nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2023‒02‒27
seven papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. The Social Construction of Ignorance: Experimental Evidence By Ivan Soraperra; Joël van der Weele; Marie Claire Villeval; Shaul Shalvi
  2. Willingness to Accept, Willingness to Pay, and Loss Aversion By Jonathan Chapman; Mark Dean; Pietro Ortoleva; Erik Snowberg; Colin Camerer
  3. Mind the framing when studying social preferences in the domain of losses By Armenak Antinyan; Luca Corazzini; Miloš Fišar; Tommaso Reggiani
  4. Norms, Emotions, and Culture in Human Cooperation and Punishment: Theory and Evidence By Sanjit Dhami; Mengxing Wei
  5. The Adventure of Running Experiments with Teenagers By Antonio Alfonso-Costillo; Pablo Brañas-Garza; Diego Jorrat; Pablo Lomas; Benjamin Prissé; Mónica Vasco
  6. Honesty Nudges: Effect Varies with Content but Not with Timing By Benoît Le Maux; Sarah Necker
  7. Narrative Persuasion By Kai Barron; Tilman Fries

  1. By: Ivan Soraperra; Joël van der Weele; Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Shaul Shalvi
    Abstract: We experimentally study the social transmission of "inconvenient" information about the externalities generated by one's own decision. In the laboratory, we pair uninformed decision makers with informed senders. Compared to a setting where subjects can choose their information directly, we find that social interactions increase selfish decisions. On the supply side, senders suppress almost 30 percent of "inconvenient" information, driven by their own preferences for information and their beliefs about the decision maker's preferences. On the demand side, about one-third of decision makers avoids senders who transmit inconvenient information ("shooting the messenger"), which leads to assortative matching between information-suppressing senders and information-avoiding decision makers. Having more control over information generates opposing effects on behavior: selfish decision makers remain ignorant more often and donate less, while altruistic decision makers seek out informative senders and give more. We discuss applications to information sharing in social networks and to organizational design.
    Keywords: Social interactions, Information avoidance, Assortative matching, Ethical behavior, Experiment
    Date: 2022
  2. By: Jonathan Chapman; Mark Dean; Pietro Ortoleva; Erik Snowberg; Colin Camerer
    Abstract: We use four incentivized representative surveys to study the endowment effect for lotteries in 4, 000 U.S. adults. We replicate the standard finding of an endowment effect—the divergence between Willingness to Accept (WTA) and Willingness to Pay (WTP), but document three new findings. First, we find little evidence that the endowment effect is related to loss aversion for risky prospects, counter to predictions of popular theories in economics. Second, WTA and WTP not only diverge, but are, at best, weakly correlated. Third, WTA and WTP strongly relate to other aspects of risk preferences. The structure of these behaviors points to different theories of the endowment effect.
    Keywords: Willingness To Pay, Willingness to Accept, endowment effect, loss aversion
    JEL: C90 D81 D91
    Date: 2023
  3. By: Armenak Antinyan (Cardiff Business School, Cardiff University, Cardiff, United Kingdom and Wenlan School of Business, Zhongnan University of Economics and Law, Wuhan, China); Luca Corazzini (Department of Economics and VERA, Ca’ Foscari University of Venice, Venezia, Italy and MUEEL, Masaryk University, Brno, Czech Republic); Miloš Fišar (Competence Center for Experimental Research, Vienna University of Economics and Business, Vienna, Austria, MUEEL, Masaryk University, Brno, Czech Republic, and Department of Economics, Ca’ Foscari, University of Venice, Venezia, Italy); Tommaso Reggiani (Cardiff Business School, Cardiff University, United Kingdom and MUEEL, Masaryk University, Brno, Czech Republic, and IZA)
    Abstract: There has been an increasing interest in altruistic behaviour in the domain of losses recently. Nevertheless, there is no consensus in whether the monetary losses make individuals more generous or more selfish. Although almost all relevant studies rely on a dictator game to study altruistic behaviour, the experimental designs of these studies differ in how the losses are framed, which may explain the diverging findings. Utilizing a dictator game, this paper studies the impact of loss framing on altruism. The main methodological result is that the dictators’ prosocial behaviour is sensitive to the loss frame they are embedded in. More specifically, in a dictator game in which the dictators have to share a loss between themselves and a recipient, the monetary allocations of the dictators are more benevolent than in a standard setting without a loss and in a dictator game in which the dictators have to share what remains of their endowments after a loss. These differences are explained by the different social norms that the respective loss frames invoke.
