nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2021‒03‒01
eight papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. The Conservatism Principle and Asymmetric Preferences Over Reporting Errors By Jivas Chakravarthy; Timothy W. Shields
  2. Does gender affect medical decisions? Results from a behavioral experiment with physicians and medical students By Godager, Geir; Hennig-Schmidt, Heike; Li, Jing Jing; Wang, Jian; Yang, Fan
  3. Economics students: self-selected in preferences and indoctrinated in beliefs By Antonio M. Espín; Manuel Correa; Alberto Ruiz-Villaverde
  4. Interactions between social norms and incentive mechanisms in organizations By Ravshanbek Khodzhimatov; Stephan Leitner; Friederike Wall
  5. Nudges and Threats: Soft vs Hard Incentives for Tax Compliance By Andersson, Henrik; Engström, Per; Nordblom, Katarina; Wanander, Susanna
  6. Do Financial Concerns Make Workers Less Productive? By Supreet Kaur; Sendhil Mullainathan; Suanna Oh; Frank Schilbach
  7. Honesty in the City By Dufwenberg, Martin; Servátka, Maroš; Tarrasó, Jorge; Vadovič, Radovan
  8. The Effect of Goal-Setting Prompts in a Blended Learning Environment – Evidence from a Field Experiment By Erwin Amann; Sylvi Rzepka

  1. By: Jivas Chakravarthy (University of Texas, Arlington); Timothy W. Shields (Argyros School of Business and Economics, Chapman University)
    Abstract: At present, accounting conservatism is generally viewed from a measurement or reporting perspective. In contrast, we consider whether it relates to a moral rule of conduct. Conservatism has been described as deriving from a preference for reporting errors to be in the direction of understatement rather than overstatement. We experimentally pair Reporters who provide information with Users who rely on the information. We posit that under misaligned incentives that motivate aggressive reporting, Users view an aggressive report as reflecting Reporters’ exploitative intent and expect that a social norm prohibiting aggressive reporting applies. We predict that Users use noisy reporting errors to gauge Reporters’ norm compliance. Consistent with this we find that, ceteris paribus, Users prefer not to be paired with Reporters who produce overstatement errors that are likely to reflect aggressive reporting. This preference, revealed through Users’ incentivized actions, is both inconsistent with neoclassical economic models and cannot be explained by loss aversion. Alternatively, when Reporters’ motives are aligned with Users’, we find no such preference. While our evidence is indirect, it opens the possibility that conservatism emerged from a norm that enhances trust and cooperation among economic agents. We believe this insight can open new possibilities for conservatism research.
    Keywords: accounting conservatism; experimental economics; intentions; moral hazard
    JEL: B52 D81 D82 M41
    Date: 2020
  2. By: Godager, Geir (Department of Health Management and Health Economics); Hennig-Schmidt, Heike (BonnEconLab, University of Bonn, Germany); Li, Jing Jing (Shandong Provincial Hospital Affiliated to Shandong First Medical University, Jinan, Shandong, China); Wang, Jian (Dong Fureng Institute of Economic and Social Development, Wuhan University, China); Yang, Fan (Department of Health Management and Health Economics)
    Abstract: It is rarely the case that differences in behaviors of females and males are described under a ceteris paribus condition, and behaviors can potentially be influenced by the environment in which decisions are made. In the case of medical decisions, physicians are expected to account for patient characteristics as well as observed and unobserved contextual factors, such as whether the patient has a healthy lifestyle. Since one usually do not randomize physicians to context, reported gender differences in medical practice can have several alternative interpretations. <p> A key question is whether the medical treatment of a given patient is expected to depend on the gender of the physician. To address this question, we quantify gender effects using data from an incentivized laboratory experiment, where Chinese medical doctors and Chinese medical students choose medical treatment under different payment schemes. We estimate preference parameters of females and males assuming decision-makers have patient-regarding preferences. We cannot reject the hypothesis that gender differences in treatment choices are absent. Preference parameters of females and males are not statistically different in a log-likelihood ratio test, and there is no evidence that the degree of randomness in choices differs between genders. <p> The absence of gender effects in the laboratory, where choice context is fixed, provides nuance to previous findings on gender differences, and highlights the general difficulty of separating individuals’ behavior from the context they are in.
    Keywords: Gender; Laboratory experiment; Bounded rationality; Physician behavior
    JEL: C92 D82 H40 I11 J33
    Date: 2021–02–22
  3. By: Antonio M. Espín (Department of Social Anthropology, University of Granada); Manuel Correa (Department of Applied Economics, University of Granada); Alberto Ruiz-Villaverde (Department of Applied Economics, University of Granada)
    Abstract: There is much debate as to why economics students display more self-interested behavior than other students: whether homo economicus self-select into economics or students are instead “indoctrinated†by economics learning, and whether these effects impact on preferences or beliefs about others’ behavior. Using a classroom survey (n>500) with novel behavioral questions we show that, compared to students in other majors, econ students report being: (i) more self-interested (in particular, less compassionate or averse to advantageous inequality) already in the first year and the difference remains among more senior students; (ii) more likely to think that people will be unwilling to work if unemployment benefits increase (thus, assuming others are motivated primarily by self-interest), but only among senior students. These results suggest self-selection in preferences and indoctrination in beliefs.
