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on Cognitive and Behavioural Economics |
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Issue of 2024‒04‒01
four papers chosen by |
| By: | Gächter, Simon (University of Nottingham); Lee, Kyeongtae (Bank of Korea); Sefton, Martin (University of Nottingham); Weber, Till O. (Newcastle University) |
| Abstract: | The prisoner's dilemma (PD) is arguably the most important model of social dilemmas, but our knowledge about how a PD's material payoff structure affects cooperation is incomplete. In this paper we investigate the effect of variation in material payoffs on cooperation, focusing on one-shot PD games where efficiency requires mutual cooperation. We report results from three experiments (N = 1, 993): in a preliminary experiment, we vary the payoffs over a large range. In our first main experiment (Study 1), we present a novel design that varies payoffs orthogonally in a within-subjects design. Our second main experiment, Study 2, investigates the orthogonal variation of payoffs in a between-subjects design. In a complementary analysis we also study the closely related payoff indices of normalized loss and gain, and the K-index. The most robust finding of our experiments and the complementary analyses is that cooperation in a PD increases with the gains of mutual cooperation over mutual defection. |
| Keywords: | prisoner's dilemma, cooperation, payoff parameters, temptation, risk, efficiency, normalized gain, normalized loss, K-index, experiments |
| JEL: | A13 C91 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16814&r=cbe |
| By: | Auer, Daniel (University of Bern); Ruedin, Didier (University of Neuchâtel) |
| Abstract: | We ask how human behavior changes when racial discrimination is costly and when choices are risky. By asking N = 4, 944 participants in Germany to form a soccer team in a series of online experiments, we measure decision-making in an accessible way. Higher costs of discrimination can reduce disparities, but we show that these costs can also trigger implicit racial bias: participants who received an additional financial incentive to select more skilled soccer players outperformed nonincentivized participants and differentiated less based on skin color. However, when confronted with risky choices in a lottery, incentivized participants are more likely to gamble to avoid players with a darker skin color. That is, racial (minority) markers alter the risk preferences of people when their decisions carry costly consequences. This implicit racial bias may partly explain why members of visible minority groups are regularly discriminated against in real-world competitive markets. |
| Date: | 2023–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:wrebf&r=cbe |
| By: | Lisa Bruttel (University of Potsdam, CEPA); Vasilisa Petrishcheva (University of Potsdam) |
| Abstract: | In this paper, we study one channel through which communication may facilitate cooperative behavior – belief precision. In a prisoner’s dilemma experiment, we show that communication not only makes individuals more optimistic that their partner will cooperate but also increases the precision of this belief, thereby reducing strategic uncertainty. To disentangle the shift in mean beliefs from the increase in precision, we elicit beliefs and precision in a two-stage procedure and in three situations: without communication, before communication, and after communication. We find that the precision of beliefs increases during communication. |
| Keywords: | prisoner’s dilemma, communication, beliefs, strategic uncertainty, experiment |
| JEL: | C92 D83 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:pot:cepadp:74&r=cbe |
| By: | Krecik, Markus |
| Abstract: | Behavioral economics has so far largely avoided discussing the psychological origins of preferences, as well as their relation to needs. This has not only restricted interdisciplinary exchange, but also significantly limits the predictive capabilities of models. For example, the revealed preference approach can only reliably predict repeating choices, while needing large amounts of observations for calibration. In this paper, I show how unifying preferences with the psychological concept of needs strengthens economic models, by developing a decision-making framework for well-being assessment and choice prediction. To present the direct merit of this approach, I show how this framework yields a systematic approximation scheme, which is able to solve limitations of current approaches by describing new alternatives, non-repeating choices, or otherwise unobservable desires. Meanwhile, the approximation scheme requires less observations on an individual level than current approaches. I achieve this by constructing a hierarchical dependency between human motivations and preferences through the language of needs. I show the basic feasibility of the approximation scheme through simulations on random populations. In practice, the framework is applicable in situations where individuals exert choices only once and measuring preferences is expensive, like evaluating policy proposals or predicting decisions under technological change. |
| Keywords: | Preferences, Basic Needs, Decision-Making, Behavioral Economics, Welfare Economics |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:284393&r=cbe |