nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2021‒07‒19
eight papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Limited Self-knowledge and Survey Response Behavior By Armin Falk; Thomas Neuber; Philipp Strack
  2. Fighting Climate Change: The Role of Norms, Preferences, and Moral Values By Peter Andre; Teodora Boneva; Felix Chopra; Armin Falk
  3. Expl(AI)ned: The impact of explainable artificial intelligence on cognitive processes By Bauer, Kevin; von Zahn, Moritz; Hinz, Oliver
  4. Fostering the adoption of robo-advisors: A 3-weeks online stock-trading experiment By Alexia Gaudeul; Caterina Giannetti
  5. Healthy, nudged, and wise: Experimental evidence on the role of cost reminders in healthy decision-making By Adnan M. S. Fakir; Tushar Bharati
  6. Patterned Variation: The Role of Psychological Dispositions in Social and Institutional Evolution By Schlicht, Ekkehart
  7. Learning versus Unlearning: An Experiment on Retractions By Duarte Gon\c{c}alves; Jonathan Libgober; Jack Willis
  8. Sustainable Consumption and Mass Communication: A German Experiment By Reisch, L.; Spash, Clive L.; Bietz, Sabine

  1. By: Armin Falk (briq and the University of Bonn); Thomas Neuber (University of Bonn); Philipp Strack (Yale University)
    Abstract: We study response behavior in surveys and show how the explanatory power of self-reports can be improved. First, we develop a choice model of survey response behavior under the assumption that the respondent has imperfect self-knowledge about her individual characteristics. In panel data, the model predicts that the variance in responses for different characteristics increases in self-knowledge and that the variance for a given characteristic over time is non-monotonic in self-knowledge. Importantly, the ratio of these variances identifies an individual's level of self-knowledge, i.e. the latter can be inferred from observed response patterns. Second, we develop a consistent and unbiased estimator for self-knowledge based on the model. Third, we run an experiment to test the model's main predictions in a context where the researcher knows the true underlying characteristics. The data confirm the model's predictions as well as the estimator's validity. Finally, we turn to a large panel data set, estimate individual levels of self-knowledge, and show that accounting for differences in self-knowledge significantly increases the explanatory power of regression models. Using a median split in self-knowledge and regressing risky behaviors on self-reported risk attitudes, we find that the R2 can be multiple times larger for above- than below-median subjects. Similarly, gender differences in risk attitudes are considerably larger when restricting samples to subjects with high self-knowledge. These examples illustrate how using the estimator may improve inference from survey data.
    Keywords: survey research, rational inattention, laboratory experiments, non-cognitive skills, preferences
    JEL: C83 D91 J24
    Date: 2021–07
  2. By: Peter Andre (University of Bonn); Teodora Boneva (University of Bonn); Felix Chopra (University of Bonn); Armin Falk (briq and the University of Bonn)
    Abstract: We document individual willingness to fight climate change and its behavioral determinants in a large representative sample of US adults. Willingness to fight climate change - as measured through an incentivized donation decision - is highly heterogeneous across the population. Individual beliefs about social norms, economic preferences such as patience and altruism, as well as universal moral values positively predict climate preferences. Moreover, we document systematic misperceptions of prevalent social norms. Respondents vastly underestimate the prevalence of climate- friendly behaviors and norms among their fellow citizens. Providing respondents with correct information causally raises individual willingness to fight climate change as well as individual support for climate policies. The effects are strongest for individuals who are skeptical about the existence and threat of global warming.
    Keywords: climate change, climate behavior, climate policies, social norms, economic preferences, moral values, beliefs, survey experiments
    JEL: D64 D91 Q51
    Date: 2021–07
  3. By: Bauer, Kevin; von Zahn, Moritz; Hinz, Oliver
    Abstract: This paper explores the interplay of feature-based explainable AI (XAI) techniques, information processing, and human beliefs. Using a novel experimental protocol, we study the impact of providing users with explanations about how an AI system weighs inputted information to produce individual predictions (LIME) on users' weighting of information and beliefs about the task-relevance of information. On the one hand, we find that feature-based explanations cause users to alter their mental weighting of available information according to observed explanations. On the other hand, explanations lead to asymmetric belief adjustments that we interpret as a manifestation of the confirmation bias. Trust in the prediction accuracy plays an important moderating role for XAI-enabled belief adjustments. Our results show that feature-based XAI does not only superficially influence decisions but really change internal cognitive processes, bearing the potential to manipulate human beliefs and reinforce stereotypes. Hence, the current regulatory efforts that aim at enhancing algorithmic transparency may benefit from going hand in hand with measures ensuring the exclusion of sensitive personal information in XAI systems. Overall, our findings put assertions that XAI is the silver bullet solving all of AI systems' (black box) problems into perspective.
