nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2021‒05‒17
seven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. To pay or not to pay: Measuring riskpreferences in lab and field By Pablo Brañas-Garza; Lorenzo Estepa Mohedano; Diego Jorrat; Victor Orozco; Ericka Rascón Ramírez
  2. The Power of Conformity in Citizens’ Blame: Evidence from a Survey Experiment By Sievert, Martin; Vogel, Dominik; Reinders, Tim; Ahmed, Waqar
  3. Confidence is good; too much, not so much: Exploring the effects on reward-based crowdfunding success By Naomi Moy; Ho Fai Chan; Frank Mathmann; Markus Schaffner; Benno Torgler
  4. Trust and trustworthiness after negative random shocks By Hernán Bejarano; Joris Gillet; Ismael Rodríguez-Lara
  5. Ever Since Allais By Aluma Dembo; Shachar Kariv; Matthew Polisson; John K.-H. Quah
  6. Deviant or Wrong? The Effects of Norm Information on the Efficacy of Punishment By Cristina Bicchieri; Eugen Dimant; Erte Xiao
  7. Sport as a Behavioral Economics Lab By Ho Fai Chan; David A. Savage; Benno Torgler

  1. By: Pablo Brañas-Garza (Universidad Loyola); Lorenzo Estepa Mohedano (Universidad Loyola); Diego Jorrat (Universidad Loyola); Victor Orozco (The World Bank); Ericka Rascón Ramírez (Middlesex University London)
    Abstract: Measuring risk preferences in the field is critical for policy, however, it can be expensive and maygenerate unequal payoffs due to bad luck. For instance, the commonly used measure of Holt andLaury (2002) relies on a dozen of lottery choices and payments which makes it time consuming andcostly, but also raises moral concerns as a result of the unequal payments generated by the lotteries.We propose a short version of the Holt and Laury (2002) which produces in the lab (Spain) thesame results as the long HL. Using the short HL in the field (Honduras and Nigeria), we observethat paying or not for the measurement of risk preferences produces the same findings. Our low-costapproach makes the measurement of risk preferences simpler, faster and cheaper in the lab and field.
    Keywords: Risk preferences, Holt Laury, Field Experiments, Monetary Payoffs, Incentives.
    JEL: D81 C91 C93
    Date: 2021–05
  2. By: Sievert, Martin (University of Mannheim); Vogel, Dominik (University of Hamburg); Reinders, Tim; Ahmed, Waqar
    Abstract: The authors examine whether conformity towards prevailing public opinions and pre-existing blame influences citizens’ attribution of blame for public service failure, by using a between-group experimental design with five groups. Two groups received information cues mentioning different public opinions. Two additional groups received information on pre-existing blame or the absence of such blame. One control group did not receive any information. The empirical analysis reveals that public opinion in favor of blame leads to increased blame attribution, while a contrary public opinion decreases citizens’ blame. Likewise, the expected increase in citizens’ blame resulting from pre-existing blame is supported. However, the absence of blame has no effect. Overall, the experiment supports the impact of conformity on citizens' blame. In addition, the literature on citizens’ blame is extended by utilizing a citizen-centered perspective and taking social psychological theory into account.
    Date: 2019–09–10
  3. By: Naomi Moy; Ho Fai Chan; Frank Mathmann; Markus Schaffner; Benno Torgler
    Abstract: Self-confidence has long been regarded as one of the key qualities in determining entrepreneurial success. In markets with uncertainty, like crowdfunding, entrepreneurial confidence is an important signal that lowers the information imbalance for potential investors. However, current literature on confidence is limited in three ways; first is the limited understanding of confidence in interpersonal interactions; second is the accurate measurement of confidence and thirdly, limited insight on whether an optimal level of confidence exists. We use two novel behavioral approaches to measure self and exhibited confidence and examine their relation to entrepreneurial success in reward-based crowdfunding. Derived from ex-ante information (i.e., before realization of success), our measurements for confidence allow us to draw causal inferences, allowing for contributions to confidence and displays of interpersonal emotion literature. By analyzing over 70,000 Kickstarter projects, we show an optimal level of entrepreneurial confidence exists in determining funding received, popularity, and likelihood of success.