    Keywords: loss, framing, altruism, dictator game, experiment, social norms
    JEL: C91 D02 D64
    Date: 2022–10
  4. By: Sanjit Dhami; Mengxing Wei
    Abstract: We consider the psychological and social foundations of human contributions and punishments in a voluntary contributions mechanism with punishment (VCMP). We eliminate ‘dynamic economic linkages’ between the two stages of our ‘modified’ VCMP to rule out other potential explanations. We use a beliefs-based model, rooted in psychological game theory, to derive rigorous theoretical predictions that are then tested with pre-registered experiments in China and the UK. Social norms, culture, and endogenous emotions are the key determinants of contributions and punishments. The emotions of shame, frustration, and anger, play a key role in our theoretical and empirical analysis through ‘dynamic psychological linkages’. We provide potential microfoundations for the inherent human tendency to follow social norms and punish norm violators, while respecting boundedly rational strategic decision making.
    Keywords: cooperation and punishment, emotions-shame, frustration, anger, social norms, culture, bounded rationality
    JEL: C91 C92 D01 D91
    Date: 2023
  5. By: Antonio Alfonso-Costillo (Universidad Loyola); Pablo Brañas-Garza (Universidad Loyola); Diego Jorrat (Universidad Loyola); Pablo Lomas (Universidad Loyola); Benjamin Prissé (Universidad Loyola); Mónica Vasco (Universidad Loyola)
    Abstract: Economists are increasingly interested in how to conduct experiments with teenagers. This paper evaluates whether different methodological factors impact the answers of teenagers to standard experimental tasks on measuring time preferences, risk preferences, cognitive abilities and financial abilities, among others. Results show: i) the recruitment process matters depending on whether the school includes the experiment as an institutional activity or the teachers led the process particularly for their class; the dropout rate reduced significantly from the first to the third experimental wave, when the school was responsible for organizingthe experiment; ii) hypothetical payments elicits similar results than monetary payments; iii) adding visual elements to the experiment’s interface improves the quality of answers; and iv) the type of electronic device on which subjects answer the tasks does not influence results, while administrating the experiment by school teachers does affect the answers. We conclude by giving three suggestions to researchers interested in conducting experiments with teenagers: first, run the experiment as a school-programmed activity; second, it is not necessary the use of real payments which increases the cost and complicates the recruitment; and third, integratevisual components to the task
    Keywords: developmental decision-making; field experiments; economic preferences; teenagers
    JEL: C91 D81
    Date: 2023–02
  6. By: Benoît Le Maux; Sarah Necker
    Abstract: We use a ten-round online mind game to determine whether the effect of honesty nudges depends on timing and content. Reminding individuals about the right thing to do increases honesty. Including information that it is possible to assess an individual’s dishonesty strengthens the effect of the intervention. Both types of intervention are similarly effective when they take place before an individual has made any decision or after individuals have played five rounds of the mind game. Nudging an individual after they have made five decisions allows us to add personalized information based on the individual’s previous response; however, this does not increase honesty. Examining the reaction to nudges based on previous behavior shows that (presumably) honest and dishonest individuals respond by reducing overreporting. The effect of the different nudge content is driven by those previously dishonest.
    Keywords: dishonesty, lying, cheating, honesty nudge, moral reminder, deterrence
    JEL: C91 C92 M52 J28 J33
    Date: 2023
  7. By: Kai Barron; Tilman Fries
    Abstract: Modern life offers nearly unbridled access to information; it is the harnessing of this information to guide decision-making that presents a challenge. We study how one individual may try to shape the way another person interprets objective information by proposing a causal explanation (or narrative) that makes sense of this objective information. Using an experiment, we examine the use of narratives as a persuasive tool in the context of financial advice where advisors may hold incentives that differ from those of the individuals they are advising. Our results reveal several insights about the underlying mechanisms that govern narrative persuasion. First, we show that advisors construct self-interested narratives and make them persuasive by tailoring them to fit the objective information. Second, we demonstrate that advisors are able to shift investors’ beliefs about the future performance of a company. Third, we identify the types of narratives that investors find convincing, namely those that fit the objective information well. Finally, we evaluate the efficacy of several potential policy interventions aimed at protecting investors. We find that narrative persuasion is difficult to protect against.
    Keywords: narratives, beliefs, financial advice, conflicts of interest, behavioural finance
    JEL: D83 G40 G50 C90
    Date: 2023

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