    Keywords: XAI,explainable machine learning,Information Processing,Belief updating,algorithmic transparency
    Date: 2021
  4. By: Alexia Gaudeul; Caterina Giannetti
    Abstract: We consider how to increase the take-up of robo-advisors to help investors cope with the disposition effect. In a 3-weeks online stock-trading experiment, participants traded freely in week 1, were assisted by trading algorithms in week 2, and chose whether to be assisted in week 3. Passive algorithms prevented trading, active ones traded according to Bayesian rules. Participants could override algorithm choices in some treatments. Only a minority adopted robo-advisors in week 3, with the worst performers being the least likely to do so. Algorithm aversion was reduced if the algorithm traded actively and could be overridden.
    Keywords: disposition effect, commitment devices, robo-advisors, sophisticated investors, trading, algorithm aversion
    JEL: G11 G40
    Date: 2021–07–01
  5. By: Adnan M. S. Fakir (Business School, The University of Western Australia); Tushar Bharati (Business School, The University of Western Australia)
    Abstract: We evaluate the performance of two behavioral interventions aimed at reducing tobacco consumption in an ultra-poor, rural region of Bangladesh where conventional methods like taxes and warning labels are infeasible. The first intervention asked participants to daily log their tobacco consumption expenditure. The second intervention placed two graphic posters warning participating households of the harmful effects of tobacco consumption on their children and themselves in their sleeping quarters. While both interventions reduced household tobacco consumption expenditure, male participants who logged their expenditure substituted cigarettes with cheaper smokeless tobacco. Risk-averse males who spent relatively more on tobacco responded more to the logbook intervention. Relatively more educated, patient males with children below age five responded better to the poster intervention. The findings suggest extending policies that worked elsewhere to the rural poor in developing countries, where cheaper substitutes are readily available, might be unwise. Instead, policies can leverage something as universal as parents’ concern for their children’s health for promoting healthy decision-making.
    Keywords: tobacco; smoking; healthy decision-making; nudge; field experiment; Bangladesh
    JEL: C93 D9 I1 I12 I18 O1
    Date: 2021
  6. By: Schlicht, Ekkehart
    Abstract: The new institutional economics has one of its roots in evolutionary thinking. The idea is that there is competition among organizational forms. Some forms spread faster than others and thereby displace and eventually destroy the less well adapted forms. In the end, the most 'efficient' organizational formation will survive, where 'efficiency’ is a social analogue for biological fitness. The process is predominately envisaged as a process of what I am going to term 'blind evolution': a combination of random variation and selection. The idea of randomness is put into question. If evolution is is to be able to work successfully on complex organisms or organizations, it is necessary that variation occurs in a patterned fashion with systematically correlated changes. Once the importance of patterned variation is established, it must be asked where the patterns come from. It will be argued that, for the purpose of the social sciences, these patterns are generated by psychological regularities, both cognitive and emotional. Features of patterning are discussed (channeling by constraints, hitchhiking, radiation, founder effects, irreversibly, functional shifts, evolutionary detours, punctuation).
    Keywords: evolution; evodevo; evo-devo; variation; selection; institutional economics; social psychology; channeling by constraints; hitchhiking; radiation; founder effects; irreversibly; functional shifts; evolutionary detours; punctuation
    JEL: B15 B25 B52 D02 D23 E14
    Date: 2021
  7. By: Duarte Gon\c{c}alves; Jonathan Libgober; Jack Willis
    Abstract: Widely discredited ideas nevertheless persist. Why do people fail to ``unlearn''? We study one explanation: beliefs are resistant to retractions (the revoking of earlier information). Our experimental design identifies unlearning -- i.e., updating from retractions -- and enables its comparison with learning from equivalent new information. Across different kinds of retractions -- for instance, those consistent or contradictory with the prior, or those occurring when prior beliefs are either extreme or moderate -- subjects do not fully unlearn from retractions and update less from them than from equivalent new information. This phenomenon is not explained by most of the well-studied violations of Bayesian updating, which yield differing predictions in our design. However, it is consistent with difficulties in conditional reasoning, which have been documented in other domains and circumstances.
    Date: 2021–06
  8. By: Reisch, L.; Spash, Clive L.; Bietz, Sabine
    Abstract: How to change economic behaviour and achieve sustainable consumption? This paper reports onusing television and internet communication as a means of engaging the least interested sectionsof society with respect to environmental problems and sustainability issues. The theory behinddeveloping such communication is described and the importance of social psychological factorsbrought to the fore. Initial results indicating the success of the approach employed in actualbroadcasts on television in Germany are then reported. Some concerns over use of the media andpublic engagement are also discussed.
    Keywords: Consumption, behaviour, choice, norms, consumer theory, environment
    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.