nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2011‒04‒02
twelve papers chosen by
Matthew Baker
City University of New York

  1. Temporal stability and psychological foundations of cooperation preferences By Volk, Stefan; Thoeni, Christian; Ruigrok, Winfried
  2. Emotions, Sanctions and Cooperation By Joffily, Mateus; Masclet, David; Noussair, Charles N.; Villeval, Marie Claire
  3. Cooperation limitations under a one-time threat of expulsion and punishment By Aaron Lowen; Pamela Schmitt
  4. Envy and agricultural innovation: An Experimental Case Study from Ethiopia By Bereket Kebede; Daniel John Zizzo
  5. Experiments with the Traveler's Dilemma: Welfare, Strategic Choice and Implicit Collusion By Kaushik Basu; Leonardo Becchetti; Luca Stanca
  6. Determinants of Individual Investor Behaviour: An Orthogonal Linear Transformation Approach By Chandra, Abhijeet; Kumar, Ravinder
  7. Sanctions that Signal: an Experiment. By Roberto Galbiati; Karl Schlag; Joel van der Weele
  8. The Empire Is Dead, Long Live the Empire! Long-Run Persistence of Trust and Corruption in the Bureaucracy By Becker, Sascha O.; Boeckh, Katrin; Hainz, Christa; Woessmann, Ludger
  9. Migration and Culture By Gil S. Epstein; Ira N. Gang
  10. The Long Shadow of Income on Trustworthiness By Ermisch, John; Gambetta, Diego
  11. Predicting Lotto Numbers By Claus Bjørn Jørgensen; Sigrid Suetens; Jean-Robert Tyran
  12. Inequality, Human Capital Formation and the Process of Development By Oded Galor

  1. By: Volk, Stefan; Thoeni, Christian; Ruigrok, Winfried
    Abstract: A core element of economic theory is the assumption of stable preferences. We test this assumption in public goods games by repeatedly eliciting cooperation preferences in a fixed subject pool over a period of five months. We find that cooperation preferences are very stable at the aggregate level, but less so at the individual level. Nevertheless, individual preferences are sufficiently stable to predict future behavior fairly accurately. Our results also provide evidence on the psychological foundations of cooperation preferences. The personality dimension 'Agreeableness' is closely related to both the type and the stability of cooperation preferences.
    Keywords: Social preferences, preference stability, conditional cooperation, free riding, personality, Big-Five.
    JEL: C91 C72 H41
    Date: 2011–01
  2. By: Joffily, Mateus (CNRS); Masclet, David (University of Rennes); Noussair, Charles N. (Tilburg University); Villeval, Marie Claire (CNRS, GATE)
    Abstract: We use skin conductance responses and self-reports of hedonic valence to study the emotional basis of cooperation and punishment in a social dilemma. Emotional reaction to free-riding incites individuals to apply sanctions when they are available. The application of sanctions activates a "virtuous emotional circle" that accompanies cooperation. Emotionally aroused cooperators relieve negative emotions when they punish free riders. In response, the free-riders experience negative emotions when punished, and increase their subsequent level of cooperation. The outcome is an increased level of contribution that becomes the new standard or norm. For a given contribution level, individuals attain higher levels of satisfaction when sanctioning institutions are in place.
    Keywords: emotions, sanctions, cooperation, experiment, skin conductance responses
    JEL: C92 D62 D63 D64 D74
    Date: 2011–03
  3. By: Aaron Lowen (Grand Valley State University); Pamela Schmitt (United States Naval Academy)
    Abstract: We examine the role one-time threats of expulsion and punishment have on voluntary contributions in a public goods game. This paper extends the work of Cinyabuguma, Page, and Putterman (2005), who find that the threat of expulsion in every period raises contributions to near Pareto Optimal levels. In our experiments, participants played in 15-round sessions where they were allowed to vote to remove other subjects only after round 5 and in one design also voted whether to punish the remaining subjects after round 10. We find that the additional threat of punishment not only increased the contributions of participants before the punishment vote, but also resulted in the expulsion of participants who had contributed more than in the no punishment treatment. Efficiency with expulsion is 58.07% without punishment, and 57.13% with punishment, including the cost for voting and punishment. Our findings indicate that the threat of expulsion as a sanctioning mechanism may not be helpful for public good provision unless expulsion can occur in every period, the threat of costly punishment increases contributions with little impact on efficiency, and that standards for inclusion rise when later punishment is available.
