nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2021‒10‒04
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. How time flies! By Xiu Chen; Xiaojian Zhao
  2. Reciprocity in Dictator Games: An Experimental Study By Luciano Andreozzi; Marco Faillo; Ali Seyhun Saral
  3. Truth, Honesty, and Strategic Interactions By Bernabe, Angelique; Hossain, Tanjim; Yu, Haomiao
  4. How Field Experiments in Economics Can Complement Psychological Research on Judgment Biases By John List
  5. Relational Incentives Theory By Gallus, Jana; Reiff, Joseph; Kamenica, Emir; Fiske, Alan Page
  6. Lack of Control: An experiment By Prissé, Benjamin; Jorrat, Diego
  7. How Do We Choose? Towards an Alternative Theory of Consumer Behavior By Kyle Glenn
  8. Narratives in economics By Roos, Michael W. M.; Reccius, Matthias
  9. The epidemiology of tax avoidance narratives By Lorenz, Johannes; Diller, Markus; Sureth, Caren
  10. Mindfulness Reduces Information Avoidance By Ash, Elliott; Sgroi, Daniel; Tuckwell, Anthony; Zhuo, Shi

  1. By: Xiu Chen (College of Business, Southern University of Science and Technology); Xiaojian Zhao (Monash University)
    Abstract: The paper identifies a potential gap between intertemporal choices and time preference: The elicited intertemporal decisions could be partly driven by a biased perception of time and thus may not completely reveal the actual time preference. To test this, we explore the causal relationship between time perception and intertemporal choices by conducting a laboratory experiment, in which cognitive load is used as a stimulating instrument to induce differences in time perception. We establish that the perceived time lengths for subjects with high cognitive load are shorter than those with low cognitive load and that individuals who underestimate time appear more patient in their intertemporal decisions. The mediation analyses show that time perception mediates a significant part of the cognitive load’s effect on intertemporal choices. Our study thus demonstrates that the time preference identified by intertemporal choices might be confounded by the potentially biased perception of how time flies.
    Keywords: time perception, intertemporal choice, time preference, cognitive load
    JEL: C91 D91
    Date: 2021–09
  2. By: Luciano Andreozzi; Marco Faillo; Ali Seyhun Saral
    Abstract: When decisions are made before roles are assigned, the Dictator Game is strategically equivalent to a linear Public Goods Game. This suggests that, when played between individuals with the same income, the prosocial behavior observed may be attributed at least in part to reciprocal altruism. Dictators transfer money only because they believe Recipients would transfer money as well, if roles were reversed. By contrast, when the game is played between individuals with different background income, the generosity of the rich towards the poor is more easily attributed to pure, non-reciprocal altruism. We test this hypothesis by eliciting conditional preferences for giving in a Dictator Game in two treatments. In the first students are matched with other students, while in the second students are matched with subjects living in a refugee camp in Uganda. We find that our predictions are only partially borne out by the data. Whether giving is directed to a person with similar or lower socioeconomic status, most subjects reveal conditionally altruistic preferences. Unconditional altruism is virtually absent in both treatments. These counter-intuitive results have important implications for the experimental elicitation of social preferences.
    Keywords: altruism, dictator game, reciprocity, social preferences, socioeconomic status
    Date: 2021
  3. By: Bernabe, Angelique; Hossain, Tanjim; Yu, Haomiao
    Abstract: We experimentally investigate how introducing the concept of truth in the natural context of a game affects player behavior using two games. Two players simultaneously make reimbursement claims for a damaged product, where players' payoffs depend only on their claims but not on the true price. Both games are dominance-solvable, and one of them has a strictly dominant strategy equilibrium, which many participants easily identified. Yet, claims in our experiments are significantly affected by the price. Analyzing the role of truth on participants' choices, we show that one needs strategic considerations and preferences for honesty to explain the results.
    Keywords: Preference for Honesty, Truth-telling in Games, Traveler's Dilemma, Dominance-solvable Games, Strictly Dominant Strategy, Level-k thinking
    JEL: C72 C91 D03
    Date: 2021–09–29
  4. By: John List
    Abstract: This review summarizes results of field experiments examining individual behaviors across several market settings from - open-air markets to rideshare markets to tax-compliance markets - where people sort themselves into market roles wherein they make consequential decisions. Using three distinct examples from my own research on the endowment effect, left-digit bias, and omission bias, I showcase how field experiments can help researchers understand mediators, heterogeneity, and causal moderation involved in judgment biases in the field. In this manner, the review highlights that economic field experiments can serve an invaluable intellectual role alongside traditional laboratory research.
    Date: 2021
  5. By: Gallus, Jana; Reiff, Joseph; Kamenica, Emir; Fiske, Alan Page
    Abstract: Our life is built around coordinating efforts with others. This usually involves incentivizing others to do things, and sustaining our relationship with them. Using the wrong incentives backfires: it lowers effort and tarnishes our relationships. But what constitutes a ‘wrong’ incentive? And can incentives be used to shape relationships in a desired manner? To address these and other questions, we introduce relational incentives theory, which distinguishes between two aspects of incentives: schemes (how the incentive is used) and means (what is used as an incentive). Prior research has focused on means (e.g., monetary vs. non-monetary incentives). Our theory highlights the importance of schemes, with a focus on how they interact with social relationships. It posits that the efficacy of incentives depends largely on whether the scheme fits the relational structure of the persons involved in the activity: participation incentive schemes for communal sharing relations, hierarchy for authority ranking relations, balancing for equality matching relations, and proportional incentive schemes for market pricing relations. We show that these four schemes comprise some of the most prevalent variants of incentives. We then discuss the antecedents and consequences of the use of congruent and incongruent incentive schemes. We argue that congruent incentives can reinforce the relationship. Incongruent incentives disrupt relational motives, which undermines the coordinating relationship and reduces effort. But, importantly, incongruent incentives can also be used intentionally to shift to a new relational model. The theory thus contributes to research on relational models by showing how people constitute and modulate relationships. It adds to the incentives and contracting literatures by offering a framework for analyzing the structural congruence between incentives and relationships, yielding predictions about the effects of incentives across different organizational and individual-level contexts.
