL: C93 G11 G41
    Date: 2021–03
  9. By: Diederich, Johannes; Epperson, Raphael; Goeschl, Timo
    Abstract: Charities frequently deviate from the standard donation scheme in which potential donors are asked how much money they are willing to give. Instead, they ask donors to choose how many units of a charitable good (e.g. meals, bed nets, or trees) to fund at a given unit price. In an onlne donation experiment, we compare the performance of such a "unit donation" scheme with that of the standard "money donation" and investigate the factors that could explain differences. We find that despite the additional demands that it imposes on the charity, the unit donation does not outperform the money donation scheme in terms of overall donations. It significantly differs, however, with respect tot the propensity to give. The sign of the difference depends on the granularity of the scheme. When one unit of the charitable good is cheap, unit donation schemes increase the propensity to give and can serve as an effective tool for recruiting donors.
    Keywords: charitable giving; unit donation; aid effectiveness; restricted choice; Framing-Effekt
    Date: 2021–02–01

This nep-cbe issue is ©2021 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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