nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2022‒04‒04
six papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Ruled by robots: Preference for algorithmic decision makers and perceptions of their choices By Marina Chugunova; Wolfgang J. Luhan
  2. Experimental Evidence on the Relationship between Perceived Ambiguity and Likelihood Insensitivity By Luca Henkel
  3. Outcome Bias in Self-evaluations: Quasi-experimental Field Evidence of Swiss Driving License Exams By Pascal Flurin Meier; Raphael Flepp; Philippe Meier; Egon Franck
  4. Instability of preferences due to Covid-19 Crisis and emotions: a natural experiment from urban Burkina Faso By Delphine BOUTIN; Laurène PETIFOUR; Haris MEGZARI
  5. Resilient entrepreneurs? Revisiting the relationship between the Big Five and self-employment By Runst, Petrik; Thomä, Jörg
  6. The determinants of population self-control By Cobb-Clark, Deborah A.; Dahmann, Sarah Christina; Kamhöfer, Daniel A.; Schildberg-Hörisch, Hannah

  1. By: Marina Chugunova (Max Planck Insitute for Innovation and Competion); Wolfgang J. Luhan (University of Portsmouth)
    Abstract: As technology-assisted decision-making is becoming more widespread, it is important to understand how the algorithmic nature of the decision-maker affects how decisions are perceived by the affected people. We use a laboratory experiment to study the preference for human or algorithmic decision makers in re-distributive decisions. In particular, we consider whether algorithmic decision maker will be preferred because of its unbiasedness. Contrary to previous findings, the majority of participants (over 60%) prefer the algorithm as a decision maker over a human—but this is not driven by concerns over biased decisions. Yet, despite this preference, the decisions made by humans are regarded more favorably. Participants judge the decisions to be equally fair, but are nonetheless less satisfied with the AI decisions. Subjective ratings of the decisions are mainly driven by own material interests and fairness ideals. For the latter, players display remarkable flexibility: they tolerate any explainable deviation between the actual decision and their ideals, but react very strongly and negatively to redistribution decisions that do not fit any fairness ideals. Our results suggest that even in the realm of moral decisions algorithmic decision-makers might be preferred, but actual performance of the algorithm plays an important role in how the decisions are rated.
    Keywords: delegation; algorithm aversion; redistribution; fairness
    JEL: C91 D31 D81 D9 O33
    Date: 2022–03–10
  2. By: Luca Henkel (University of Bonn)
    Abstract: Observed individual behavior in the presence of ambiguity is characterized by insufficient responsiveness to changes in subjective likelihoods. Such likelihood insensitivity under ambiguity is integral to theoretical models and predictive of behavior in many important domains such as financial decision-making. However, there is little empirical evidence on its causes and determining factors. This paper investigates the role of beliefs in the form of ambiguity perception - the extent to which a decision-maker has difficulties assigning a single probability to each possible event - as a potential determinant. Using an experiment, I exogenously vary the degree of ambiguity while eliciting measures of likelihood insensitivity and ambiguity perception. The results provide strong support for an ambiguity perception based explanation of likelihood insensitivity. Not only are the two measures highly correlated on the individual level, but changes in ambiguity perception due to the exogenous variation also directly induce changes in likelihood insensitivity. My evidence thus substantiates the perception based interpretation of likelihood insensitivity brought forward by multiple prior models in contrast to preference based explanations of other commonly used models.
    Keywords: Ambiguity, decision-making under uncertainty, likelihood insensitivity, multiple prior models
    JEL: D81 D83 D91 C91
    Date: 2022–03
  3. By: Pascal Flurin Meier (Department of Business Administration, University of Zurich); Raphael Flepp (Department of Business Administration, University of Zurich); Philippe Meier (Department of Business Administration, University of Zurich); Egon Franck (Department of Business Administration, University of Zurich)
    Abstract: Employing a quasi-experimental field setting, we examine whether people are outcome biased when self-evaluating their past decisions. Using data from Swiss driving license exams, we find that candidates who narrowly passed the theoretical driving exam are significantly less likely to pass the subsequent practical driving exam – which is taken several months after the theoretical exam – relative to those who failed narrowly. The candidates who passed the theoretical exam in their first attempt received more objections in momentary, on-the-spot kinds of decisions, consistent with the idea that worse preparation is the underlying behavioral difference.
