nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2022‒01‒31
eight papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Cognitive Uncertainty in Intertemporal Choice By Benjamin Enke; Thomas W. Graeber
  2. Procedurally Justifiable Strategies: Integrating Context Effects into Multistage Decision Making By Fynn Kemper; Philipp Christoph Wichardt
  3. Guns, pets, and strikes: an experiment on identity and political action By Boris Ginzburg; José-Alberto Guerra
  4. Risk, Temptation, and Efficiency in the One-Shot Prisoner's Dilemma By Gächter, Simon; Lee, Kyeongtae; Sefton, Martin; Weber, Till O.
  5. School Choice and Loss Aversion By Vincent Meisner; Jonas von Wangenheim
  6. Cognitive Imprecision and Strategic Behavior By Cary D. Frydman; Salvatore Nunnari
  8. Does Multitasking Affect Students' Academic Performance? Evidence from a Longitudinal Study By Amez, Simon; Baert, Stijn; Heydencamp, Emily; Wuyts, Joey

  1. By: Benjamin Enke; Thomas W. Graeber
    Abstract: This paper studies the relevance of cognitive uncertainty – subjective uncertainty over one’s utility-maximizing action – for understanding and predicting intertemporal choice. The main idea is that when people are cognitively noisy, such as when a decision is complex, they implicitly treat different time delays to some degree alike. By experimentally measuring and manipulating cognitive uncertainty, we document three economic implications of this idea. First, cognitive uncertainty explains various core empirical regularities, such as why people often appear very impatient, why per-period impatience is smaller over long than over short horizons, why discounting is often hyperbolic even when the present is not involved, and why choices frequently violate transitivity. Second, impatience is context-dependent: discounting is substantially more hyperbolic when the decision environment is more complex. Third, cognitive uncertainty matters for choice architecture: people who are nervous about making mistakes are twice as likely to follow expert advice to be more patient.
    Keywords: cognitive uncertainty, intertemporal choice, complexity
    Date: 2021
  2. By: Fynn Kemper; Philipp Christoph Wichardt
    Abstract: This paper proposes a simple framework to model contextual influences on procedural decision making. In terms of utility, we differentiate between monetary payoffs and contextual psychological ones, e.g. deriving from the subjects’ normative frame of reference. Monetary payoffs are treated as common knowledge while psychological payoffs are treated as partly unforeseeable. Regarding behaviour, we assume that players act optimal given their local perception of the game. As perceptions may be incorrect, we do not consider common equilibrium conditions but instead require strategies to be procedurally justifiable. As we will argue, various common inconsistencies considered in behavioural economics can be understood as procedurally justifiable behaviour. With the present framework, we add an abstract tool to the discussion which allows to consider also the behavioural implications of players foreseeing the corresponding behavioural effects - which is often not considered in the respective original models.
    Keywords: behavioural inconsistencies, context effects, limited foresight, procedural decision making, utility
    JEL: C70 D01 D91
    Date: 2021
  3. By: Boris Ginzburg; José-Alberto Guerra
    Abstract: We study the implications of participation in political collective action on identity and on interpersonal interactions using a laboratory experiment. We offer subjects the possibility to sign an online petition, which was either related to animal rights or the right to bear firearms. Before and after the petition, we measure subjects' altruism and willingness to trust by asking them to play a dictator game and a trust game in pairs. The results show that there is considerably more altruism and more trust when both subjects had signed the petition than when one or both had not signed. The same behaviour is observed when we analyse high-cost political participation, namely, joining a street protest. This suggests that the experience of common participation in political collective action creates an identity that produces in-group favouritism. These results also suggest a reason why individuals choose to participate in political action despite private costs and a low probability of affecting the outcome: participation creates private benefits in subsequent interactions with fellow participants.
    Keywords: political identity, collective action, social preferences, laboratory experiment, petitions, street protests
    JEL: C91 D64 D79 D91
    Date: 2021–12–15
  4. By: Gächter, Simon (University of Nottingham); Lee, Kyeongtae (Bank of Korea); Sefton, Martin (University of Nottingham); Weber, Till O. (Newcastle University)
    Abstract: The prisoner's dilemma (PD) is arguably the most important model of social dilemmas, but our knowledge about how a PD's material payoff structure affects cooperation is incomplete. In this paper we investigate the effect of variation in material payoffs on cooperation, focussing on one-shot PD games where efficiency requires mutual cooperation. Following Mengel (2018) we vary three payoff indices. Indices of risk and temptation capture the unilateral incentives to defect against defectors and co-operators respectively, while an index of efficiency captures the gains from cooperation. We conduct two studies: first, varying the payoff indices over a large range and, second, in a novel orthogonal design that allows us to measure the effect of one payoff index while holding the others constant. In the second study we also compare a student and non-student subject pool, which allows us to assess generalizability of results. In both studies we find that temptation reduces cooperation. In neither study, nor in either subject pool of our second study, do we find a significant effect of risk.
