nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2022‒06‒20
ten papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Herbert Simon’s experience at the Cowles Commission (1947–1954) By Alexandre Chirat; Michaël Assous; Olivier Brette; Judith Favereau
  2. Strategic Complexity and the Value of Thinking By Gill, David; Prowse, Victoria L.
  3. Beliefs in Repeated Games By Masaki Aoyagi; Guillaume Frechette; Sevgi Yuksel
  4. Preferences and Perceptions in Provision and Maintenance Public Goods By Gächter, Simon; Kölle, Felix; Quercia, Simone
  5. Locus of Control, Self-Control, and Health Outcomes By Botha, Ferdi; Dahmann, Sarah C.
  6. Disentangling material, social, and cognitive determinants of human behavior and beliefs By Tverskoi, Denis; Guido, Andrea; Andrighetto, Giulia; Sánchez, Angel; Gavrilets, Sergey
  7. Behavioural Economics Assignment: Business Consumer Decision-Making & Consumer Surplus By Mai, Nhat Chi
  8. Comparative risk and ambiguity aversion: an experimental approach By Takashi Hayashi; Ryoko Wada
  9. Leveraging the Honor Code: Public Goods Contributions under Oath By Jérôme Hergueux; Nicolas Jacquemet; Stéphane Luchini; Jason Shogren
  10. Smiles behind a mask are detectable and affect judgments of trustworthiness, attractiveness, and competence By Hopfensitz, Astrid; Mantilla, Cesar

  1. By: Alexandre Chirat; Michaël Assous; Olivier Brette; Judith Favereau
    Abstract: Surprisingly Simon’s activities at the Cowles commission remain largely unexplored; while Simon and the Cowles shared a twofold wish to operationalize economics and to formalize human decision making. This is also during his time at the Cowles commission that Simon produces his emblematic paper formalizing bounded rationality. Furthermore, Simon claims that his participation at the Cowles was decisive in his awarding of the Nobel Prize. The aim of the paper is to produce such scrutiny. As such the claim of the paper is that Simon’s relationship with the Cowles commission and its members was a bittersweet one. Indeed, such a collaboration started enthusiastically from both sides and ended surrounded by indifferences. We offer three explanations to this bittersweet relationship. First, both the Cowles and Simon shared a wish to formalize decision making problems; although, they had different conceptions about mathematical tools and the articulation between theory and empirics. Second, the irreconcilability of their conception of optimality threatened their common interest in operational research. Third, and more globally, Simon’s and the Cowles’s research agendas were not stabilized during this period explaining the enthusiastic phase as well as the cold one, once these two research agendas stabilized, but in different directions. The paper distinguishes four periods from 1947 to 1954 during Simon’s time at the Cowles. Each section of the paper deals in turn with one of these four periods.
    Keywords: Simon – Cowles Commission – Rationality – Optimization – Models
    JEL: B21 B40 C61 D01 D81
    Date: 2022
  2. By: Gill, David (Purdue University); Prowse, Victoria L. (Purdue University)
    Abstract: Response times are a simple low-cost indicator of the process of reasoning in strategic games. In this paper, we leverage the dynamic nature of response-time data from repeated strategic interactions to measure the strategic complexity of a situation by how long people think on average when they face that situation (where we categorize situations according to the characteristics of play in the previous round). We find that strategic complexity varies significantly across situations, and we find considerable heterogeneity in how responsive subjects' thinking times are to complexity. We also study how variation in response times at the individual level across rounds affects strategic behavior and success: when a subject thinks for longer than she would normally do in a particular situation, she wins less frequently and earns less. The behavioral mechanism that drives the reduction in performance is a tendency to move away from Nash equilibrium behavior. Finally, cognitive ability and personality have no effect on average response times.
