nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2021‒05‒24
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Attribute Substitution, Counterfactual Thinking, and Heterodox Economics By John B. Davis
  2. Estimating Social Preferences Using Stated Satisfaction: Novel Support for Inequity Aversion By Diaz, Lina; Houser, Daniel; Ifcher, John; Zarghamee, Homa
  3. Intuition Rather Than Deliberation Determines Selfish and Prosocial Choices By Bago, Bence; Bonnefon, Jean-François; De Neys, Wim
  4. Trustors’ Disregard for Trustees Deciding Intuitively or Reflectively: Three Experiments on Time Constraints By Antonio Cabrales; Antonio M. Espín; Praveen Kujal; Stephen Rassenti
  5. How Optimistic and Pessimistic Narratives about COVID-19 Impact Economic Behavior By Sören Harrs; Lara Marie Müller; Bettina Rockenbach
  6. Performing best when it matters the most: Evidence from professional handball By Christoph Buehren; Marvin Gabriel
  7. Bad machines corrupt good morals By Köbis, Nils; Bonnefon, Jean-François; Rahwan, Iyad
  8. Behavioural Economics, What Have we Missed? Exploring “Classical” Behavioural Economics Roots in AI, Cognitive Psychology, and Complexity Theory By Steve J. Bickley; Benno Torgler
  9. Reviewing from a Distance: Uncovering the Negativity Bias of Psychological Distance in Online Word-of-Mouth By Jürgen Neumann; Dominik Gutt; Dennis Kundisch
  10. Hate Trumps Love: The Impact of Political Polarization on Social Preferences By Eugen Dimant

  1. By: John B. Davis (Department of Economics Marquette University)
    Abstract: This paper examines how attribute substitution (AS), central to the psychology of choice and behavioral economic reasoning, can be understood when combined with counterfactual thinking (CFT), often called �what if� or �if only� thinking, and how their combination creates important opportunities for the seeing heterodox economics as a single research program alternative to mainstream economics. The first section of the paper discusses AS, CFT, and what a AS-CFT behavioral framework involves, and then emphasizes how this framework departs from fundamental assumptions mainstream rational choice theory employs. The second section reviews the foundations of behavioral thinking regarding AS, describes what it involves when it includes attention to CFT, distinguishes between more automatic and more reflective types of behavioral adjustment. It notes that heterodox economics has generally emphasized ecological rationality and bounded rationality in its use of AS. The third section then discusses how six prominent heterodox approaches can each be understood to draw on this combination of AS and CFT, and how this represents common ground for a shared critique of the mainstream economic approach. What distinguishes them is how they differ regarding the weight and emphasis placed on more automatic versus more reflective types of behavioral adjustment. The fourth section argues that within this shared framework these different heterodox approaches practice a division of labor in how they address different aspects of economic life understood in behavioral and counterfactual terms.
    Keywords: counterfactual thinking, attribute substitution, counterfactual thinking, adjustment behavior, automatic versus reflective, heterodox economics
    JEL: A12 A13 B41 D90
    Date: 2021–05
  2. By: Diaz, Lina (George Mason University); Houser, Daniel (George Mason University); Ifcher, John (Santa Clara University); Zarghamee, Homa (Barnard College)
    Abstract: In this paper, we use stated satisfaction to estimate social preferences: subjects report their satisfaction with payment-profiles that hold their own payment constant while varying another subject's payment. This approach yields significant support for the inequity aversion model of Fehr and Schmidt (1999). This model is among the most renowned in behavioral economics, positing a generalized aversion to inequality that is stronger when one's own payoff is lower–rather than higher–than others'; i.e., "envy" is stronger than "guilt." While aggregate-level estimates based on revealed preferences in laboratory games have supported the model, the assumption that guilt is stronger than envy is often violated at the individual level. This paradox may be due to limitations of the revealed-preference approach. An advantage of avoiding games is that eliciting stated satisfaction is relatively easy to implement and is less prone to being confounded with motives like reciprocity; also the absence of tradeoffs between own and others' payoffs is cognitively less demanding for subjects. Our unstructured approach does not limit the expression of social preferences to inequity aversion, yet our methodology yields significant support for it. At the individual level, 86% of subjects exhibit at least as strong envy as guilt, and 76% (65%) of subjects weakly (strongly) adhere to the model. Our individual-level estimates are robust to changing the value of one's own constant payment and to changing the range of the other subject's payments. Methodologically, eliciting satisfaction can be an easy-to-implement complement to choice-based preference-measures in contexts other than social preferences that are of interest to economists.