    Keywords: incentives, social relationships, relational models, congruence, incentive schemes
    JEL: D03 J2 J3 M14 M5 Z1
    Date: 2021
  6. By: Prissé, Benjamin; Jorrat, Diego
    Abstract: We ran an experiment to study whether lack of control has an effect on experimental results. Subjects who were recruited following standard procedures completed the experiment online or in the laboratory. The experimental design is otherwise identical between conditions. Results suggest that there are no differences between conditions, except for a larger percentage of laboratory subjects donating nothing in the Dictator Game.
    Keywords: Time Preferences, CTB, Experiments.
    JEL: B41 C99
    Date: 2021–09–25
  7. By: Kyle Glenn (Department of Economics, Adams State University)
    Abstract: In this paper we explore how economists have addressed consumer behavior. We begin by analyzing the fundamental underpinning of neoclassical consumer behavior, utility maximization. We show how the contributions of behavioral economics, which prides itself on finding moments of nonconformity within the theory of consumer behavior, has put into question the validity of mainstream consumer choice modeling Accepting that the orthodox theory provides a poor model, the question remains: What alternative theories of consumer behavior exist? We discuss two alternative frameworks for consumer behavior: the endogenous preferences literature and the post-Keynesian notion of consumer choice. While both frameworks have provided valuable insights into consumer behavior, we argue that neither theory fully captures the complexities of consumer behavior. As such, we turn to literature in Business and Psychology surrounding how consumers actually behave. We find three common principles in the literature: consumer cannot process all information, preferences are malleable, and preferences are categorized eliciting varied behaviors dependent upon the category. We posit a basic neural network model that captures the three principles and illuminates some of the complexities of consumer behavior.
    Keywords: Consumer behavior, network models
    JEL: B50 D11 D90
    Date: 2021–09
  8. By: Roos, Michael W. M.; Reccius, Matthias
    Abstract: There is growing awareness within the economics profession of the important role narratives play in the economy. Even though empirical approaches that try to quantify economic narratives are getting increasingly popular, there is no theory or even a universally accepted definition of economic arratives underlying this research. First, we review and categorize the economic literature concerned with narratives and work out the different paradigms that are at play. Only a subset of the literature considers narratives to be active drivers of economic activity. In order to solidify the foundation of narrative economics, we propose a definition of collective economic narratives, isolating five important characteristics. We argue that, for a narrative to be economically relevant, it must be a sense-making story that emerges in a social context and suggests action to a social group. We also systematize how a collective economic narrative differs from a topic and from other kinds of narratives that are likely to have less impact on the economy. With regard to the popular use of topic modeling as an empirical strategy, we suggest that the complementary use of other canonical methods from the natural language processing toolkit and the development of new methods is inevitable to go beyond identifying topics and be able to move towards true empirical narrative economics.
    Keywords: Narrative economics,complexity economics,narrative turn,textual analysis,NLP
    JEL: D91 E44 E71 B55 B41
    Date: 2021
  9. By: Lorenz, Johannes; Diller, Markus; Sureth, Caren
    Abstract: This study investigates the contagious nature of tax avoidance by examining how narratives affect tax avoiding behavior. We adapt the idea of narrative economics indicating that individuals' actions are stimulated by stories that spread within a society. We employ two types of infection models to theoretically investigate how tax avoidance schemes spread over time and vanish eventually consistent with patterns known from epidemiology. We find that general tax avoidance can persist even if its expected outcome is negative, while specific tax avoidance schemes might vanish even though their expected outcome is positive. We find empirical support for the predicted dissemination of narratives related to both general and specific tax avoidance schemes in google n-grams. Finally, we show that dissemination of specific tax avoidance schemes is attenuated by anti-narratives in (social) media. Our findings help to understand how tax avoidance spreads, under what conditions anti-avoidance measures can effectively curb tax avoidance and point towards the crucial role of transparency of enhanced enforcement by visible narratives.
    Keywords: tax avoidance,tax evasion,epidemiology,contagion,SIS-model,SIR-model,n-grams
    JEL: H26 C73 K34
    Date: 2021
  10. By: Ash, Elliott (ETH Zurich and ESRC CAGE Centre); Sgroi, Daniel (University of Warwick, ESRC CAGE Centre and IZA Bonn); Tuckwell, Anthony (University of Warwick, ESRC CAGE Centre and Alan Turing Institute); Zhuo, Shi (University of Warwick)
    Abstract: Mindfulness meditation has been found to influence various important outcomes such as health, stress, depression, productivity, and altruism. We report evidence from a randomised controlled trial on a previously untested effect of mindfulness: information avoidance. We find that a relatively short mindfulness treatment (two weeks, 15 minutes a day) is able to induce a statistically significant reduction in information avoidance – that is, avoiding information that may cause worry or regret. Supplementary evidence supports mindfulness’s effects on emotion regulation as a possible mechanism for the effect.
    Keywords: mindfulness ; information avoidance ; randomized controlled trial JEL Classification: D91 ; I31 ; C91
    Date: 2021

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