nep-neu New Economics Papers
on Neuroeconomics
Issue of 2009‒06‒03
eight papers chosen by
Daniel Houser
George Mason University

  1. Different methods to define utility functions yield different results and engage different neural processes By Heldmann, Marcus; Vogt, Bodo; Heinze, Hans-Jochen; Münte, Thomas
  2. Genetic Variability and Collective Social Norms: The Case of Binge Drinking By Shogren, Jason F.; Nævdal, Eric
  3. Rational addiction theory – a survey of opinions By Melberg, Hans Olav
  4. Marijuana Consumption, Educational Outcomes and Labor Market Success: Evidence from Switzerland By Donata Bessey; Uschi Backes-Gellner
  5. Walking Through Jelly: Language Proficiency, Emotions, and Disrupted Collaboration in Global Work By Tsedal Beyene; Pamela J. Hinds; Catherine Durnell Cramton
  6. Risk Attitudes and Wage Growth : Replication and Reconstruction By Santi Budria; Luis Diaz-Serrano; Ada Ferrer-i-Carbonell; Joop Hartog
  7. The Effect of Classmate Characteristics on Individual Outcomes: Evidence from the Add Health By Robert Bifulco; Jason M. Fletcher; Stephen L. Ross
  8. Optimal prevention when informal penalties matter: The case of medical errors By Grepperud, Sverre