    Keywords: inequity aversion, social preferences, stated satisfaction, laboratory experiment
    JEL: C91 D31 D63 I31
    Date: 2021–04
  3. By: Bago, Bence; Bonnefon, Jean-François; De Neys, Wim
    Abstract: Human interactions often involve a choice between acting selfishly (in ones' own interest) and acting prosocially (in the interest of others). Fast-and-slow models of prosociality posit that people intuitively favour one of these choices (the selfish choice in some models, the prosocial choice in other models), and need to correct this intuition through deliberation in order to make the other choice. We present 7 studies that force us to reconsider this longstanding “corrective” dual process view. Participants played various economic games in which they had to choose between a prosocial and a selfish option. We used a two-response paradigm in which participants had to give their first, initial response under time-pressure and cognitive load. Next, participants could take all the time they wanted to reflect on the problem and give a final response. This allowed us to identify the intuitively generated response that preceded the final response given after deliberation. Results consistently showed that both prosocial and selfish responses were predominantly made intuitively rather than after deliberate correction. Pace the deliberate correction view, the findings indicate that making prosocial and selfish choices does typically not rely on different types of reasoning modes (intuition vs deliberation) but rather on different types of intuitions.
    Date: 2021–05
  4. By: Antonio Cabrales (Dept. of Economics, Universidad Carlos III de Madrid); Antonio M. Espín (Department of Social Anthropology, University of Granada and Loyola Behavioral Lab, Loyola Andalucía University); Praveen Kujal (Department of Economics, Middlesex University); Stephen Rassenti (Economic Science Institute, Chapman University)
    Abstract: Human decisions in the social domain are modulated by the interaction between intuitive and reflective processes. Requiring individuals to decide quickly or slowly triggers these processes and is thus likely to elicit different social behaviors. Meanwhile, time pressure has been associated with inefficiency in market settings and market regulation often requires individuals to delay their decisions via cooling-off periods. Yet, recent research suggests that people who make reflective decisions are met with distrust. If this extends to external time constraints, then forcing individuals to delay their decisions may be counterproductive in scenarios where trust considerations are important. In three Trust Game experiments (total n = 1,872), including within- and betweensubjects designs, we test whether individuals trust more someone who is forced to respond quickly (intuitively) or slowly (reflectively). We find that trustors do not adjust their behavior (or their beliefs) to the trustee’s time conditions. This seems to be an appropriate response because time constraints do not affect trustees’ behavior, at least when the game decisions are binary (trust vs. don’t trust; reciprocate vs. don’t reciprocate) and therefore mistakes cannot explain choices. Thus, delayed decisions per se do not seem to elicit distrust.
    Keywords: trust; trustworthiness; beliefs; reflection; dual process; intuition
    JEL: C90 C91 D91
    Date: 2021
  5. By: Sören Harrs (Department of Economics, University of Cologne); Lara Marie Müller (Department of Economics, University of Cologne); Bettina Rockenbach (Department of Economics, University of Cologne and Max Planck Institute for Research on Collective Goods)
    Abstract: Politicians, scientists and journalists have aired vastly different assessments of the COVID-19 pandemic, ranging from rather optimistic to very pessimistic ones. In this paper we investigate how narratives conveying different assessments of the pandemic impact economic behavior. In a controlled experiment with incentivized economic games we find that subjects behave more risk averse and less patiently when confronted with a pessimistic compared to an optimistic or balanced narrative. Further we find that narratives change subjects’ expectations about the pandemic and the stock market. Hence our experiment provides causal evidence for an impact of narratives on fundamental determinants of household behavior.
    Keywords: Narrative Economics, Risk Aversion, Patience, Expectations
    JEL: D80 D91 E71 G41
    Date: 2021–05
  6. By: Christoph Buehren (Clausthal University of Technology); Marvin Gabriel (University of Kassel)
    Abstract: We analyze the impact of psychological pressure on individual performance with handball penalties thrown in the decisive stage vs. the rest of the game. Contrary to the phenomenon of choking under pressure, we observe that most of the analyzed players perform best when it matters the most. The positive effect of pressure on performance is especially pronounced when the score is level or when the thrower’s team is lagging. We control for gender and psychological traits assessed with a survey. Female players score with a higher probability than male players in our sample. The positive impact of pressure is not significantly higher for female players.