    Keywords: response time, decision time, deliberation time, thinking time, complexity, level-k, game theory, strategic game, repeated games, beauty contest, cognitive ability, personality
    JEL: C72 C91
    Date: 2022–05
  3. By: Masaki Aoyagi; Guillaume Frechette; Sevgi Yuksel
    Abstract: This paper uses a laboratory experiment to study beliefs and their relationship to action and strategy choices in finitely and indefinitely repeated prisoners' dilemma games. We find subjects' beliefs about the other player's action are accurate despite some systematic deviations corresponding to early pessimism in the indefinitely repeated game and late optimism in the finitely repeated game. The data reveals a close link between beliefs and actions that differs between the two games. In particular, the same history of play leads to different beliefs, and the same belief leads to different action choices in each game. Moreover, we find beliefs anticipate the evolution of behavior within a supergame, changing in response to the history of play (in both games) and the number of rounds played (in the finitely repeated game). We then use the subjects' beliefs over actions in each round to identify their beliefs over supergame strategies played by the other player. We find these beliefs correctly capture the different classes of strategies used in each game. Importantly, subjects using different strategies have different beliefs, and for the most part, strategies are subjectively rational given beliefs. The results also suggest subjects tend to overestimate the likelihood that others use the same strategy as them, while underestimating the likelihood that others use less cooperative strategies.
    Date: 2021–02
  4. By: Gächter, Simon (University of Nottingham); Kölle, Felix (University of Cologne); Quercia, Simone (University of Verona)
    Abstract: We study two generic versions of public goods problems: in Provision problems, the public good does not exist initially and needs to be provided; in Maintenance problems, the public good already exists and needs to be maintained. In five lab and online experiments (n=2,584), we document a robust asymmetry in preferences and perceptions in two incentive-equivalent versions of these public good problems. We find fewer conditional cooperators and more free riders in Maintenance than Provision, a difference that is replicable, stable, and reflected in perceptions of kindness. Incentivized control questions administered before gameplay reveal dilemma-specific misperceptions but controlling for them neither eliminates game-dependent conditional cooperation, nor differences in perceived kindness of others' cooperation. Thus, even when sharing the same game form, Maintenance and Provision are different social dilemmas that require separate behavioral analyses. Despite some inconsistencies, a theory of revealed altruism comes closest to explaining our results.
    Keywords: maintenance and provision social dilemmas, conditional cooperation, kindness, misperceptions, experiments, revealed altruism
    JEL: C92 H41
    Date: 2022–05
  5. By: Botha, Ferdi (University of Melbourne); Dahmann, Sarah C. (University of Melbourne)
    Abstract: We provide the first empirical evidence on the direct link between locus of control and self-control, and how they interact in explaining a range of health outcomes. Using rich Australian survey data, we find that, while the two traits are distinct constructs, a greater internal locus of control is associated with higher self-control. The association between locus of control and health is reduced once we control for self-control, suggesting that self-control mediates at least part of this relationship. Finally, an internal locus of control amplifies the beneficial effects of self-control particularly for physical health.
    Keywords: locus of control, self-control, health, health behavior
    JEL: D91 I12 I31
    Date: 2022–05
  6. By: Tverskoi, Denis; Guido, Andrea (Institute for Futures Studies); Andrighetto, Giulia; Sánchez, Angel; Gavrilets, Sergey
    Abstract: In social interactions, human decision-making, attitudes, and beliefs about others coevolve. Their dynamics are affected by cost-benefit considerations, cognitive processes (such as cognitive dissonance, social projecting, and logic constraints), and social influences by peers (via descriptive and injunctive social norms) and by authorities (e.g., educational, cultural, religious, political, administrative, individual or group, real or fictitious). Here we attempt to disentangle some of this complexity by using an integrative mathematical modeling and a 35-day online behavioral experiment. We utilize data from a Common Pool Resources experiment with or without messaging promoting a group-beneficial level of resource extraction. We first show that our model provides a better fit than a wide variety of alternative models. Then we directly estimate the weights of different factors in decision-making and beliefs dynamics. We show that material payoffs accounted only for about 20\% of decision-making. The remaining 80\% was due to different cognitive and social forces which we evaluated quantitatively. Without messaging, personal norms (and cognitive dissonance) have the largest weight in decision-making. Messaging greatly influences personal norms and normative expectations. Between-individual variation is present in all measured characteristics and notably impacts observed group behavior. At the same time, gender differences are not significant. We argue that one can hardly understand social behavior without understanding the dynamics of personal beliefs and beliefs about others and that cognitive, social, and material factors all play important roles in these processes. Our results have implications for understanding and predicting social processes triggered by certain shocks (e.g., social unrest, a pandemic, or a natural disaster) and for designing policy interventions aiming to change behavior (e.g. actions aimed at environment protection or climate change mitigation).
