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on Cognitive and Behavioural Economics |
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Issue of 2024–12–09
four papers chosen by Marco Novarese, Università degli Studi del Piemonte Orientale |
| By: | Sandro Ambuehl; Heidi C. Thysen |
| Abstract: | Good decision-making requires understanding the causal impact of our actions. Often, we only have access to correlational data that could stem from multiple causal mechanisms with divergent implications for choice. Our experiments comprehensively characterize choice when subjects face conflicting causal interpretations of such data. Behavior primarily reflects three types: following interpretations that make attractive promises, choosing cautiously, and assessing the fit of interpretations to the data. We characterize properties of interpretations that obscure bad fit to subjects. Preferences for more complex models are more common than those reflecting Occam’s razor. Implications extend to the Causal Narratives and Model Persuasion literatures. |
| Keywords: | Decision-making, causal mechanisms, causal narratives, model persuasion, causal interpretations |
| JEL: | C91 D01 D83 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:zur:econwp:458 |
| By: | Pietro Battiston; Simona Gamba; Sharon G. Harrison |
| Abstract: | We run an experiment where subjects play a standard repeated two player public good game looking at the effect of being matched to a subject with different endowment — and keeping fixed the overall distribution of endowments. Unlike most of the existing literature, all subjects are aware of the existing heterogeneity in endowments, regardless of whether they are assigned to a financially homogeneous or heterogeneous group. Moreover, since in modern societies financial heterogeneity typically correlates with many other forms of heterogeneity, including habits, tastes and membership in given social groups, we look at how financial heterogeneity interacts with in–group vs. out–group feeling, using randomly formed groups. While neither economic integration nor group membership alone significantly affects overall contributions, and hence welfare, the two strongly interact: being matched to a partner with a different endowment and from the other group results in particularly low contributions. Similarly, being matched to a partner who is from the other group and has low endowment results in particularly low contributions. |
| Keywords: | public good game, economic segregation, in-group effect, laboratory experiment |
| JEL: | H41 C92 D31 |
| Date: | 2024–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:pie:dsedps:2024/318 |
| By: | Carlos Alós-Ferrer; Ernst Fehr; Helga Fehr-Duda; Michele Garagnani |
| Abstract: | Recent contributions suggest that the empirical evidence for the common ratio effect could be explained as noise instead of underlying preferences under “common assumptions.” We revisit this argument using a more general method which allows to unambiguously dis- tinguish noise from preferences nonparametrically and with less stringent assumptions. The results are independent of the assumed behavioral model or how noise affects choices. Ap- plying this method to new experimental data we show that there is a systematic preference for the common ratio and the common consequence effects which cannot be explained by noise. |
| JEL: | C91 D81 D91 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:zur:econwp:459 |
| By: | Carlos Alos Ferrer; Ernst Fehr; Michele Garagnani |
| Abstract: | Transitivity is perhaps the most fundamental axiom in economic models of choice. The empirical literature has regularly documented violations of transitivity, but these violations pose little problem if they are simply a result of somewhat-noisy decision making and not a reflection of the deterministic part of individuals’ preferences. However, what if transitivity violations reflect genuinely nontransitive preferences? And how can we separate nontransitive preferences from noise-generated transitivity violations–a problem that so far appears unresolved? To tackle these fundamental questions, we develop a theoretical framework which allows for nontransitive choices and behavioral noise. We then derive a non-parametric method which uses response times and choice frequencies to distinguish genuine (and potentially nontransitive) preferences from noise. We apply this method to two different datasets, demonstrating that a substantial proportion of transitivity violations reflect genuinely nontransitive preferences. These violations cannot be accounted for by any model using transitive preferences and noisy choices. |
| Keywords: | Transitivity, Stochastic choice, Preference Revelation |
| JEL: | D01 D81 D87 D91 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:lan:wpaper:413755644 |