nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2021‒04‒19
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Foretelling What Makes People Pay: Predicting the Results of Field Experiments on TV Fee Enforcement By KateÅ™ina Chadimová; Jana Cahlíková; Lubomír Cingl
  2. Effective policy communication: Targets versus instruments By D'Acunto, Francesco; Hoang, Daniel; Paloviita, Maritta; Weber, Michael
  3. The Risk of Algorithm Transparency: How Algorithm Complexity Drives the Effects on Use of Advice By Christiane B. Haubitz; Cedric A. Lehmann; Andreas Fügener; Ulrich W. Thonemann
  4. Is Generosity Time-Inconsistent? Present Bias across Individual and Social Context By Felix Kölle; Lukas Wenner
  5. Covid-19 Crisis Fuels Hostility against Foreigners By VojtÄ›ch BartoÅ¡; Michal Bauer; Jana Cahlíková; Julie Chytilová
  6. We, the Rich: Inequality, Identity and Cooperation in Complex Societies By Andrea F.M. Martinangeli; Peter Martinsson
  7. Concentration Bias in Intertemporal Choice By Markus Dertwinkel-Kalt; Holger Gerhardt; Gerhard Riener; Frederik Schwerter; Louis Strang
  8. Overconfident health workers provide lower quality healthcare By Kovacs, Roxanne J.; Lagarde, Mylene; Cairns, John
  9. How Experiments with Children Inform Economics By John List; Ragan Petrie; Anya Samek
  10. Reconsidering Risk Aversion By Daniel J. Benjamin; Mark Alan Fontana; Miles Kimball

  1. By: KateÅ™ina Chadimová; Jana Cahlíková; Lubomír Cingl
    Abstract: One of the current challenges in ï¬ eld experimentation is creating an efficient design including individual treatments. Ideally, a pilot should be run in advance, but when a pilot is not feasible, any information about the effectiveness of potential treatments’ to researchers is highly valuable. We run a laboratory experiment in which we forecast results of two large-scale ï¬ eld experiments focused on TV license fee collection to evaluate the extent to which it is possible to predict ï¬ eld experiment results using a non-expert subject pool. Our main result is that forecasters were relatively conservative regarding the absolute effectiveness of the treatments, but in most cases they correctly predicted the relative effectiveness. Our results suggest that, despite the artiï¬ ciality of laboratory environments, forecasts generated there may provide valuable estimates of the effectiveness of treatments.
    Keywords: lab experiments, forecasting experimental results, ï¬ eld experiments, behavioral economics
    JEL: C91 C92 C93 D03
    Date: 2019–09
  2. By: D'Acunto, Francesco; Hoang, Daniel; Paloviita, Maritta; Weber, Michael
    Abstract: Communication targeting households and firms 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 benefit 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: 2021
  3. By: Christiane B. Haubitz (Department of Supply Chain Management and Management Science, University of Cologne, 50923 Cologne, Germany); Cedric A. Lehmann (Department of Supply Chain Management and Management Science, University of Cologne, 50923 Cologne, Germany); Andreas Fügener (Department of Supply Chain Management and Management Science, University of Cologne, 50923 Cologne, Germany); Ulrich W. Thonemann (Department of Supply Chain Management and Management Science, University of Cologne, 50923 Cologne, Germany)
    Abstract: Algorithmic decision support is omnipresent in many managerial tasks, but human judgment often makes the final call. A lack of algorithm transparency is often stated as a barrier to successful human-machine collaboration. In this paper, we analyze the effects of algorithm transparency on the use of advice from algorithms with different degrees of complexity. We conduct a preregistered laboratory experiment where participants receive identical advice from algorithms with different levels of transparency and complexity. The results of the experiment show that increasing the transparency of a simple algorithm reduces the use of advice, while increasing the transparency of a complex algorithm increases it. Our results also indicate that the individually perceived appropriateness of algorithmic complexity moderates the effects of transparency on the use of advice. While perceiving an algorithm as too simple severely harms the use of its advice, the perception of an algorithm being too complex has no significant effect on it. Our results suggest that managers do not have to be concerned about revealing complex algorithms to decision makers, even if the decision makers do not fully comprehend them. However, making simple algorithms transparent bears the risk of disappointing people’s expectations, which can reduce the use of algorithms' advice.
    Keywords: Algorithm Transparency; Decision Making; Decision Support; Use of Advice
    JEL: C91
    Date: 2021–04
  4. By: Felix Kölle (Department of Economics, University of Cologne, Albertus Magnus Platz, 50923 Cologne); Lukas Wenner (Department of Economics, University of Cologne, Albertus Magnus Platz, 50923 Cologne)
    Abstract: We investigate dynamically inconsistent time preferences across contexts with and without interpersonal trade-offs. In a longitudinal experiment participants make a series of intertemporal allocation decisions of real-effort tasks between themselves and another person. Our results reveal that agents are present-biased when making choices that only affect themselves but not when choosing for others. Despite this asymmetry, we find no evidence for time-inconsistent generosity, i.e., when choices involve trade-offs between own and other’s consumption. Structural estimations reveal no individual-level correlation of present bias across contexts. Discounting in social situations thus seems to be conceptually different from discounting in individual situations.
    Keywords: Present bias; altruism; stability; real effort; dictator game; intertemporal choice
    JEL: C91 D64 D90
    Date: 2021–04
  5. By: VojtÄ›ch BartoÅ¡; Michal Bauer; Jana Cahlíková; Julie Chytilová
    Abstract: Aggressive behavior against out-group members often rises during periods of economic hardship and health pandemics. Here, we test the widespread concern that the Covid-19 crisis may fuel hostility against people from other nations or ethnic minorities. Using a controlled money-burning task, we elicited hostile behavior among a nationally representative sample (n=2,186) in the Czech Republic, at a time when the entire population was under lockdown. We provide causal evidence that exogenously elevating salience of the Covid-19 crisis magnifies hostility against foreigners. This behavioral response is similar across various demographic sub-groups. The results underscore the importance of not inflaming anti-foreigner sentiments and suggest that efforts to restore international trade and cooperation will need to address both social and economic damage.
