nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2022‒12‒05
eight papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Inequality and cooperation: meta-analytical evidence from Public Good Experiments. By Rémi Suchon; Vincent Théroude
  2. Eliciting Preferences for Risk and Altruism: Experimental Evidence By Romain Gauriot; Stephanie A. Heger; Robert Slonim
  3. The restart effect in social dilemmas shows humans are self-interested not altruistic By Burton-Chellew, Maxwell
  4. Motivated beliefs, social preferences, and limited liability in financial decision-making By Ahrens, Steffen; Bosch-Rosa, Ciril
  5. The Individual-Team Discontinuity Effect on Institutional Choices: Experimental Evidence in Voluntary Public Goods Provision By Kenju Kamei; Katy Tabero
  6. Anomalies or Expected Behaviors? Understanding Stated Preferences and Welfare Implications in Light of Contemporary Behavioral Theory By Leonhard K. Lades; Ewa Zawojska; Robert J. Johnston; Nick Hanley; Liam Delaney; Mikołaj Czajkowski
  7. Proud to Not Own Stocks: How Identity Shapes Financial Decisions By Luca Henkel; Christian Zimpelmann
  8. The smart green nudge: Reducing product returns through enriched digital footprints & causal machine learning By von Zahn, Moritz; Bauer, Kevin; Mihale-Wilson, Cristina; Jagow, Johanna; Speicher, Max; Hinz, Oliver

  1. By: Rémi Suchon; Vincent Théroude
    Abstract: We build a dataset based on 23 experiments that introduce heterogeneous endowments into linear public good games. We use it to measure the effect of inequality on cooperation. This method allows an investigation of a large panel of inequality scenarios, with maximum representativeness in terms of the strength of inequality and design features. It offers the possibility to study the effect of the strength of inequality, a distinctive feature of our paper compared to the past experimental literature which has focused mainly on the existence of inequality. We also explore the contribution gaps between the relatively rich and relatively poor in heterogeneous groups. We discuss the interaction of time (dynamics) and punishment with inequality. We find that not only the presence, but also the strength of inequality has a negative impact on cooperation, but that the marginal effect becomes less negative as the level of inequality increases. We find that the rich contribute more than the poor in absolute amounts, while the poor contribute more as a proportion of their endowment. Both these gaps increase with the strength of inequality. Finally, punishment strongly attenuates the effect of inequality on aggregate cooperation, but has contrasted effects on the contribution gaps between the rich and the poor. There is no significant effect of inequality on the dynamics of contributions.
    Keywords: Public good game, cooperation, inequality, meta-analysis.
    JEL: C92 H41 D91
    Date: 2022
  2. By: Romain Gauriot; Stephanie A. Heger; Robert Slonim
    Abstract: We apply the basic lessons and insights learned in the elicitation and estimation of risk and time preferences literature to the literature on social preferences. Following Andersen et al. (2008), we design a laboratory experiment to jointly elicit risk preferences and preferences for altruism. Consistent with theory, we find that the standard simplifying assumptions about risk preferences lead to significantly biased estimates of altruism. This is particularly problematic when comparing altruism across relevant sub-groups, such as gender and wealth, leading to possibly erroneous conclusions about which is the more generous sex and the self-regarding rich.
    Keywords: altruism, risk aversion, experiment
    Date: 2022
  3. By: Burton-Chellew, Maxwell
    Abstract: Do economic games show evidence of altruistic or self-interested motivations in humans? A huge body of empirical work has found contrasting results. While participants routinely make costly decisions that help strangers, consistent with an evolutionary novel form of altruism, participants also typically learn to pay fewer costs with experience, consistent with self-interested individuals adapting to an unfamiliar environment. Key to resolving this debate is explaining the famous ‘restart effect’, a puzzling enigma whereby failing cooperation in experiments can be briefly rescued by a surprise restart. Here we show that this canonical result, which is often assumed to be evidence of altruism, can be entirely removed, replaced, or even reversed depending on experimental design. Specifically, the restart effect (1) disappears when reputational benefits to cooperation are fully removed, consistent with strategically motivated, self-interested, cooperation; (2) can be replaced by an irrational restart that benefits no-one if individuals are grouped with computers, consistent with confusion; and (3) can even be reversed, so that contributions gradually increase rather than decrease towards the end of the game, if the contributions of the computerized groupmates are programmed accordingly. These results show that the restart effect is driven by a mixture of self-interested and irrational beliefs about the game’s payoffs and not altruism. Consequently, our results suggest that economic games have often been measuring self-interested but confused behaviours and reject the idea that conventional theories of evolution cannot explain the results of economic games.
    Date: 2022–06–12
  4. By: Ahrens, Steffen; Bosch-Rosa, Ciril
    Abstract: Using a new experimental design, we compare how subjects form beliefs in an investor-client setup under varying degrees of liability. Our results reflect the importance of social preferences when making investment decisions for others. We show that when investors have no liability, those with stronger social preferences are more optimistic about the probability that their investment results in a gain. In other words, we find that social preferences appear to be correlated with motivated beliefs. This finding suggests the existence of cognitive biases in financial decision-making and supports the recent literature on the formation of motivated beliefs under limited liability (Barberis, 2015; Bénabou and Tirole, 2016).
