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on Evolutionary Economics |
| By: | Bénabou, Roland; Tirole, Jean |
| Abstract: | We build a theory of prosocial behaviour that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. The presence of rewards or punishments creates doubt as to the true motive for which good deeds are performed, and this ‘overjustification effect’ can result in a net crowding out of prosocial behaviour by extrinsic incentives. The model also allows us to identify settings that are conducive to multiple social norms of behaviour, and those where disclosing one’s generosity may backfire. Finally, we analyse the equilibrium contracts offered by sponsors, including the level and confidentiality or publicity of incentives. Sponsor competition may cause rewards to bid down rather than up, and can even reduce social welfare by requiring agents to engage in inefficient sacrifices. |
| Keywords: | altruism; crowding out; D64; identity; motivation; overjustification effect; reputation; rewards; social norms; Z13 |
| JEL: | D82 H41 |
| Date: | 2004–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4633&r=evo |
| By: | Brunnermeier, Markus K; Parker, Jonathan A |
| Abstract: | This Paper introduces a tractable, structural model of subjective beliefs. Forward-looking agents care about expected future utility flows, and hence have higher current felicity if they believe that better outcomes are more likely. On the other hand, biased expectations lead to poorer decisions and worse realized outcomes on average. Optimal expectations balance these forces by maximizing average felicity. A small bias in beliefs typically leads to first-order gains due to increased anticipatory utility and only to second-order costs due to distorted behaviour. We show that in a portfolio choice problem, agents overestimate the return on their investment and exhibit a preference for skewness. In general equilibrium, agents’ prior beliefs are endogenously heterogeneous. Finally, in a consumption-saving problem with stochastic income, agents are both overconfident and overoptimistic. |
| Keywords: | belief biases; consumption; expectation; gambling; heterogenous beliefs; overconfidence; portfolio choice; saving |
| JEL: | D10 D80 E21 G11 G12 |
| Date: | 2004–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4656&r=evo |
| By: | Brülhart, Marius; Usunier, Jean-Claude |
| Abstract: | Behavioural economists have come to recognize that reciprocity, the interaction of trust and trustworthiness, is a distinct and economically relevant component of individual preferences alongside selfishness and altruism. This recognition is principally due to observed decisions in experimental ‘trust games’. However, recent research has cast doubt on the explanatory power of trust as a determinant of those decisions, suggesting that altruism may explain much of what ‘looks like’ trust. Moreover, empirical tests for alternative behavioural determinants can be sensitive to experimental bias due to differences in protocols and framing. Therefore, we propose discriminatory tests for altruism and trust that can be based on within-treatment and within-subject comparisons, and we control for group attributes of experimental subjects. Our results support trust (i.e. expected reciprocation) as the dominant motivation for ‘trust like’ decisions. |
| Keywords: | altruism; experimental error; reciprocity; trust game |
| JEL: | C91 D63 D64 |
| Date: | 2004–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:4758&r=evo |
| By: | Robert J. Shiller (Cowles Foundation, Yale University) |
| Abstract: | Behavioral economics has played a fundamental role historically in innovation in economic institutions, even long before behavioral economics was recognized as a discipline. Examples from history, notably that of the invention of workers’ compensation, illustrate this point. Though scholarly discussion develops over decades, actual innovation tends to occur episodically, particularly at times of economic crisis. Fortunately, some of the major professional societies, the Verein für Sozialpolitik, the American Economic Association and their successors, have managed to keep a broad discourse going, involving a variety of research methods including some that may be described today as behavioral economics, thereby maintaining an environment friendly to institutional innovation. Further, the broad expansion of behavioral economics that is going on today can be expected to yield even more such important institutional innovations. |
| Keywords: | Economic innovation, Invention, Psychological economics, Institutional economics, Social insurance, Workers’ compensation, American Economic Association, Germany, Verein fur Sozialpolitik |
| JEL: | B41 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1499&r=evo |