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on Cognitive and Behavioural Economics |
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Issue of 2024‒05‒27
four papers chosen by |
| By: | Avichai Snir; Dudi Levy; Dian Wang; Haipeng Allan Chen; Daniel Levy |
| Abstract: | Many experimental studies report that economics students tend to act more selfishly than students of other disciplines, a finding that received widespread public and professional attention. Two main explanations that the existing literature offers for the differences found in the behavior between economists and noneconomists are the selection effect, and the indoctrination effect. We offer an alternative, novel explanation. We argue that these differences can be explained by differences in the interpretation of the context. We test this hypothesis by conducting two social dilemma experiments in the US and Israel with participants from both economics and non-economics majors. In the experiments, participants face a tradeoff between profit maximization, that is the market norm and workers welfare, that is the social norm. We use priming to manipulate the cues that the participants receive before they make their decision. We find that when participants receive cues signaling that the decision has an economic context, both economics and non-economics students tend to maximize profits. When the participants receive cues emphasizing social norms, on the other hand, both economics and non-economics students are less likely to maximize profits. We conclude that some of the differences found between the decisions of economics and non-economics students can be explained by contextual cues. |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2405.03893&r=cbe |
| By: | Alger, Ingela; Rivero-Wildemauwe, José Ignacio |
| Abstract: | We conduct a laboratory experiment using framing to assess the willing-ness to “sell a lemon”, i.e., to undertake an action that benefits self but hurts the other (the “buyer”). We seek to disentangle the role of other-regarding preferences and (Kan-tian) moral concerns, and to test if it matters whether the decision is described in neutral terms or as a market situation. When evaluating an action, morally motivated individuals consider what their own payo would be if—hypothetically—the roles were reversed and the other subject chose the same action (universalization). We vary the salience of role uncertainty, thus varying the ease for participants to envisage the role-reversal scenario. We find that subjects are (1) more likely to “sell a lemon” in the market frame, and (2) less likely to do so when the role uncertainty is salient. We also structurally estimate other-regarding and Kantian moral concern parameters. |
| Keywords: | market framing; lemons; social preferences; Kantian morality; experiment |
| JEL: | C91 D01 D91 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:129328&r=cbe |
| By: | Ruggeri, Kai (Columbia University); Abate Romero Landini, Giampaolo; Busch, Katharina; Cafarelli, Valentina; Doubravová, Barbora; Gurol, Deniz Misra; Miralem, Melika; Nilsson, Fredrik; Ashcroft-Jones, Sarah (University of Heidelberg); Stock, Friederike |
| Abstract: | Positive deviants are individuals from disadvantaged circumstances who outperform the typically negative outcomes for their group. Research on positive deviance in behavioral sciences is scarce, although such information could provide valuable insights into overcoming inequalities useful for developing interventions. We tested choice patterns between positive deviants, low-income individuals, and the general population. Our aim was to investigate whether positive deviants perform differently on cognitive bias tasks compared to other individuals with low incomes or the general population. The instrument was tested in multiple countries (N = 1, 722) to determine potential differentiation based on systems-level, social, and structural factors. We found no differences between income groups in the fourteen choice patterns assessed in our instrument involving cognitive biases, and only anecdotal differences in some financial behaviors. Such findings suggest that, while behavioral interventions will benefit individuals where appropriately implemented, systemic and structural factors are most critical for improving the financial well-being of entire populations. |
| Date: | 2024–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:f8hyk&r=cbe |
| By: | Huang, Lingxi; Guenther, Benno |
| Abstract: | The disposition effect is one of the most prominent and widely studied behavioral biases observed among investors. It describes the tendency to close out winning investments prematurely while holding on to losing ones for too long and is generally associated with reduced investment returns. Researchers have explored various debiasing strategies and interventions to mitigate the disposition effect and its detrimental impact on returns. We summarize a between-subject experiment with n = 132 UK participants testing the impact of an informational feedback-like intervention to mitigate the disposition effect, informing participants about the disposition effect. Moreover, we re-examine our intervention's impact in the follow-up measurements which are two weeks and again three months after the first measurement. We find our intervention to have a significant impact, reducing the disposition effect in the first measurement. In addition, we still find a significant impact of the intervention, reducing the disposition effect after two weeks, while no significant impact is observed at the three-month point.While we find a higher disposition effect to be associated with lower returns for one measurement, the opposite is true for the other two measurements. Moreover, the intervention had a return reducing impact for one measurement and no significant impact for the other two. Overall, our study shows a promising intervention that may be readily deployed among retail investors with a somewhat lasting impact to mitigate the disposition effect. However, our study also shows that the relationship between the disposition effect and investment returns is nuanced. |
| Keywords: | disposition effect; behavioral finance; trading biases; retail investors; investment decision-making; REF fund |
| JEL: | J1 |
| Date: | 2024–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:122579&r=cbe |