    Date: 2022–05–05
  7. By: Mai, Nhat Chi
    Abstract: Task: Behavioural Economics Assignment task: Essay “A nudge in the right direction?” Behavioural economists study how people’s buying, selling and other behaviour responds to various incentives and social situations. They don’t accept the simplistic notion that people are always rational maximisers. As the Livemint article (2016) states, “According to behavioural economists, the human brain neither has the time nor the ability to process all the information involved in decision making, as assumed by the rational model.” Instead, rationality is bounded: people use simple rules of thumb in making decisions – rules they have developed over time in the light of experience.
    Date: 2022–05–01
  8. By: Takashi Hayashi (University of Glasgow); Ryoko Wada (Keiai University)
    Abstract: This paper experimentally studies comparative properties of risk aversion and ambiguity aversion in the way that the role of heterogeneity is allowed for. We examine correlation between the degrees of risk aversion and the degree of ambiguity aversion, how the latter changes across geometric properties of objective sets of possible probability distributions and how ambiguous information is generated.
    Keywords: Ambiguity aversion, risk aversion, comparative definitions, choice experiments
    JEL: C91 D81
    Date: 2022–05
  9. By: Jérôme Hergueux (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Nicolas Jacquemet (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Stéphane Luchini (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Jason Shogren (UW - University of Wyoming)
    Abstract: Public good games are at the core of many environmental challenges. In such social dilemmas, a large share of people endorse the norm of reciprocity. A growing literature complements this finding with the observation that many players exhibit a self-serving bias in reciprocation: "weak reciprocators" increase their contributions as a function of the effort level of the other players, but less than proportionally. In this paper, we build upon a growing literature on truth-telling to argue that weak reciprocity might be best conceived not as a preference, but rather as a symptom of an internal trade-off at the player level between (i) the truthful revelation of their private reciprocal preference, and (ii) the economic incentives they face (which foster free-riding). In truth-telling experiments, many players misrepresent private information when this is to their material benefit, but to a significantly lesser extent than what would be expected based on the profit-maximizing strategy. We apply this behavioral insight to strategic situations, and test whether the preference revelation properties of the classic voluntary contribution game can be improved by offering players the possibility to sign a classic truth-telling oath. Our results suggest that the honesty oath helps increase cooperation (by 33% in our experiment). Subjects under oath contribute in a way which is more consistent with (i) the contribution they expect from the other players and (ii) their normative views about the right contribution level. As a result, the distribution of social types elicited under oath differs from the one observed in the baseline: some free-riders, and many weak reciprocators, now behave as pure reciprocators.
    Keywords: Cooperation,Reciprocity,Social preferences,Public goods,Truth-telling oath
    Date: 2022–03
  10. By: Hopfensitz, Astrid; Mantilla, Cesar
    Abstract: Smiling is a popular and powerful facial signal used to influence how we are judged and evaluated by others. The recent COVID pandemic made the use of facemasks common around the world. Since facemasks, when properly worn, cover the lower half of the face, a common concern with them is that they inhibit our ability to signal to others through facial expressions like smiles. In this paper, we show through three subsequent studies that smiling faces are easily distinguished from neutral faces even if the person is wearing a face mask (Study 1, N=1814). We further show that smiling behind a facemask significantly influences ratings regarding attractiveness, trustworthiness, and competence (Study 2, N=250). We finally show that individuals with about 18 months of experience with facemasks are well aware that smiling behind facemasks will influence ratings regarding attractiveness and trustworthiness by others (Study 3, N=94). Together, our studies provide evidence that facemasks should not be seen as a threat that inhibits simple non-verbal communication through smiles.
    Date: 2022–05–05

This nep-cbe issue is ©2022 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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