    Date: 2011–03
  4. By: Bereket Kebede; Daniel John Zizzo
    Abstract: The underlying motivations for envy or related social preferences and their impact on agricultural innovations are examined by combining data from money burning experimental game and household survey from Ethiopia. In the first stage of the money burning experimental game, income inequality is induced by providing different endowments and playing a lottery. In the second, people are allowed to decrease (‘burn’) other players’ money at their own expense. Conditional on individual behaviour, experimentally measured envious preferences from others have a negative effect on real life agricultural innovation.
    Keywords: envy; social preferences; money burning games; agricultural innovations; Ethiopia
    JEL: C93 O12 O55
    Date: 2011
  5. By: Kaushik Basu (Department of Economics, Cornell University); Leonardo Becchetti (University of Rome "Tor Vergata"); Luca Stanca (University of Milan - Bicocca)
    Abstract: This paper investigates behavior in the Traveler's Dilemma game and isolates deviations from textbook predictions caused by differences in welfare perceptions and strategic miscalculations. It presents the results of an experimental analysis based on a 2x2 design where the own and the other subject's bonus-penalty parameters are changed independently. We find that the change in own bonus-penalty alone entirely explains the effect on claims of a simultaneous change in one's own and the other's bonus-penalty. An increase in the other subject's bonus-penalty has a significant negative effect on claims when the own bonus-penalty is low, whereas it does not have a significant effect when the own bonus-penalty is high. We also find that expected claims are inconsistent with actual claims in the asymmetric treatments. Focusing on reported strategies, we document substantial heterogeneity and show that changes in choices across treatments are largely explained by risk aversion.
    Date: 2011–03–23
  6. By: Chandra, Abhijeet; Kumar, Ravinder
    Abstract: Expected utility theory views the individual investment decision as a tradeoff between immediate consumption and deferred consumption. But individuals do not always prefer according to the classical theory of economics. Recent studies on individual investor behavior have shown that they do not act in a rational manner, rather several factors influences their investment decisions in stock market. The present study considers this theory of irrationality of individual investors and investigates into their behaviour relating to investment decisions. We examine whether some psychological and contextual factors affect individual investor behaviour and if yes which factors influences most. Extrapolating from previous literature on economics, finance and psychology, we surveyed individual investors to find what and to what extent affects their investment behaviour. Our conceptual analysis, empirical findings and the perspective framework that we have developed in the present study, provide five major factors that can influence individual investor behaviour in Indian stock market. The findings can be useful in profiling individual investors and designing appropriate investment strategies according to their personal characteristics, thereby enabling them optimum return on their investments.
    Keywords: Individual investor; Psychological biases; Investment behaviour; Indian stock market; Behavioural economics.
    JEL: C39 G11 C93
    Date: 2011–01–13
  7. By: Roberto Galbiati; Karl Schlag; Joel van der Weele
    Abstract: Sanctions are a means to provide incentives towards more pro-social behavior. Yet their implementation can be a signal that past behavior was undesirable. We investigate experimentally the importance of the informational content of the choice to sanction. We place this in a context of a coordination game to focus attention on beliefs and information and less on intrinsic or pro-social motivations. We compare the eect of sanctions that are introduced exogenously by the experimenter to that of sanctions which have been actively chosen by a subject who takes the role of a fictitious policy maker with superior information about the previous eort of the other players. We nd that cooperative subjects perceive actively chosen sanctions as a negative signal which eliminates for them the incentive eect of sanctions.
