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on Cognitive and Behavioural Economics |
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Issue of 2024‒08‒19
five papers chosen by |
| By: | Fabian Herweg (University of Bayreuth); Svenja Hippel (University of Bonn); Daniel Müller (University of Würzburg); Fabio Römeis (University of Würzburg) |
| Abstract: | In prosocial decisions, decision-makers are inherently uncertain about how their decisions impact others’ utility – we call this interpersonal uncertainty. We show that people's response to interpersonal uncertainty shapes well-known patterns of prosocial behavior. First, using standard social allocation decisions, we replicate the classic patterns of ingroup favoritism, merit-based fairness ideals, and self-favoring behavior in dictator games. We then show that these patterns also arise in non-social decisions which have no consequences for others and instead solely reflect responses to interpersonal uncertainty. Behavior across social and non-social decisions is highly correlated, and self-reported interpersonal uncertainty predicts behavior in both situations. Moreover, exogenously varying interpersonal uncertainty shifts prosocial behavior in the direction that avoids such uncertainty. Our results quantify how beliefs in the form of interpersonal uncertainty influence prosocial behavior, which we estimate to be of similar importance to social preferences. |
| Keywords: | Axiomatic rationality, Choice under risk, Context-dependent preferences, Mistakes, Regret theory |
| JEL: | C91 D01 D81 D91 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:326 |
| By: | Anujit Chakraborty (University of California); Luca Henkel (University of Chicago & University of CEMA) |
| Abstract: | In prosocial decisions, decision-makers are inherently uncertain about how their decisions impact others’ utility – we call this interpersonal uncertainty. We show that people's response to interpersonal uncertainty shapes well-known patterns of prosocial behavior. First, using standard social allocation decisions, we replicate the classic patterns of ingroup favoritism, merit-based fairness ideals, and self-favoring behavior in dictator games. We then show that these patterns also arise in non-social decisions which have no consequences for others and instead solely reflect responses to interpersonal uncertainty. Behavior across social and non-social decisions is highly correlated, and self-reported interpersonal uncertainty predicts behavior in both situations. Moreover, exogenously varying interpersonal uncertainty shifts prosocial behavior in the direction that avoids such uncertainty. Our results quantify how beliefs in the form of interpersonal uncertainty influence prosocial behavior, which we estimate to be of similar importance to social preferences. |
| Keywords: | Prosocial behavior, social preferences, ingroup versus outgroup decisions, dictator games, fairness preferences, interpersonal uncertainty |
| JEL: | C91 D01 D91 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:327 |
| By: | Alem, Yonas (University of Gothenburg & Jameel Poverty Action Lab, J-PAL); Loeser, John (Development Impact Evaluation, World Bank); Mahajan, Aprajit (University of California, Berkeley) |
| Abstract: | The implications of commonly used money earlier or later (MEL) games for intertemporal behavior depend critically upon subjects’ choice bracketing. If subjects bracket narrowly, responses reflect preferences independent of subjects’ financial environment. Alternatively, if subjects bracket broadly, responses reflect subjects’ marginal returns to investment. We test both hypotheses in a lab-in-the-field experiment, which involves repeated MEL games, a large unconditional cash transfer, and an illiquid savings product. Subjects do not narrowly bracket – randomized cash transfers induce greater patience in MEL choices. Subjects do not broadly bracket either – they fail to arbitrage across equivalent MEL and savings opportunities. We provide a conceptual framework and present evidence that narrowly bracketing subjects drive the predictive power of MEL outcomes for financial choices, justifying the common practice of interpreting MEL choices as a proxy for time preferences rather than financial environment. |
| Keywords: | Time preferences; narrow bracketing; broad bracketing |
| JEL: | C93 D03 D11 D90 |
| Date: | 2024–06–24 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:gunefd:2024_009 |
| By: | Radosveta Ivanova-Stenzel (TU Berlin); Michel Tolksdorf (TU Berlin) |
| Abstract: | We suggest a simple method to elicit individual preferences for algorithms. By altering the monetary incentives for ceding control to the algorithm, the menu-based approach allows for measuring, in particular, the degree of algorithm aversion. Using an experiment, we elicit preferences for algorithms in an environment with measurable performance accuracy under two conditions|the absence and the presence of information about the algorithm's performance. Providing such information raises subjects' willingness to rely on algorithms when ceding control to the algorithm is more costly than trusting their own assessment. However, algorithms are still underutilized. |
| Keywords: | algorithm aversion; delegation; experiment; preferences; |
| JEL: | C91 D83 D91 |
| Date: | 2024–07–30 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:508 |
| By: | Holden, Stein T. (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Tione, Sarah Ephrida (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Tilahun, Mesfin (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Katengeza, Samson (Centre for Land Tenure Studies, Norwegian University of Life Sciences) |
| Abstract: | We investigate how random luck in repeated variants of the risky investment game of Gneezy, Leonard, and List (2009); Gneezy and Potters (1997) influences risk-taking and discounting behavior in future risky prospects with probabilistic payouts one week, six, 12, and 24 months into the future. We test non-parametrically whether luck enhances risk-taking and patience (reduces the discount rate) in risky prospects with delayed payouts. To investigate whether luck influences probability weighting (w(p) function), we estimate structural models with two-parameter Prelec probability weighting functions to decompose risk-taking in prospects with potential payouts six and 12 months into the future. We find that luck results in more optimistic (reduces the Prelec β parameter) and less non-linear (inverse-S-shaped) (increases the Prelec α parameter) w(p) function. We assess this for two samples from Malawi: one is a random sample of university students (n=721), and the other is a random sample (n=835) of rural subjects with limited education. The students were found to be more patient but had similar probability weighting functions. |
| Keywords: | Luck; Discounting; Risk-taking; Probability weighting |
| JEL: | C91 C93 D81 D84 D91 |
| Date: | 2024–07–18 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nlsclt:2024_004 |