    Keywords: COVID-19, pandemic, scapegoating, hostility, inter-group conflict, discrimination, experiment
    JEL: C90 D01 D63 D91 J15
    Date: 2020–05
  6. By: Andrea F.M. Martinangeli; Peter Martinsson
    Abstract: Inequality not only generates status differentials between rich and poor individuals, it also generates status differentials between groups of different composition and income level. We organise the social structure within which groups are embedded to directly manipulate the processes of categorization, identiï¬ cation and comparison to induce weaker or stronger group identities. How well individuals cooperate within each of such groups will ultimately determine the degree of cooperativeness within the whole society. We ï¬ nd that the impact of inequality on social cooperativeness is as complex as is the social structure itself: cooperation varies with the strength of the group’s identity as predicted by social identity theory. In particular, high endowment homogeneous groups cooperate most and increasingly over time. Low endowment homogeneous groups display intermediate levels of cooperation. Heterogeneous groups cooperate least, a result driven by lack of cooperation on behalf of the rich. When comparing with an analogous fully homogeneous society, we show that the resulting net impact of inequality on social cooperation is not obvious.
    Keywords: experiment, inequality, multiple groups, public goods, social identity
    JEL: C91 H41
    Date: 2019–11
  7. By: Markus Dertwinkel-Kalt (University of Konstanz); Holger Gerhardt (UniversityofBonn); Gerhard Riener (Heinrich Heine University Düsseldorf); Frederik Schwerter (University of Cologne); Louis Strang (University of Cologne)
    Abstract: Many intertemporal trade-offs are unbalanced: while the advantages of options are concen- trated in a few periods, the disadvantages are dispersed over numerous periods. We provide novel experimental evidence for “concentration bias”, the tendency to overweight advantages that are concentrated in time. Subjects commit to too much overtime work that is dispersed over multiple days in exchange for a bonus that is concentrated in time: concentration bias increases subjects’ willingness to work by 22.4% beyond what standard discounting models could account for. In additional conditions and a complementary experiment involving mon- etary payments, we study the mechanisms behind concentration bias and demonstrate the robustness of our findings.
    Keywords: Attention, Focusing, Bounded rationality, Intertemporal choice, Future bias, Present bias, Framing
    JEL: D01
    Date: 2021–04
  8. By: Kovacs, Roxanne J.; Lagarde, Mylene; Cairns, John
    Abstract: While a growing body of evidence suggests that healthcare workers in low and middle-income countries often provide poor quality of care, the reasons behind such low performance remain unclear. The literature on medical decision-making suggests that cognitive biases, or failures related to the way healthcare providers think, explain many diagnostic errors. This study investigates whether one cognitive bias, overconfidence, defined as the tendency to overestimate one's performance relative to others, is associated with the low quality of care provided in Senegal. We link survey data on the overconfidence of health workers to objective measures of the quality of care they provide to standardised patients – enumerators who pose as real patients and record details of the consultation. We find that about a third of providers are overconfident – meaning that they overestimate their own abilities relative to their peers. We then show that overconfident providers are 26% less likely to manage patients correctly and exert less effort in clinical practice. These results suggest that the low levels of quality of care observed in some settings could be partly explained by the cognitive biases of providers, such as overconfidence. Policies that encourage adequate supervision and feedback to healthcare workers might reduce such failures in clinical decision-making.
    Keywords: cognitive bias; medical decision making; overconfidence; overplacement; quality of care; Senegal; standardised patients
    JEL: D01 I10
    Date: 2020–01–01
  9. By: John List; Ragan Petrie; Anya Samek
    Abstract: In the past several decades the experimental method has lent deep insights into economics. One surprising area that has contributed is the experimental study of children, where advances as varied as the evolution of human behaviors that shape markets and institutions to how early life influences shape later life outcomes have been explored. We first develop a framework for economic preference measurement that provides a lens into how to interpret data from experiments with children. Next, we survey work that provides general empirical insights within our framework. Finally, we provide 10 tips for pulling off experiments with children, including factors such as taking into account child competencies, causal identification, and logistical issues related to recruitment and implementation. We envision the experimental study of children as a high growth research area in the coming decades as social scientists begin to more fully appreciate that children are active participants in markets who (might) respond predictably to economic incentives.
    Date: 2021
  10. By: Daniel J. Benjamin (University of California Los Angeles & NBER); Mark Alan Fontana (Hospital for Special Surgery & Weill Cornell Medical College); Miles Kimball (University of Colorado Boulder & NBER)
    Abstract: Risk aversion is typically inferred from real or hypothetical choices over risky lotteries, but such “untutored” choices may reflect mistakes rather than preferences. We develop a procedure to disentangle preferences from mistakes : after eliciting untutored choices, we confront participants with their choices that are inconsistent with expected-utility axioms (broken down enough to be self-evident) and allow them to reconsider their choices. We demonstrate this procedure via a survey about hypothetical retirement investment choices administered to 596 Cornell students. We find that, on average, reconsidered choices are more consistent with almost all expected-utility axioms, with one exception related to regret.
    Keywords: risk aversion, mistakes, retirement investing, framing effects, expected utility
    JEL: D63 D81 G11 H8
    Date: 2020–10–21

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.