nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2022‒10‒03
six papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Beliefs, Learning, and Personality in the Indefinitely Repeated Prisoner's Dilemma By Gill, David; Rosokha, Yaroslav
  2. Lie for me: An experiment about delegation, efficiency, and morality By Matteo Ploner
  3. Self-regulatory Resources and Institutional Formation: A first experimental test By KAMEI Kenju
  4. Social Preferences and Rating Biases in Subjective Performance Evaluations By Kusterer, David; Sliwka, Dirk
  5. Product Lotteries and Loss Aversion By Schäfers, Sebastian
  6. Nudges and peak pricing: A common pool resource energy conservation experiment By Penelope Buckley; Daniel Llerena

  1. By: Gill, David (Purdue University); Rosokha, Yaroslav (Purdue University)
    Abstract: We aim to understand the role and evolution of beliefs in the indefinitely repeated prisoner's dilemma (IRPD). To do so, we elicit beliefs about the supergame strategies chosen by others. We find that heterogeneity in beliefs and changes in beliefs with experience are central to understanding behavior and learning in the IRPD. Beliefs strongly predict cooperation, initial beliefs match behavior quite well, most subjects choose strategies that perform well given their beliefs, and beliefs respond to experience while becoming more accurate over time. Finally, we uncover a novel mechanism whereby trusting subjects learn to cooperate through their interaction with experience.
    Keywords: infinitely repeated prisoner’s dilemma, cooperation, optimism, belief elicitation, supergame strategies, experimentation, trust, experiment
    JEL: C72 C73 C91 D91
    Date: 2022–08
  2. By: Matteo Ploner
    Abstract: Individuals and organizations may delegate others to perform actions they would not do themselves because of moral constraints. In our experimental setting, a Principal can either self-report a value in a die-under-the-cup task or delegate the report to an Agent who has no material interest in the report. We experimentally manipulate the relative efficiency of the report: the Agent’s prospect either stochastically dominates that of the Principal or vice versa. We find that Principals have a high propensity to lie and delegate only when the Agent’s prospect is more efficient. Agents generally behave honestly, but those with higher prosocial attitudes tend to lie when assigned an inefficient lottery, most likely not to let down the Principal.
    Keywords: Honesty, Decision Making for Others, Belief-based preferences.
    JEL: D91 C91 D81
    Date: 2022
  3. By: KAMEI Kenju
    Abstract: This study conducts a novel laboratory experiment that shows, for the first time, that the state of people’s self-regulatory resources influences their reliance on the formal enforcement of norms in a social dilemma. The experimental subjects’ self-regulatory resources are rigorously manipulated using well-known depletion tasks. On the one hand, when their resources are not depleted, most decide to govern themselves through monitoring and decentralized, peer-to-peer punishment in a public goods dilemma, and then successfully achieve high cooperation norms. On the other hand, when the amount of their resources is limited, the majority vote to enact a costly formal sanctioning institution and then construct deterrent punishment toward free riders; backed by formal punishment, groups achieve strong cooperation. A supplementary survey on the Covid-19 pandemic was conducted to enhance the external validity of the findings, generating a similar pattern. Self-control and commitment preference theories, combined with inequity aversion, can explain these patterns, because they predict that those with limited self-regulatory resources are motivated to remove temptations in advance as a commitment device, thus avoiding a large self-control cost. This underscores the role of commitment in the context of a social dilemma.
    Date: 2022–08
  4. By: Kusterer, David (University of Cologne); Sliwka, Dirk (University of Cologne)
    Abstract: We study the determinants of biases in subjective performance evaluations in an MTurk experiment to test the implications of a standard formal framework of rational subjective evaluations. In the experiment, subjects in the role of workers work on a real effort task. Subjects in the role of supervisors observe subsamples of the workers' output and assess their performance. We conduct 6 experimental treatments varying (i) whether workers' pay depends on the performance evaluation, (ii) whether supervisors are paid for the accuracy of their evaluations, and (iii) the precision of the information available to supervisors. In line with the predictions of the model of optimal evaluations we find that ratings are more lenient and less accurate when they determine bonus payments and that rewards for accuracy reduce leniency. When supervisors have access to more detailed performance information their ratings vary to a stronger extent with observed performance. In contrast to the model's prediction we do not find that more prosocial supervisors always provide more lenient ratings, but that they invest more time in the rating task and achieve a higher rating accuracy.
    Keywords: subjective performance evaluation, bias, bonuses, differentiation, social preferences
    JEL: J33 C91 M52
    Date: 2022–08
  5. By: Schäfers, Sebastian (University of Basel)
    Abstract: Product lotteries are a sales strategy where companies hide features of differentiated products from consumers until the purchase is complete. I identify loss aversion as an important factor explaining the existence of vertical product lotteries. I consider a profit-maximizing monopolist serving loss-averse consumers with rational expectations about the lottery. I find that the optimal strategy consists of offering a premium product with high and deterministic quality and a lottery with stochastic and lower expected quality. When consumers are reasonably loss averse, I show that the profit increase from adding a quality lottery exceeds 10% compared to the case without a lottery.
    Keywords: Product lotteries, Probabilistic selling, Reference-dependent preferences, Loss aversion
    JEL: D42 D81 D91 L12
    Date: 2022–08–22
  6. By: Penelope Buckley (GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes); Daniel Llerena (GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes)
    Abstract: Using a contextualised common pool resource framework, individual energy consumption choices are studied. Individuals are nudged towards the socially optimal level of consumption by the use of a happy (sad) face if they are underconsuming (overconsuming). A price is set to incentivise a second group to choose the level of consumption observed in the nudge treatment in order to quantify the nudge via an equivalent price. Across all 10 periods, consumption is significantly lower in treatment groups compared to control groups without nudges and prices. The price treatment leads to an average level of consumption above the Nash equilibrium. There are implications for policy makers as the nudge treatment performs as well, on average, as an equivalent price without the implied loss of welfare, and is understood and integrated into subjects' decision making quicker than an equivalent price. However, there is a tendency for both the nudge and the price to reinforce existing consumption behaviour as those who overconsume continue to overconsume.
    Keywords: Energy conservation,Financial incentive,Laboratory experiment,Nudge
    Date: 2022

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.