    Keywords: Moral Hazard,Experiment,Motivated Beliefs,Social Preferences
    JEL: C91 D84 G11 G41
    Date: 2022
  5. By: Kenju Kamei (Faculty of Economics, Keio University); Katy Tabero (Durham University Business School)
    Abstract: A laboratory experiment is used to show that teams as a decision-making unit behave more efficiently than individuals in an institutional setting. Subjects make voting choices over formal versus informal (peer to peer) sanctions in a finitely repeated public goods dilemma. When a formal sanction scheme is selected in their groups, teams vote for deterrent sanction rates much more frequently than individuals. When an informal sanction scheme is selected, teams inflict costly punishment more frequently on low contributors than individuals, thereby reducing the relative frequency of gmisdirected h punishment among teams. As such, teams sustain cooperation surprisingly better than individuals regardless of which scheme is enacted. These behavioral patterns are consistent with the idea of gtruth wins h which proposes that teams achieve better choices than individuals through deliberation and learning. The results underscore the effectiveness of having teams as a decision-making unit in organizations in combating a moral hazard problem, such as free riding.
    Keywords: institution;public goods;experiment;punishment;discontinuity effect
    JEL: C92 D72 H41
    Date: 2022–11–10
  6. By: Leonhard K. Lades (Environmental Policy & Geary Institute, University College Dublin); Ewa Zawojska (University of Warsaw, Faculty of Economic Sciences); Robert J. Johnston (George Perkins Marsh Institute and Department of Economics, Clark University); Nick Hanley (Institute of Biodiversity Animal Health & Comparative Medicine, University of Glasgow); Liam Delaney (Department of Psychological and Behavioural Science, The London School of Economics and Political Science); Mikołaj Czajkowski (University of Warsaw, Faculty of Economic Sciences)
    Abstract: The stated preference literature contains an expansive body of research on behavioral anomalies, typically understood as response patterns that are inconsistent with standard neoclassical choice theory. While the literature often implies that anomalous behaviors are distinct to stated preferences, widespread evidence of similar patterns across real-world settings raises the potential for an alternative interpretation. We argue that these anomalies might actually reflect behaviors that are to be expected once deviations from the standard economic model and behavioral reactions to the choice architecture in stated preference surveys are considered. The article reviews and organizes the evidence of so-called “anomalous” stated preference behaviors within the context of behavioral science to provide guidance for applied welfare economics. We coordinate evidence on these anomalies using a typology grounded in behavioral science, which groups non-standard behaviors into: non-standard preferences, non-standard beliefs, and non-standard decision-making. We apply this typology to organize the evidence, clarify nomenclature, and understand the implications of non-standard behaviors in stated preference studies for applied welfare analysis. Observing the systematic and common nature of these behaviors in actual and hypothetical settings, we outline possibilities to overcome associated challenges for applied welfare analysis, by adapting new frameworks for welfare analysis proposed within behavioral science.
    Keywords: anomalies, behavioral science, non-standard behaviors, stated preferences, welfare analysis
    JEL: D61 D91 Q51
    Date: 2022
  7. By: Luca Henkel (University of Bonn); Christian Zimpelmann (IZA – Institute of Labor Economics)
    Abstract: This paper introduces a key factor influencing households' decision to invest in the stock market: how people view stockholders. Using survey data from the US and the Netherlands, we first document that the overwhelming majority of respondents view stockholders negatively -- they are perceived as greedy, gambler-like, and selfish individuals. We then provide experimental evidence that such perceptions of identity-relevant characteristics causally influence decision-making: if people view stockholders more negatively, they are less likely to choose stock-related investments. Furthermore, by linking survey and administrative data, we show that negative perceptions strongly predict households' stock market participation, more so than leading alternative determinants. Beyond investment decisions, perceptions predict individuals' polarizing behavior towards stockholders, support for taxation and regulation of financial markets, and misreporting in surveys. Our findings provide a novel explanation for the puzzlingly low stock market participation rates around the world, new perspectives on the malleability of financial decision-making, and evidence for the importance of identity in economic decision-making.
    Keywords: identity, perceptions, stock market participation, financial decision-making
    JEL: G41 G51 D14 D83
    Date: 2022–11
  8. By: von Zahn, Moritz; Bauer, Kevin; Mihale-Wilson, Cristina; Jagow, Johanna; Speicher, Max; Hinz, Oliver
    Abstract: With free delivery of products virtually being a standard in E-commerce, product returns pose a major challenge for online retailers and society. For retailers, product returns involve significant transportation, labor, disposal, and administrative costs. From a societal perspective, product returns contribute to greenhouse gas emissions and packaging disposal and are often a waste of natural resources. Therefore, reducing product returns has become a key challenge. This paper develops and validates a novel smart green nudging approach to tackle the problem of product returns during customers' online shopping processes. We combine a green nudge with a novel data enrichment strategy and a modern causal machine learning method. We first run a large-scale randomized field experiment in the online shop of a German fashion retailer to test the efficacy of a novel green nudge. Subsequently, we fuse the data from about 50,000 customers with publicly-available aggregate data to create what we call enriched digital footprints and train a causal machine learning system capable of optimizing the administration of the green nudge. We report two main findings: First, our field study shows that the large-scale deployment of a simple, low-cost green nudge can significantly reduce product returns while increasing retailer profits. Second, we show how a causal machine learning system trained on the enriched digital footprint can amplify the effectiveness of the green nudge by "smartly" administering it only to certain types of customers. Overall, this paper demonstrates how combining a low-cost marketing instrument, a privacy-preserving data enrichment strategy, and a causal machine learning method can create a win-win situation from both an environmental and economic perspective by simultaneously reducing product returns and increasing retailers' profits.
    Keywords: Product returns,Green Nudging,Causal Machine Learning,Enriched Digital Footprint
    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.
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