    Keywords: prisoner’s dilemma, cooperation, temptation, risk, efficiency
    JEL: A13 C91
    Date: 2021–11
  5. By: Vincent Meisner; Jonas von Wangenheim
    Abstract: Evidence suggests that participants in direct student-proposing deferred-acceptance mechanisms (DA) play dominated strategies. To explain the data, we introduce expectation-based loss aversion into a school-choice setting and characterize choice-acclimating personal equilibria in DA. We find that non-truthful preference submissions can be strictly optimal if and only if they are top-choice monotone. In equilibrium, DA may implement allocations with justified envy. Specifically, it discriminates against students who are more loss averse or less confident than their peers, and amplifies already existing discrimination. To level the playing field, we propose sequential mechanisms as alternatives that are robust to these biases.
    Keywords: market design, matching, school choice, reference-dependent preferences, loss aversion, deferred acceptance
    JEL: C78 D47 D78 D81 D82 D91
    Date: 2021
  6. By: Cary D. Frydman; Salvatore Nunnari
    Abstract: We propose and experimentally test a theory of strategic behavior in which players are cognitively imprecise and perceive a fundamental parameter with noise. We focus on 2 x 2 coordination games, which generate multiple equilibria when perception is precise. When adding a small amount of cognitive imprecision to the model, we obtain a unique equilibrium where players use a simple cutoff strategy. The model further predicts that behavior is context-dependent: players implement the unique equilibrium strategy with noise, and the noise decreases in fundamental volatility. Our experimental data strongly support this novel prediction and reject several alterna-tive game-theoretic models that do not predict context-dependence. We also find that subjects are aware of other players’ imprecision, which is key to generating strategic uncertainty. Our framework has important implications for the literature on global games and, more broadly, illuminates the role of perception in generating both random and context-dependent behavior in games.
    Keywords: perception, efficient coding, coordination, global games
    JEL: C72 C92 D91 E71
    Date: 2021
  7. By: Maria Mercanti-Guérin (IAE Paris - Sorbonne Business School)
    Abstract: Digital twins are a digital representation of the physical world. Among the multiple applications of digital twins, housing is one of the first sectors concerned. The objective of this re-search is to determine whether interior designs conceived by digital twins are more readable by artificial intelligence than human-designed designs (1) and whether these designs generate more consumer preference (2). Our first experiment shows that AI generates fewer annotation or classification errors when analyzing designs conceived via digital twins. Our second experiment shows that consumers' attitudes are more favorable towards designs conceived by digital twins. Aesthetics and complexity, which are two dimensions of object creativity, are perceived negatively. Only the "novelty" dimension which can be assimilated to modernity ex-plains a strong preference for this type of interior. A discussion on AI as a possible brake on creativity and reinforcement of the status quo bias is proposed.
    Keywords: status quo,creativity,AI,digital twins
    Date: 2021–11–25
  8. By: Amez, Simon (Ghent University); Baert, Stijn (Ghent University); Heydencamp, Emily (Ghent University); Wuyts, Joey (Ghent University)
    Abstract: Multitasking – alternating between two different tasks at the same time – has become a daily habit for many university students. However, this may come at a cost since the existing literature emphasises the negative association between multitasking and academic performance. Nonetheless, this literature is based on cross-sectional observational data so that that estimates cannot be given a causal interpretation. To complement these studies, we opted for a longitudinal design in this study. Specifically, for three consecutive years, students at two Belgian universities, in more than ten different study programmes, were surveyed on their multitasking preferences and academic performance. Then, these results were merged with the students' exam scores. We exploited the longitudinal character of the data by running random and fixed effect models. Our results indicate that the positive and negative aspects of multitasking with respect to academic performance cancel each other out.
    Keywords: multitasking, academic performance, longitudinal data
    JEL: I23 J24
    Date: 2021–11

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