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on Cognitive and Behavioural Economics |
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Issue of 2024‒07‒08
six papers chosen by |
| By: | Wu, Keyu (University of Zurich); Fehr, Ernst (University of Zurich); Hofland, Sean (Lucerne School of Business); Schonger, Martin (Lucerne School of Business) |
| Abstract: | Ambiguous prospects are ubiquitous in social and economic life, but the psychological foundations of behavior under ambiguity are still not well understood. One of the most robust empirical regularities is the strong correlation between attitudes towards ambiguity and compound risk which suggests that compound risk aversion may provide a psychological foundation for ambiguity aversion. However, compound risk aversion and ambiguity aversion may also be independent psychological phenomena, but what would then explain their strong correlation? We tackle these questions by training a treatment group’s ability to reduce compound to simple risks, and analyzing how this affects their compound risk and ambiguity attitudes in comparison to a control group who is taught something unrelated to reducing compound risk. We find that aversion to compound risk disappears almost entirely in the treatment group, while the aversion towards both artificial and natural sources of ambiguity remain high and are basically unaffected by the teaching of how to reduce compound lotteries. Moreover, similar to previous studies, we observe a strong correlation between compound risk aversion and ambiguity aversion, but this correlation only exists in the control group while in the treatment group it is rather low and insignificant. These findings suggest that ambiguity attitudes are not a psychological relative, and derived from, attitudes towards compound risk, i.e., compound risk aversion and ambiguity aversion do not share the same psychological foundations. While compound risk aversion is primarily driven by a form of bounded rationality – the inability to reduce compound lotteries – ambiguity aversion is unrelated to this inability, suggesting that ambiguity aversion may be a genuine preference in its own right. |
| Keywords: | ambiguity aversion, compound risk aversion, bounded rationality, reduction of compound lotteries |
| JEL: | C91 D01 D91 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17032&r= |
| By: | Ingela Alger; Jos\'e Ignacio Rivero-Wildemauwe |
| Abstract: | We conduct a laboratory experiment using framing to assess the willingness 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 (Kantian) 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 payoff 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. |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2405.13186&r= |
| By: | Herz, Holger (University of Fribourg, Switzerland); Zihlmann, Christian |
| Abstract: | Organizational structures are an important determinant of individual incentives and thus individual motivation in organizations. We study whether their effects on individual motivation go beyond incentives and how they relate to the perceived legitimacy of organizational structure. To this end, we design a laboratory experiment in which we exogenously manipulate the organizational structure in a way that leaves the incentives of all individuals unaffected, but changes the perceived legitimacy of the organizational structure. Our data show that organizational structure indeed affects behavior beyond monetary incentive effects and that the observed changes are significantly associated with changes in perceived legitimacy.. |
| Keywords: | Legitimacy, Organization, Motivation |
| JEL: | D01 D23 D91 M5 |
| Date: | 2024–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:fri:fribow:fribow00533&r= |
| By: | Flagner, Stefan (Maastricht University); Meissner, Thomas (Maastricht University); Künn, Steffen (Maastricht University); Eichholtz, Piet (Maastricht University); Kok, Nils (Maastricht University); Kramer, Rick (Eindhoven University of Technology); van Marken-Lichtenbelt, Wouter (Maastricht University); Ly, Cynthia (Maastricht University); Plasqui, Guy (Maastricht University) |
| Abstract: | This study provides novel evidence on the isolated effect of carbon dioxide on cognition, economic decision-making, and the physiological response in healthy office workers. The experiment took place in an air-tight respiration chamber fully controlling the environmental conditions. In a single-blind, within-subject study design, 20 healthy participants were exposed to carbon dioxide concentrations of 3, 000 ppm and 900 ppm in randomized order, with each exposure lasting for 8 hours. We do not find evidence on a statistically significant effect on either cognitive or physiological outcome variables. Thus, the evidence shows that the human body appears to be able to deal with exposure to indoor carbon dioxide concentration of 3, 000 ppm without suffering significant cognitive decline, changes in decision-making or showing any physiological response. |
| Keywords: | carbon dioxide, indoor air quality, cognition, economic decision-making, physiological response |
| JEL: | D87 J24 Q54 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17019&r= |
| By: | Manzoni, Elena (University of Bergamo); Murard, Elie (University of Trento); Quercia, Simone (University of Verona); Tonini, Sara (Universidad de Alicante) |
| Abstract: | How do emotions affect policy views on immigration? How do they influence the way people process and respond to factual information? We address these questions using a survey experiment in Italy, which randomly exposes around 7, 000 participants to (i) sensational news about immigrant crimes, (ii) statistical information about immigration, or to (iii) the combination of both. First, we find different effects of news depending on the severity of the reported crime: while the news of a rape against a young woman significantly increases the demand for anti-immigration policies, there is no impact of the news of a petty theft. Consistent with a causal role of emotions, we find that the rape news triggers a stronger emotional reaction than the theft news, while having a similar effect on factual beliefs. Second, we document that information provision corrects beliefs, irrespective of whether participants are also exposed to the rape news. Yet, the exposure to the rape news strongly influences whether belief updating translates into change in policy views: when presented in isolation, information tends to reduce anti-immigration views; when combined with the rape news, the impact of the latter dominates and participants increase their anti-immigration views to the same extent as when exposed to the rape news only. This evidence suggests that, once negative emotions are triggered, having more accurate factual knowledge no longer matters for forming policy views on immigration. |
| Keywords: | news, information, immigration, experiment, belief, emotions |
| JEL: | F22 C90 D91 D72 D83 J15 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17017&r= |
| By: | Davis, John B.; ; (Department of Economics Marquette University; Department of Economics Marquette University) |
| Abstract: | This paper discusses the difference between mainstream and heterodox economics in terms of philosophy’s distinction between two types of temporal sequences governing events: the static, truth-tenseless before-after sequence and the dynamic, truth-tensed past-present-future sequence. Mainstream theory and optimization analysis employs the first. However, Aristotle showed long ago this implies fatalism. Heterodox explanations employ the second, which I argue implies people reflexively adjust their choices over time in a combined backward-looking and forward-looking way that rules out optimization. Central to this explanation of behavior is how uncertainty about the future is connected to uncertainty about the past. I show this can be explained in terms of how people engage in counterfactual thinking whereby their uncertainty about the future is investigated through how they re-examine their uncertainty about the past. This behavioral explanation affects how we interpret two different sets of temporal phenomena heterodoxy emphasizes: (i) irreversibility and path-dependence and (ii) emergence and cumulative causation. I argue this demonstrates the need for the open economic thinking heterodoxy employs, not the closed economic thinking the mainstream employs. |
| Keywords: | temporal sequences, fatalism, reflexive adjustment, future-past uncertainty, open economic thinking |
| JEL: | B41 B50 D01 D80 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:mrq:wpaper:2024-03&r= |