  1. By: Heldmann, Marcus (Otto-von-Guericke University Magdeburg); Vogt, Bodo (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Heinze, Hans-Jochen (Otto-von-Guericke University Magdeburg); Münte, Thomas (Otto-von-Guericke University Magdeburg)
    Abstract: Although the concept of utility is fundamental to many economic theories, up to now a generally accepted method determining a subject’s utility function is not available. We investigated two methods that are used in economic sciences for describing utility functions by using response-locked event-related potentials in order to assess their neural underpinnings. For defining the certainty equivalent (CE), we used a lottery game with probabilities of 0.5, for identifying the subjects’ utility functions directly a standard bisection task was applied. Although the lottery tasks’ payoffs were only hypothetical, a pronounced negativity was observed resembling the error related negativity (ERN) previously described in action monitoring research, but this occurred only for choices far away from the indifference point between money and lottery. By contrast, the bisection task failed to evoke an ERN irrespective of the responses’ correctness. Based on these findings we are reasoning that only decisions made in the lottery task achieved a level of subjective relevance that activates cognitive-emotional monitoring. In terms of economic sciences, our findings support the view that the bisection method is unaffected by any kind of probability valuation or other parameters related to risk and in combination with the lottery task can, therefore, be used to differentiate between payoff and probability valuation.
    Keywords: Utility function; neuroeconomics; error-related negativity; executive functions; cognitive electrophysiology; lottery,bisection
    Date: 2009–05
  2. By: Shogren, Jason F. (Department of Economics and Finance); Nævdal, Eric (Department of Economics and HERO)
    Abstract: This paper explores how collective social norms can have individual-level genetic foundation. Our study is the first we know to report a plausible link between genetically founded individual preferences in a fraction of a population and social norms governing behavior of all individuals. As our motivating example, we focus on patterns of Excessive Drinking in Social Situations (EDSS) across Europe that are possibly triggered by genetically caused variations in personality. The genetic trait is shyness, which correlates with eye color. We present empirical results indicating that alcohol consumption in social situations correlate with eye color and a model which suggests that conditions exist in which EDSS can emerge as a strategy in a larger fraction of the population than is genetically predisposed to EDSS. In addition, our model shows that alcohol taxes may be counter-productive in controlling the emergence of EDSS as a social norm.
    Keywords: Excessive Drinking in Social Situations (EDSS); drinking behavior; genetically founded individual preferences; sosial norms
    JEL: I12 I18
    Date: 2009–06–04
  3. By: Melberg, Hans Olav (Institute of Health Management and Health Economics)
    Abstract: This paper reports briefly on some of the results from a survey of academics who have written about the theory of rational addiction. The topic is important in itself because if the literature is viewed by its participants as an intellectual game, then policy makers should be aware of this so as not to derive actual policy from toy models. More generally, the answers shed light on the nature of economics and how many economists think about model building, evidence requirements and the policy relevance of their work. A majority of the respondents believe the literature is a success story that demonstrates the power of economic reasoning. At the same time they also believe the empirical evidence to be weak, and they disagree both on the type of evidence that would validate the theory and the policy implications. Taken together this points to an interesting gap. On the one hand most of the respondents claim that the theory has valuable real-world implications. On the other hand they do not believe the theory has received empirical support.
    Keywords: Rational addiction theory; survey of opinions of economists; disagreement on evidence criteria and interpretation of evidence
    JEL: I10
    Date: 2009–06–02
  4. By: Donata Bessey (Institute for Strategy and Business Economics, University of Zurich); Uschi Backes-Gellner (Institute for Strategy and Business Economics, University of Zurich)
    Abstract: In this paper, we analyze the impact of onset of marijuana consumption during different periods in youth on educational outcomes and labor market success using a Swiss data set. In order to deal with endogeneity, we estimate a multivariate probit model with an instrumental variables strategy. Our results seem to suggest that onset of marijuana consumption under age 14 leads to a signicantly lower probability of having at least a secondary education, and onset of consumption between age 15 and 16 as well as between age 17 and 18 leads to a signicantly lower probability of having a tertiary education. While we do not find any impact of marijuana consumption on the probability of being unemployed, onset of marijuana consumption under age 14 and between age 15 and 16 leads to a significantly higher probability of working less than 80%.
    Keywords: Risky behavior, production of human capital, multivariate probit
    JEL: I19 I21
    Date: 2009–02
  5. By: Tsedal Beyene (Harvard Business School, Organizational Behavior Unit); Pamela J. Hinds (Department of Management Science & Engineering, Stanford University); Catherine Durnell Cramton (School of Management, George Mason University)
    Abstract: In an ethnographic study comprised of interviews and concurrent observations of 145 globally distributed members of nine project teams of an organization, we found that uneven proficiency in English, the lingua franca, disrupted collaboration for both native and non-native speakers. Although all team members spoke English, different levels of fluency contributed to tensions on these teams. As non-native English speakers attempted to counter the apprehension they felt when having to speak English and native English speakers fought against feeling excluded and devalued, a cycle of negative emotion ensued and disrupted interpersonal relationships on these teams. We describe in detail how emotions and actions evolved recursively as coworkers sought to relieve themselves of negative emotions prompted by the lingua franca mandate and inadvertently behaved in ways that triggered negative responses in distant coworkers. Our results add to the scant literature on the role of emotions in collaborative relationships in organizations and suggest that organizational policies can set in motion a cycle of negative emotions that interfere with collaborative work.
    Date: 2009–06
  6. By: Santi Budria; Luis Diaz-Serrano; Ada Ferrer-i-Carbonell; Joop Hartog
    Abstract: We replicate Shaw (1996) who found that individual wage growth is higher for individuals with greater preference for risk taking. Expanding her dataset with more American observations and data for Germany, Spain and Italy, we find mixed support for the earlier results. We present and estimate a new model and find that in particular the wage level is sensitive to attitudes towards risk taking.
    Keywords: wage growth, risk, post-school investment
    JEL: J24 J30
    Date: 2009
  7. By: Robert Bifulco (Syracuse University); Jason M. Fletcher (Yale University); Stephen L. Ross (University of Connecticut)
    Abstract: We use data from the National Longitudinal Study of Adolescent Health (Add Health) to examine the effects of classmate characteristics on economic and social outcomes of students. The unique structure of the Add Health allows us to estimate these effects using comparisons across cohorts within schools, and to examine a wider range of outcomes than other studies that have used this identification strategy. This strategy yields variation in cohort composition that is uncorrelated with student observables suggesting that our estimates are not biased by the selection of students into schools or grades based on classmate characteristics. We find that increases in the percent of classmates whose mother is college educated has significant, desirable effects on educational attainment and substance use. We find no evidence that in-school achievement, student attitudes, or behaviors serve as mechanisms for this effect. The percent of students from disadvantaged minority groups does not show any negative effects on the post-secondary outcomes we examine, but is associated with students reporting less caring student-teacher relationships and increased prevalence of some undesirable student behaviors during high school.
    Keywords: Education, Peer Effects, Cohort Study, Substance Abuse
    JEL: I21 I19 J13 J15
    Date: 2009–06
  8. By: Grepperud, Sverre (Institute of Health Management and Health Economics)
    Abstract: Individuals often respond with strong emotions to being penalised. Such responses suggest that informal penalties are important and play a role in creating deterrence. In this paper informal penalties are analysed in the context of medical errors. The introduction of informal penalties, if dependent upon formal ones, implies that: (i) the optimal enforcement regime becomes more lenient, and in some cases the lack of formal punishment is preferred, (ii) the first-best solution becomes unattainable, (iii) liability rates and formal penalty level are no longer perfect deterrence substitutes. In addition, powers of informal penalties provide a rationale for administrative sanctions (informal criticism, reprimands and warnings).
    Keywords: Iatrogenic injury; enforcement; administrative sanctions
    JEL: D64 I18 K32 K42
    Date: 2009–06–03

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