nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2021‒09‒27
six papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Egocentric Norm Adoption By Thomas Neuber
  2. Deceptive Communication By Despoina Alempaki; Valeria Burdea; Daniel Read
  3. Interpreting the will of the people: a positive analysis of ordinal preference aggregation By Sandro Ambuehl; B. Douglas Bernheim
  4. Cognitive skills, strategic sophistication, and life outcomes By Eduardo Fe; David Gill; Victoria Prowse
  5. How Serious is the Measurement-Error Problem in Risk-Aversion Tasks? By Fabien Perez; Guillaume Hollard; Radu Vranceanu
  6. Inequity aversion and limited foresight in the repeated prisoner's dilemma By Backhaus, Teresa; Breitmoser, Yves

  1. By: Thomas Neuber (University of Bonn)
    Abstract: Social norms pervade human interaction, but their demands are often in conflict. To understand behavior, it is thus crucial to know how individuals resolve normative tradeoffs. This paper proposes that sincere judgments about the relative importance of conflicting norms are shaped by personal interest. We show that people tend to follow norms from which they benefit themselves, even in contexts where their own decisions only affect others. In a (virtual) laboratory experiment, each subject makes two decisions over allocations of points within a group of two other participants. The sets of possible allocations entail different normative tradeoffs, and subjects have no personal stakes in their own decisions. However, they are affected by others' decisions: each subject is part of a group, and the members of different groups simultaneously decide over others' allocations along a circle. We find that subjects' decisions are biased towards the normative principles aligned with their own interests, thereby favoring other players whenever these share those interests. Subjects' beliefs about the choices made by others suggest a largely unconscious mechanism. Moreover, survey answers indicate that the effects are driven by self-centered reasoning: subjects who report pronounced perspective-taking are less biased.
    Keywords: egocentrism, experiment, social norms
    Date: 2021–09
  2. By: Despoina Alempaki; Valeria Burdea; Daniel Read
    Abstract: In cases of conflict of interest, people can lie directly about payoff relevant private information, or they can evade the truth without lying directly. We analyse this situation theoretically and test the key predictions in an experimental sender-receiver setting. We find senders prefer to deceive through evasion rather than direct lying. This is because they do nοt want to deceive others, and they do nοt want to be seen as deceptive. The specific language of evasion does not matter. The results suggest deception should be tested in more naturalistic contexts with richer language.
    JEL: C91 D82 D83 D91
    Date: 2021
  3. By: Sandro Ambuehl; B. Douglas Bernheim
    Abstract: We investigate how individuals think groups should aggregate members’ ordinal preferences – that is, how they interpret “the will of the people.” In an experiment, we elicit revealed attitudes toward ordinal preference aggregation and classify subjects according to the rules they apparently deploy. Majoritarianism is rare. Instead, people employ rules that place greater weight on compromise options. The classification’s fit is excellent, and clustering analysis reveals that it does not omit important rules. We ask whether rules are stable across domains, whether people impute cardinal utility from ordinal ranks, and whether attitudes toward aggregation differ across countries with divergent traditions.
    Keywords: Experiment, welfare economics, social choice, Borda, Condorcet
    JEL: C91 D71
    Date: 2021–09
  4. By: Eduardo Fe; David Gill; Victoria Prowse
    Abstract: Classification-
    Date: 2021–09
  5. By: Fabien Perez (CREST, ENSAE, INSEE); Guillaume Hollard (CREST, EcolePolytechnique, CNRS); Radu Vranceanu (ESSEC Business School and THEMA)
    Abstract: This paper analyzes within-session test/retest data from four different tasks used to elicit risk attitudes. Maximum-likelihood and non-parametric estimations on 16 datasets reveal that, irrespective of the task, measurement error accounts for approximately 50% of the variance of the observed variable capturing risk attitudes. The consequences of this large noise element are evaluated by means of simulations. First, as predicted by theory, the coefficient on the risk measure in univariate OLS regressions is attenuated to approximately half of its true value, irrespective of the sample size. Second, the risk-attitude measure may spuriously appear to be insignificant, especially in small samples. Unlike the measurement error arising from within-individual variability, rounding has little influence on significance and biases. In the last part, we show that instrumental-variable estimation and the ORIV method, developed by Gillen et al. (2019), both of which require test/retest data, can eliminate the attenuation bias, but do not fully solve the insignificance problem in small samples. Increasing the number of observations to N=500 removes most of the insignificance issues.
    Keywords: Measurement error, Risk-aversion, Test/retest, ORIV, Sample size
    JEL: C18 C26 C91 D81
    Date: 2021–07–08
  6. By: Backhaus, Teresa; Breitmoser, Yves
    Abstract: Reanalyzing 12 experiments on the repeated prisoner's dilemma (PD), we robustly observe three distinct subject types: defectors, cautious cooperators and strong cooperators. The strategies used by these types are surprisingly stable across experiments and uncorrelated with treatment parameters, but their population shares are highly correlated with treatment parameters. As the discount factor increases, the shares of defectors decrease and the relative shares of strong cooperators increase. Structurally analyzing behavior, we next find that subjects have limited foresight and assign values to all states of the supergame, which relate to the original stage-game payoffs in a manner compatible with inequity aversion. This induces the structure of coordination games and approximately explains the strategies played using Schelling's focal points: after (c,c) subjects play according to the coordination game's cooperative equilibrium, after (d,d) they play according to its defective equilibrium, and after (c,d) or (d, c) they play according to its mixed equilibrium.
    Keywords: Repeated game,Behavior,Tit-for-tat,Mixed strategy,Memory,Belief-freeequilibrium,Laboratory experiment
    JEL: C72 C73 C92 D12
    Date: 2021

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