    Keywords: Outcome bias; Self-evaluation; Behavioral economics; Judgment; Regression discontinuity design
    JEL: D81 D83 D91
    Date: 2022–03
  4. By: Delphine BOUTIN; Laurène PETIFOUR; Haris MEGZARI
    Abstract: The salience of the first Covid-19 crisis over a well-identified period represents an unexpected and abrupt change in the environment. This study uses the onset of the Covid-19 crisis to empirically examine whether risk and time preferences change in response to this exogenous shock. We use an original panel dataset conducted in January 2020 (before any event) and June 2020 (after the removal of strong economic measures) among women working in the informal sector in Ouagadougou, Burkina Faso. We use individual fixed effects on a balanced panel of 853 women to isolate the specific causal effect of the Covid-19 crisis on variation in attitudes toward risk and time over these six months and rule out alternative explanations for differences in preferences. We demonstrate strong preference instability: risk aversion changed over the period in both the gain (13%) and loss (-47%) domains, while impatience increased by 9%. We also show that risk aversion (in both domains) is non-sensitive to actual impacts, but appears to be driven by economic fears and concerns related to the Covid-19 crisis. We also find that greater exposure to the media reinforces preference instability: the more informed the respondent is, the more their risk and time preferences vary. The same phenomenon is observed when their source of information comes from the government or from a social network (Facebook and WhatsApp).
    Keywords: Covid-19, Risk attitude, Impatience, Emotions, Media exposure
    JEL: D8 D9 C93 I18 O55
    Date: 2022
  5. By: Runst, Petrik; Thomä, Jörg
    Abstract: Based on a trait-oriented approach, Big Five personality traits have been repeatedly shown to affect entrepreneurial action. In the last two decades, a new literature stream on the Big Five has emerged in the field of psychology that has partly moved away from a traitbased perspective towards a person-centered approach, suggesting that multiple stable combinations of traits form individual personalities. We examine the relationship between this prototyping approach and entrepreneurship. Moreover, we compare prototyping with entrepreneurial profiling, another person-oriented approach to the Big Five, which assumes that low levels of agreeableness and high levels of all other traits describe a particular entrepreneurship-prone personality. By using data from the German Socio-Economic Panel (SOEP), we show that at least three prototypes can be identified, one of which - the resilient type - can be hypothesized to significantly increase the likelihood of entrepreneurial action. Our regression results provide evidence of a positive impact of the resilient type on the likelihood of and transitioning into self-employment but not the likelihood of exit. We also show that the prototyping approach explains individual self-employment decisions over and above what can already be explained by the profiling approach. Thus, the entrepreneurial profile tends to ignore a relatively large number of individuals who exhibit certain combinations of traits predisposing them to become entrepreneurs. In the context of entrepreneurship, profiling should therefore only be seen as a first step on the way from the usual trait-based to a person-oriented view of the Big Five.
    Keywords: Entrepreneurship,Self-employment,Big Five,Personality,Prototypes,Profiles
    JEL: D91 L26 M13
    Date: 2022
  6. By: Cobb-Clark, Deborah A.; Dahmann, Sarah Christina; Kamhöfer, Daniel A.; Schildberg-Hörisch, Hannah
    Abstract: This paper demonstrates that structural factors can shape people's self-control. We study the determinants of adult self-control using population-representative data and exploiting two sources of quasi-experimental variation|Germany's division and compulsory schooling reforms. We find that former East Germans have substantially higher levels of self-control than West Germans and provide evidence for suppression as a possible underlying mechanism. An increase in compulsory schooling had no causal effect on self-control. Moreover, we find that self-control increases linearly with age. In contrast to previous findings for children, there is no gender gap in adult self-control and family background does not predict self-control.
    Keywords: determinants of self-control,quasi-experiments,German division,compulsory schooling reforms,population-representative evidence,Brief Self-Control Scale
    JEL: D90 C26
    Date: 2022

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