    Keywords: Behavioral; crowdfunding; entrepreneur; exhibiting confidence; interpersonal confidence
    Date: 2021–05
  4. By: Hernán Bejarano (Centro de Investigación y Docencia en Economía de México/Chapman University); Joris Gillet (Middlesex University); Ismael Rodríguez-Lara (Chapman University/Universidad de Granada)
    Abstract: We investigate experimentally the effect of a negative endowment shock in a trust game to assess whether different causes of inequality have different effects on trust and trustworthiness. In our trust game there may be inequality in favor of the second mover and this may (or may not) be the result of a negative random shock (i.e., the outcome of a die roll) that decreases the endowment of the first-mover. Our findings suggest that inequality leads to differences in behavior. First-movers send more of their endowment and second-movers return more when there is inequality. However, we do not find support for the hypothesisthat the cause of the inequality matters. Behavior after the occurrence of a random shock is not significantly different from the behavior when the inequality exists from the outset. Our results highlight that we have to be cautious when interpreting the effects on trust and trustworthiness of negative random shocks that occur in the field (e.g., natural disasters). Our results suggest that these effects are largely driven by the inequality caused by the shock and not by any of the additional characteristics of the shock like saliency or uncertainty.
    Keywords: Trust game endowment heterogeneity random shocks inequality aversion experimental economics
    JEL: C91 D02 D03 D69
    Date: 2021–04
  5. By: Aluma Dembo; Shachar Kariv; Matthew Polisson; John K.-H. Quah
    Abstract: The Allais critique of expected utility theory (EUT) has led to the development of theories of choice under risk that relax the independence axiom, but which adhere to the conventional axioms of ordering and monotonicity. Unlike many existing laboratory experiments designed to test independence, our experiment systematically tests the entire set of axioms, providing much richer evidence against which EUT can be judged. Our within-subjects analysis is nonparametric, using only information about revealed preference relations in the individual-level data. For most subjects we find that departures from independence are statistically signifficant but minor relative to departures from ordering and/or monotonicity.
    Date: 2021–05–11
  6. By: Cristina Bicchieri; Eugen Dimant; Erte Xiao
    Abstract: Research examining the effect of weak punishment on conformity indicates that punishment can backfire and lead to suboptimal social outcomes. We examine whether this effect is due to a lack of perceived legitimacy of rule enforcement, which would enable agents to justify selfish behavior. We address the question of legitimacy by shedding light upon the importance of social norms and their interplay with weak punishment in the context of a trust game. Across six conditions, we systematically vary the combination of existence of weak punishment and norm information. Norm information may refer either to what most others do (empirical) or to what most others deem appropriate (normative). We show that in isolation, neither weak punishment nor empirical/normative information increase prosocial, reciprocal behavior. We instead find that reciprocity significantly increases when normative information and weak punishment are combined, but only when compliance is relatively cheap. When compliance is more costly, we find that the combination of punishment and generic empirical information about others’ conformity can have detrimental effects. In additional experiments, we show that this negative effect can be attributed to the punishment being perceived as unjustified, at least in some individuals. Our results have important implications for researchers and practitioners alike.
    Keywords: conformity, punishment, social norms, trust
    JEL: C91 D03 D73 H26
    Date: 2021
  7. By: Ho Fai Chan; David A. Savage; Benno Torgler
    Abstract: Sporting events can be seen as controlled, real-world, miniature laboratory environments, approaching the idea of holding other things equal when exploring the implications of decisions, incentives, and constraints in a competitive setting (Goff and To llison 1990, Torgler 2009). Thus, a growing number of studies have used sports data to study decision making questions that have guided behavioural economics literature. Creative application of sports data can offer insights into behavioural aspects with implications beyond just sports. In this chapter, we will discuss the methodological advantages of seeing sport as a behavioural econom ics lab, concentrating on the settings, concepts, biases, and challenging areas. Beyond that, we will discuss que stions that have not yet been analysed, offering ideas for future studies using sports data. We will fu rther reflect on how AI has evolved; focusing, for example, on chess, which provides insights into the mechanism and machinery of decision-making.
    Date: 2021–05

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