    Keywords: self-selection, indoctrination, self-interest, inequality aversion, beliefs
    JEL: A11 A13 A22 D31 D63 D9 I22
    Date: 2021
  4. By: Ravshanbek Khodzhimatov; Stephan Leitner; Friederike Wall
    Abstract: We focus on how individual behavior that complies with social norms interferes with performance-based incentive mechanisms in organizations with multiple distributed decision-making agents. We model social norms to emerge from interactions between agents: agents observe other the agents' actions and, from these observations, induce what kind of behavior is socially acceptable. By complying with the induced socially accepted behavior, agents experience utility. Also, agents get utility from a pay-for-performance incentive mechanism. Thus, agents pursue two objectives. We place the interaction between social norms and performance-based incentive mechanisms in the complex environment of an organization with distributed decision-makers, in which a set of interdependent tasks is allocated to multiple agents. The results suggest that, unless the sets of assigned tasks are highly correlated, complying with emergent socially accepted behavior is detrimental to the organization's performance. However, we find that incentive schemes can help offset the performance loss by applying individual-based incentives in environments with lower task-complexity and team-based incentives in environments with higher task-complexity.
    Date: 2021–02
  5. By: Andersson, Henrik (Uppsala University); Engström, Per (Uppsala University); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University); Wanander, Susanna (The Swedish Tax Agency)
    Abstract: We study what induces delinquent taxpayers to pay their taxes due. We use high quality administrative data from the Swedish Tax Agency. We find a strong effect of the standard enforcement regime: a threat of having the debt handed over to the Enforcement Agency increases payments by roughly 10 percentage points. When including actual enforcement, payment increases by around 20 percentage points compared to those who do not risk enforcement. In a field experiment, we compare these effects of standard enforcement to those of much milder nudges, consisting of letters reminding tax delinquents to pay their taxes due. We find that a “pure nudge”, i.e., the inclusion of an extra piece of paper with no valuable information, has an effect of 7-8 percentage points for those who do not risk enforcement upon non-payment. However, the same nudge has no detectable effect for the group at risk of enforcement. Social-norm messages in turn increase payments both for those who risk enforcement and for those who do not, but to a much smaller degree. We also find that a pure nudge works much better for those who receive a physical letter than for those who receive information electronically, while the reaction to the social-norm nudge is significant for those who get the electronic information.
    Keywords: tax compliance; RCT; nudge; quasi-experiment; regression discontinuity
    JEL: C21 D03 D91 H24 H26
    Date: 2021–02
  6. By: Supreet Kaur (University of California, Berkeley - Department of Economics; NBER); Sendhil Mullainathan (University of Chicago - Booth School of Business; NBER); Suanna Oh (Paris School of Economics); Frank Schilbach (Massachusetts Institute of Technology - Department of Economics; NBER)
    Abstract: We test whether increasing cash-on-hand raises the productivity of poor workers. Our motivation is psychological. Concerns about money can create mental burdens such as worry, stress, or sadness. These in turn could interfere with the ability to work effectively. We empirically test for this possibility using a field experiment with piece-rate manufacturing workers in India. We randomize the timing of income receipt, so that on a given day some workers have more cash-on-hand than others. This manipulation holds constant wages and piece rates, as well as human and physical capital. On cash-rich days, average productivity increases by 0.11 standard deviations (6.2%); this effect is concentrated among relatively poorer workers. Mistakes also decline on these days — an effect that is again concentrated among poorer workers. Having more cash-on-hand thus enables workers to work faster while making fewer errors, suggesting improved cognition. We argue that mechanisms such as gift exchange, trust, and nutrition cannot account for our findings. Instead, our results suggest a range of psychological mechanisms wherein alleviating financial concerns allows workers to be more attentive and productive at work.
    JEL: D03 D14 D31 J24 O1
    Date: 2020
  7. By: Dufwenberg, Martin; Servátka, Maroš; Tarrasó, Jorge; Vadovič, Radovan
    Abstract: Lab evidence on trust games involves more cooperation than conventional economic theory predicts. We explore whether this pattern extends to a field setting where (much like in a lab) we are able to control for (lack of) repeat-play and reputation: cab drivers in Mexico City. We find a remarkably high degree of trustworthiness, also with price-haggling, which is predicted to reduce trustworthiness.
    Keywords: trust, honesty, reciprocity, field experiment, haggling, taxis
    JEL: C72 C90 C93
    Date: 2021–02–22
  8. By: Erwin Amann (University Duisburg-Essen); Sylvi Rzepka (University of Potsdam)
    Abstract: We investigate how inviting students to set task-based goals affects usage of an online learning platform and course performance. We design and implement a randomized field experiment in a large mandatory economics course with blended learning elements. The low-cost treatment induces students to use the online learning system more often, more intensively, and to begin earlier with exam preparation. Treated students perform better in the course than the control group: they are 18.8% (0.20 SD) more likely to pass the exam and earn 6.7% (0.19 SD) more points on the exam. There is no evidence that treated students spend significantly more time, rather they tend to shift to more productive learning methods. The heterogeneity analysis suggests that higher treatment effects are associated with higher levels of behavioral bias but also with poor early course behavior.
    Keywords: natural field experiment, blended learning, behavioral economics, goal-setting
    JEL: I21 I23 C93 D91
    Date: 2021–02

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.