    Keywords: Performance under pressure; sports data; psychological traits; survey
    JEL: D
    Date: 2021
  7. By: Köbis, Nils; Bonnefon, Jean-François; Rahwan, Iyad
    Abstract: Machines powered by Artificial Intelligence (AI) are now influencing the behavior of humans in ways that are both like and unlike the ways humans influence each other. In light of recent research showing that other humans can exert a strong corrupting influence on people’s ethical behavior, worry emerges about the corrupting power of AI agents. To estimate the empirical validity of these fears, we review the available evidence from behavioral science, human-computer interaction, and AI research. We propose that the main social roles through which both humans and machines can influence ethical behavior are (a) role model, (b) advisor, (c) partner, and (d) delegate. When AI agents become influencers (role models or advisors), their corrupting power may not exceed (yet) the corrupting power of humans. However, AI agents acting as enablers of unethical behavior (partners or delegates) have many characteristics that may let people reap unethical benefits while feeling good about themselves, indicating good reasons for worry. Based on these insights, we outline a research agenda that aims at providing more behavioral insights for better AI oversight.
    Keywords: machine behavior; behavioral ethics; corruption; artificial intelligence
    Date: 2021–05
  8. By: Steve J. Bickley; Benno Torgler
    Abstract: In this chapter, we ask (conceptually and methodologically) what exactly is behavioural economics and what are its roots? And further, what may we have missed along the way? We argue that revisiting “classical” behavioural economics concepts and methods will benefit the wider behavioural economics program by questioning its yardstick approach to ‘Olympian’ rationality and optimisation and in doing so, exploring the ‘how’ and ‘why’ of economic behaviours (micro, meso, and macro) in greater detail and clarity. We also do the same for fields which share similar ontological and epistemological roots with “classical” behavioural economics. In particular, cognitive psychology, complexity theory, and artificial intelligence. By engaging in debate and investing thought into multiple layers of the ontology-epistemology- methodology, we look to engage in ‘deeper’ (and potentially more profound) scientific discussions. We also explore the utility and implications of mixed methods in behavioural economics research, policy, and practice.
    Keywords: Behavioural Economics; Cognitive Psychology; Complexity Theory; Artificial Intelligence
    Date: 2021–05
  9. By: Jürgen Neumann (University of Paderborn); Dominik Gutt (Erasmus University Rotterdam); Dennis Kundisch (University of Paderborn)
    Abstract: How does reviewing consumption experiences from a psychological distance affect one's online ratings? Prior literature has found a positivity bias in the reviewing behaviors of consumers when they evaluate an experience from a spatial or a temporal distance. However, these results do not fully account for the unique context of online reviews, which involves publicly associating oneself with a potentially negative experience in front of others. Analyzing a data set from a large review platform, which enables identification of reviewers' spatial and temporal distance, we found that the positivity bias is not present for consumption experiences that are characterized by a negative sentiment. Instead, ratings for negative experiences reviewed from a spatial distance - that is, reviews by travelers - are systematically lower than ratings given in spatial proximity - that is, reviews by locals. These findings can be attributed to spatial distance, enabling travelers to distance themselves from these experiences and thus publicly associate themselves with lower ratings. For temporal distance, we found patterns consistent with prior literature that highlighted a disparity between spatial and temporal distance. These results improve our theoretical understanding of reviewing behavior and help platforms in their efforts to de-bias ratings.
    Keywords: Online Word-of-Mouth, Traveling, Psychological Distance, Construal Level, Self-Enhancement, Self-Distancing
    JEL: M15 M31 O32 D12
    Date: 2021–05
  10. By: Eugen Dimant
    Abstract: Political polarization has ruptured the fabric of U.S. society. I quantify this phenomenon through the use of 5 pre-registered studies, comprising 15 behavioral experiments and a diverse set of over 8,600 participants. The focus of this paper is to examine various behavioral-, belief-, and norm-based layers of (non-)strategic decision-making that are plausibly affected by existing polarization in the context of Donald J. Trump. I find strong heterogeneous effects: ingroup-love occurs in the perceptional domain (how close one feels towards others), whereas outgroup-hate occurs in the behavioral domain (how one helps/harms/cooperates with others). The rich setting also allows me to examine the mechanisms of observed intergroup conflict, which can be attributed to one’s grim expectations regarding cooperativeness of the opposing faction, rather than one’s actual unwillingness to cooperate. In a final step, I test whether popular behavioral interventions (defaults and norm-nudging) can eradicate the detrimental impact of polarization in the (non-) strategic contexts studied here. The interventions are ineffective in closing the polarization gap, suggesting that structural – on top of behavioral - changes are needed to mend existing fractions and heal the society.
    Keywords: identity, norms, nudging, polarization, social preferences
    JEL: C90 D01 D90
    Date: 2021

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.