nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2022‒01‒10
five papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Herd behavior in the choice of motorcycles: Evidence from Nepal By Nilkanth Kumar; Nirmal Kumar Raut; Suchita Srinivasan
  2. Choice Determinants of a Smart Contract vs. Ambiguous Expert-Based Insurance: An Experiment By Giuseppe Attanasi; Marta Ballatore; Michela Chessa; Agnès Festré; Chris Ouangraoua
  3. Selfish learning is more important than fair-minded conditional cooperation in public goods games By Maxwell N. Burton-Chellew; Claire Guerin
  4. Social closeness can help, harm and be irrelevant in solving pure coordination problems By Simon Gaechter; Chris Starmer; Christian Thoeni; Fabio Tufano; Till O Weber
  5. Does the “bomb crater” effect really exist? Evidence from the laboratory By Matthias Kasper; James Alm

  1. By: Nilkanth Kumar (Center of Economic Research (CER-ETH), ETH Zurich, Zurich, Switzerland); Nirmal Kumar Raut (Central Department of Economics (CEDECON), Tribhuvan University, Kathmandu, Nepal); Suchita Srinivasan (Center of Economic Research (CER-ETH), ETH Zurich, Zurich, Switzerland)
    Abstract: This article sheds light on a scarcely explored area of research related to herd behavior in urban settings of developing economies, where the use of motorized twowheelers has been increasing rapidly. Using primary survey-based data from Nepal, we examine whether potential motorcycle buyers in the Kathmandu valley exhibit herd behavior or price-conscious behavior when making a hypothetical choice decision and then evaluate the determinants of the observed behavior. Using factor analysis, the paper identifies distinct homogeneous groups of respondents based on their preferences towards motorcycle attributes and on their psychological traits and attitudes. Not only do we find a prevalence of herding in the choice of motorcycles, the results also find strong suggestive evidence that, in addition to gender and income, several latent factors related to preferences and psychological traits might play a crucial role in determining the herd behavior. We discuss policy implications in the context of consumer behavior and environmental policy in the backdrop of rapid vehicle demand and dangerous air pollution levels.
    Keywords: herd behavior; determinants; motorcycle choice; psychological factors; bounded rationality; Nepal
    JEL: D12 D83 D91 Q58
    Date: 2022–01
  2. By: Giuseppe Attanasi (Université Côte d'Azur, France; GREDEG CNRS); Marta Ballatore (GREDEG CNRS; Université Côte d'Azur, France); Michela Chessa (Université Côte d'Azur, France; GREDEG CNRS); Agnès Festré (GREDEG CNRS; Université Côte d'Azur, France; The Arctic University of Norway, Tromsø, Norway); Chris Ouangraoua (GREDEG CNRS; Université Côte d'Azur, France)
    Abstract: This study proposes an analysis of behavioral factors (attitudes toward risk, ambiguity and reduction of compound lotteries) as choice determinants of a blockchain-based car insurance smart contract (henceforth, BCT-based SC) vs. an ambiguous expert-based one. In a laboratory experiment, we develop a toy model representing such a choice and complement it with a questionnaire in order to collect data concerning participants’ demographics, personality traits, and car use experience. Our results can inform policies aimed at improving the understanding of BCT-based SC in the case of car insurance services. In particular, they advocate for designing ad hoc policies depending on user’s experience with cars.
    Keywords: Laboratory experiments, Blockchain, Smart contracts, Technology adoption, Risk, Ambiguity, Compound lottery
    JEL: C81 C83 C91 D81 D91
    Date: 2021–12
  3. By: Maxwell N. Burton-Chellew; Claire Guerin
    Abstract: Why does human cooperation often unravel in economic experiments despite a promising start? Previous studies have interpreted the decline as the reaction of disappointed cooperators retaliating in response to lesser cooperators (conditional cooperation). This interpretation has been considered evidence of a uniquely human form of cooperation, motivated by altruistic concerns for fairness and requiring special evolutionary explanations. However, experiments have typically shown individuals information about both their personal payoff and information about the decisions of their groupmates (social information). Showing both confounds explanations based on conditional cooperation with explanations based on individuals learning how to better play the game. Here we experimentally decouple these two forms of information, and thus these two learning processes, in public goods games involving 616 Swiss university participants. We find that payoff information leads to a greater decline, supporting a payoff-based learning hypothesis. In contrast, social information has small or negligible effect, contradicting the conditional cooperation hypothesis. We also find widespread evidence of both confusion and selfish motives, suggesting that human cooperation is maybe not so unique after all.
    Keywords: altruism, behavioral economics, confusion, reciprocity, social preferences
    JEL: D01
    Date: 2021–11
  4. By: Simon Gaechter (University of Nottingham, IZA Bonn); Chris Starmer (University of Nottingham); Christian Thoeni (University of Lausanne); Fabio Tufano (University of Nottingham); Till O Weber (Newcastle University)
    Abstract: Experimental research has shown that ordinary people often perform remarkably well in solving coordination games that involve no conflicts of interest. While most experiments in the past studied such coordination games among socially distant anonymous players, here we study behaviour in a set of two player coordination games and compare the outcomes depending on whether the players are socially close or socially distant. We find that social closeness influences prospects for coordination, but whether it helps, harms or has no impact on coordination probabilities, depends on the structure of the game.
    Keywords: Coordination; Lab-in-the-field experiment; Oneness; Salience; Social closeness; Social distance
    Date: 2021–09
  5. By: Matthias Kasper (University of Vienna); James Alm (Tulane University)
    Abstract: This study uses a laboratory experiment to investigate two behavioral explanations for taxpayers’ tendency to reduce their compliance after an audit (the “bomb crater effect”): the tendency to make up for losses incurred in the past (loss repair), and the incorrect assumption that experiencing an audit decreases the risk of a future audit (misperception of risk). Our findings suggest that audits do not have a strong effect in the aggregate. However, behavioral responses depend on the audit outcome. While taxpayers who were found to report all income correctly are substantially less compliant in their subsequent tax declaration, taxpayers who were found to evade their entire income show the opposite response. These results suggest that audits do not induce a general tendency for loss repair or a general misperception of the risk of a subsequent audit. Moreover, when comparing these changes in reporting behavior to the behavior of taxpayers who did not experience an audit, we find that audits do in fact not induce strong behavioral responses in general, and they do not induce a “bomb crater effect” in particular. Rather, our findings suggest that taxpayers reporting compliance in the laboratory is volatile, even absent any audits. We conclude that experimental studies should use control groups of unaudited taxpayers to identify the causal effect of audits on post-audit tax compliance.
    Keywords: Tax compliance; Bomb crater effect; Laboratory experiments
    JEL: C9 H26 H83
    Date: 2021–12

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