    JEL: C92 D83 K42
    Date: 2011–03
  8. By: Becker, Sascha O. (University of Warwick); Boeckh, Katrin (Osteuropa-Institut, Regensburg (OEI)); Hainz, Christa (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: Do empires affect attitudes towards the state long after their demise? We hypothesize that the Habsburg Empire with its localized and well-respected administration increased citizens' trust in local public services. In several Eastern European countries, communities on both sides of the long-gone Habsburg border have been sharing common formal institutions for a century now. Identifying from individuals living within a restricted band around the former border, we find that historical Habsburg affiliation increases current trust and reduces corruption in courts and police. Falsification tests of spuriously moved borders, geographic and pre-existing differences, and interpersonal trust corroborate a genuine Habsburg effect.
    Keywords: Habsburg Empire, trust, corruption, institutions, borders
    JEL: N33 N34 D73 Z10
    Date: 2011–03
  9. By: Gil S. Epstein (Department of Economics, Bar Ilan University); Ira N. Gang (Rutgers University)
    Abstract: Culture is not new to the study of migration. It has lurked beneath the surface for some time, occasionally protruding openly into the discussion, usually under some pseudonym. The authors bring culture into the open. They are concerned with how culture manifests itself in the migration process for three groups of actors: the migrants, those remaining in the sending areas, and people already living in the recipient locations. The topics vary widely. What unites the authors is an understanding that though actors behave differently, within a group there are economically important shared beliefs (customs, values, attitudes, etc.), which we commonly refer to as culture. Culture and identify play a central role in our understanding of migration as an economic phenomenon; but what about them matters? Properly, we should be looking at the determinants of identity and the determinants of culture (prices and incomes, broadly defined). But this is not what is done. Usually identity and culture appear in economics articles as a black box. Here we try to begin to break open the black box.
    Date: 2010–08
  10. By: Ermisch, John (University of Essex); Gambetta, Diego (University of Oxford)
    Abstract: We employ a behavioural measure of trustworthiness obtained from an experiment carried out with a sample of the general British population whose individuals were extensively interviewed on earlier occasions. These previous interviews allow us to have very good income measures, and in particular to construct a measure of relative income that uses past income as a reference point. Our basic finding is that given past income, higher current income increases trustworthiness and, given current income, higher past income reduces trustworthiness. Past income determines the level of financial aspirations and whether or not these are fulfilled by the level of current income affects trustworthiness. But past income has a disproportionately large effect on trustworthiness compared to that predicted by the relative income theory, and this leads us to suspect that past income may also capture heterogeneity in relevant subjects’ dispositions, with more opportunistic subjects being less trustworthy and having higher average incomes. We suggest and estimate a two-tier model in which relative income has the same positive effect within each past income class, but people in higher past income classes have a lower fundamental levels of trustworthiness.
    Keywords: trustworthiness, relative income
    JEL: C93 D10
    Date: 2011–03
  11. By: Claus Bjørn Jørgensen (Department of Economics, University of Copenhagen); Sigrid Suetens (Tilburg University); Jean-Robert Tyran (Department of Economics, University of Vienna)
    Abstract: We investigate the “law of small numbers” using a unique panel data set on lotto gambling. Because we can track individual players over time, we can measure how they react to outcomes of recent lotto drawings. We can therefore test whether they behave as if they believe they can predict lotto numbers based on recent drawings. While most players pick the same set of numbers week after week without regards of numbers drawn or anything else, we find that those who do change, act on average in the way predicted by the law of small numbers as formalized in recent behavioral theory. In particular, on average they move away from numbers that have recently been drawn, as suggested by the “gambler’s fallacy”, and move toward numbers that are on streak, i.e. have been drawn several weeks in a row, consistent with the “hot hand fallacy”.
    Keywords: gambler’s fallacy; hot hand fallacy; representativeness; law of small numbers
    JEL: D81 D84
    Date: 2011–03
  12. By: Oded Galor
    Abstract: #
    Keywords: Education, Gender Gap, Human capital, Income distribution, Inequality, Devel- opment, Unified Growth Theory
    Date: 2011

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