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on Cognitive and Behavioural Economics |
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Issue of 2021‒12‒20
six papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Douadia Bougherara (CEE-M, Univ. Montpellier, CNRS, INRAE, Institut Agro, Montpellier, France); Lana Friesen (School of Economics, University of Queensland, Brisbane, Australia); Céline Nauges (Toulouse School of Economics, INRAE, University of Toulouse Capitole, Toulouse, France) |
| Abstract: | We study the interaction between risk taking and skewness seeking behavior among the French population using an experiment that elicits certainty equivalent over lotteries that vary the second and third moments orthogonally. We find that the most common behavior is risk avoidance and skewness seeking. On average, we find no interaction between the two, and a weakly significant interaction only in some segments of the population. That is, in most cases, skewness seeking is not affected by the variance of the lotteries involved, nor is risk taking affected by the skewness of the lotteries. We also find a significant positive correlation between risk avoiding and skewness seeking behavior. Older and female participants make more risk avoiding and more skewness seeking choices, while less educated people and those not in executive occupations are more skewness seeking. |
| Keywords: | Risk; Skewness; Certainty Equivalent; Experiment |
| JEL: | C91 D81 D91 G11 G22 |
| Date: | 2021–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:650&r= |
| By: | Morone, Andrea; Casamassima, Alessia; Cascavilla, Alessandro |
| Abstract: | We replicate the experiment proposed by Lisa R. Anderson and Sarah L. Stafford (2009) by conducting it through the Instagram platform. The structure of questionnaire is the same as the one of the original experiment inasmuch subjects might choose between two options that differ in resolution timing. According to the experimental results, we show that the percentage of subjects choosing later option increases as the value of the later option increases, and the percentage of subjects choosing later option is smaller the longer the temporal delay between two options. We found that risk does not make subjects less patient and there are interactions between risk and the length temporal delay. |
| Keywords: | Intertemporal decision-making; Risk; Intertemporal choice; Experiment. |
| JEL: | C91 D8 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110777&r= |
| By: | Gerardo Sabater-Grande (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain); Nikolaos Georgantzís (WSB Lab and School of Wine and Spirits Business, Burgundy School of Business, Dijon, France and LEE and Department of Economics, Universitat Jaume I, Castellón, Spain); Noemí Herranz-Zarzoso (LEE, Universitat Jaume I, Castellón, and Department of Economic Analysis, Universitat de València, Spain) |
| Abstract: | In this paper, we study overconfidence and goal-setting in academic performance, with and without monetary incentives. Students enrolled in a Microeconomics course were offered the possibility of setting their own target grade before taking part in the final exam. They were also asked to guess their grade immediately after they had taken the exam (“post-diction”). In general, students overestimated their performance, both at the goal-setting and at the post-diction stages. Controlling for several sources of this bias (cognitive abilities, academic record, risk preferences and self-reported academic confidence), we find that the use of monetary rewards mitigates the overestimation of potential achievements and eliminates overestimation of actual achievements through the improvement of actual performance. Our results suggest that monetary incentives do not cause subjects to put more effort into correct guesses but makes them put more effort into academic performance. Using students’ academic records to measure overall skill, we find a strong Dunning-Kruger bias which is intensified in the presence of monetary rewards. |
| Keywords: | overconfidence bias, reference points, self-chosen goals, post-dictions, monetary incentives, Dunning-Kruger cognitive bia |
| JEL: | C93 D03 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2021/14&r= |
| By: | Bryan, Gharad; Grant, Matthew; Haggag, Kareem; Karlan, Dean; Startz, Meredith; Udry, Christopher |
| Abstract: | We test whether the endowment effect holds in an experiment conducted with children during Halloween trick-or-treating. We do not find evidence of the endowment effect in this context and with this experimental protocol. |
| Keywords: | endowment effect; external validity; Halloween |
| JEL: | J1 |
| Date: | 2020–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:105097&r= |
| By: | Gustafsson, Peter (Lund University); Nilsson, Peter (GfK); David, Lucinda (CIRCLE, Lund University); Marañon, Antonia (CIRCLE, Lund University) |
| Abstract: | Sustainability transitions literature is largely missing the point of view of consumers. This is problematic in efforts to understand how sustainable forms of energy diffuses where consumers are understood as active players in embedding energy efficient technologies in their homes. It remains unclear how consumers make energy-relevant decisions and what constitutes this decision-making process. We address this gap by conducting a random experiment asking consumers to make choices regarding solar energy technologies based on a set of options. Options are framed in either a subtractive or additive way to test how consumers process these choices, whether the type of framing matters in encouraging pro-solar energy behavior, and which solar technologies are preferred. We hypothesize that subtractive framing of energy-relevant choices leads to more options being selected than additive framing, that the type of option framing matters in shaping consumer preferences, and that the framing affects the transition probabilities in the decision-making process. Results show that consumers are susceptible to option framing when making energy-relevant decisions. Respondents were concerned primarily with costs when options were framed additively but exhibited decision difficulties and more pro-solar energy transition behavior when options were framed subtractively. This paper demonstrates the sequential steps in decision-making under subtractive framing, which induces a willingness in consumers to embed more solar energy technologies into their households despite the cost, as opposed to additive framing. This paper contributes a representation of the cognitive process of energy relevant decision-making, empirical evidence on the potentiality of nudging consumers towards more pro-solar energy transition behavior, and the importance of framing tools in encouraging this behavior. |
| Keywords: | additive and subtractive option framing; experimental design; Markov chain; final state distribution; transition probability; distance from initial model; anchoring |
| JEL: | C12 C93 D12 D81 |
| Date: | 2021–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2021_014&r= |
| By: | C. Grace Haaf; Devansh Singh; Cinny Lin; Scofield Zou |
| Abstract: | Humans exhibit irrational decision-making patterns in response to environmental triggers, such as experiencing an economic loss or gain. In this paper we investigate whether algorithms exhibit the same behavior by examining the observed decisions and latent risk and rationality parameters estimated by a random utility model with constant relative risk-aversion utility function. We use a dataset consisting of 10,000 hands of poker played by Pluribus, the first algorithm in the world to beat professional human players and find (1) Pluribus does shift its playing style in response to economic losses and gains, ceteris paribus; (2) Pluribus becomes more risk-averse and rational following a trigger but the humans become more risk-seeking and irrational; (3) the difference in playing styles between Pluribus and the humans on the dimensions of risk-aversion and rationality are particularly differentiable when both have experienced a trigger. This provides support that decision-making patterns could be used as "behavioral signatures" to identify human versus algorithmic decision-makers in unlabeled contexts. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2111.07295&r= |