nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2021‒03‒22
five papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Reprocity and Uncertainty: When Do People Forgive? By Andrés Gago
  2. Narrative based information: is it the facts or their packaging that matters? By Shaun P. Hargreaves Heap; Aikaterini Karadimitropoulou; Eugenio Levi
  3. Group identification and giving: in-group love, out-group hate and their crowding out By Shaun P. Hargreaves Heap; Eugenio Levi; Abhijit Ramalingam
  4. Is Care by Grandparents or Parents Better for Children’s Non-cognitive Skills? Evidence on Locus of Control from China By Xiang Ao; Xuan Chen; Zhong Zhao
  5. On the Emotional Fallout of COVID-19 By Julia M. Puaschunder

  1. By: Andrés Gago (Universidad Torcuato Di Tella)
    Abstract: A sizable proportion of individuals act reciprocally. They punish and reward depending on the (un)kindness of those with whom they interact. In this paper, I explore whether individuals still reciprocate intentions when others lack full control over the consequences of their actions. By means of a dictator game with punishment opportunities, I show that unkind intentions are enough to trigger punishments, irrespectively of the outcome. By contrast, accidents are forgiven. To isolate how uncertainty over the result of an action affects the assessment of intentions, I control for other possible departures from self-profit maximization, such as distributional concerns or efficiency maximization. I find that the former also plays a role in respondents’ behavior.
    Keywords: Reciprocity, uncertaint,; blame, intentions, dictator, punishment.
    JEL: C91 D63 C79
    Date: 2020–10
  2. By: Shaun P. Hargreaves Heap (Department of Political Economy, King’s College London); Aikaterini Karadimitropoulou (School of Economics, Business and International Studies, Department of Economics, University of Piraeus); Eugenio Levi (Department of Public Economics, Masaryk University)
    Abstract: People typically do not acquire new information about the facts of the economy through consulting official statistics; they read or listen to mediatype reports/stories on the economy where the facts are packaged in a story. This paper tests with an experiment whether the explanatory style used in such media-type stories affects individual decision making. We also compare this particular narrative influence with that of the actual facts contained in the story. Our subjects receive a media-type story about the economy before they play a minimum effort game. The media story has either good or bad background facts about the economy and we use the psychological theory of explanatory styles to present these facts in a narrative style designed to engender either optimism or pessimism. We find evidence that the explanatory style matters more than facts in the sense that optimistic styles support higher equilibria than pessimistic ones while the influence of the facts itself is weaker.
    Keywords: narratives, information, media, minimum effort game
    JEL: E71
    Date: 2021–03
  3. By: Shaun P. Hargreaves Heap (Department of Political Economy, King’s College London); Eugenio Levi (Department of Public Economics, Masaryk University); Abhijit Ramalingam (Department of Economics, Walker College of Business, Appalachian State University)
    Abstract: Using a dictator game experiment, we examine whether the introduction of group identities affects giving. Group identities can activate feelings of in-group love and out-group hate to create an in-group bias. In addition, group identities may spawn social sanctions that are designed to reinforce this in-group bias. We find that the aggregate effect on giving of group identities alone tends to be positive but depends on the relative size of two sub-sets of the subject pool: those who exhibit an in-group bias and those who do not. With the latter, the introduction of group identities has no effect on giving. With the former, the in-group bias arises from both in-group love and out-group hate and with interactions skewed towards own group members, in-group love will dominate to produce an increase in gifts. Sanctions too depend for their aggregate effect on the relative size of these two sub-sets in the population, but in the opposite way. This is because in-group biased preferences are crowded-in by the sanctions among the hitherto equal givers and in-group biased preferences are crowded-out among those who would otherwise exhibit the in-group bias.
    Keywords: dictator game, in-group love, out-group hate, crowding-out
    JEL: C72 C91 D31 D63 D91 J70 Z18
    Date: 2021–03
  4. By: Xiang Ao (Renmin University of China); Xuan Chen (Renmin University of China); Zhong Zhao (Renmin University of China)
    Abstract: This study investigates the effect of grandparental care on children’s locus of control (LOC), which is an important non-cognitive skill that affects children’s future development. We use data from the China Family Panel Studies, which is a nationally representative survey, and employ instrumental variables to address the endogeneity of family childcare choice. We find that children in the care of their grandparents have more external LOC than children in the care of their parents do; that is, they are more likely to attribute individual success to external factors, such as luck, fate, and family background. This finding is robust to different measures of grandparental care and different model specifications. We further examine the potential mechanisms underlying this effect. Grandparents have more external LOC than parents do, which can affect children’s LOC through intergenerational transmission of LOC. Their parenting attitudes and styles are also different from parents’ in that grandparents take less responsibility for children’s academic performance than parents do and are less strict with children. In addition, grandparental care induces adverse effects on children’s family environment.
    Keywords: intergenerational childcare, non-cognitive skills, locus of control
    JEL: J13 J24 D19
    Date: 2021–03
  5. By: Julia M. Puaschunder (The New School, Department of Economics, New York, USA)
    Abstract: Income inequality stretches deep in the time prospect the differing groups of the finance community and the real economy have during crises. Differing emotionality arises from economic crisis communication in the news if wealth exists or does not. In the aftermath of the COVID-19 fallout, the finance world in general has different emotional experiences than real economy agents. The most recent market volatility created opportunities for the sophisticated finance community to swop winning industries for losing industries that can be shorted and hence negative market performance could be turned into gains. In the real economy, concrete constraints create a more emotional and destructive reaction to the general information about COVID-19. Comparing the economic consequence of the endogenous crunch for the finance world and the real economy aids to retrieve crisis-specific recovery recommendations. Understanding how the social compound forms economic outcomes promises to explain how market outcomes are developed in society.
    Keywords: Affect, Collective moods, Communication, Consumption, Coronavirus, COVID-19, Digitalization, Economic fundamentals, External shock, Information, Lockdown, News, Pandemic, Social volatility, Socio-Economics, Socio-Psychological Foundations, 2008/09 World Financial Crisis
    Date: 2021–01

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