New Economics Papers
on Neuroeconomics
Issue of 2010‒08‒14
four papers chosen by

  1. Cognitive styles and teamwork: examining the impact of team composition on team processes and outcomes By Vanderheyden, K.; Lommelen, B.; Cools, E.
  2. Disappointment Cycles By David Dillenberger; Kareen Rozen
  3. Do Emotions Improve Labor Market Outcomes? By Lorenz Goette; David Huffman
  4. Analyzing social experiments as implemented: evidence from the HighScope Perry Preschool Program By James Heckman; Seong Hyeok Moon; Rodrigo Pinto; Peter Savelyev; Adam Yavitz

  1. By: Vanderheyden, K.; Lommelen, B.; Cools, E. (Vlerick Leuven Gent Management School)
    Abstract: The question whether diversity is advantageous or disadvantageous for teams has yet to be resolved. The present research investigates the effect of cognitive diversity on team processes and outcomes through two successive studies with experimental team tasks involving 57 teams of management students (N = 288). Team composition in each of the studies was manipulated on the basis of students’ cognitive profiles, as measured with the Cognitive Style Indicator (CoSI), leading to homogeneously composed teams, semi-homogeneous teams, and heterogeneous teams. Contrary to previous research, the time needed to complete the task was longer in homogeneous teams than in semi-homogeneous and heterogeneous teams, and team composition had no effect on performance or satisfaction. Apart from heterogeneous teams showing to be more task oriented, there seemed to be no relationship between team composition and team process variables, including perceived relational orientation, and groupthink. However, in the different homogeneous teams, the perception of individuals with different cognitive styles did vary on these dimensions. Cognitive styles were also significantly related to preferences for certain task types. The relevance of these findings is discussed in the light of the recruitment and staffing decisions and pathways for future research are indicated.
    Keywords: team diversity, cognitive styles, team effectiveness, team satisfaction, task orientation, relational orientation
    Date: 2010–07–26
  2. By: David Dillenberger (University of Pennsylvania); Kareen Rozen (Cowles Foundation, Yale University)
    Abstract: We propose a model of history dependent disappointment aversion (HDDA), allowing the attitude of a decision-maker (DM) towards disappointment at each stage of a T-stage lottery to evolve as a function of his history of disappointments and elations in prior stages. We establish an equivalence between the existence of an HDDA representation and two documented cognitive biases. First, the DM overreacts to news: after suffering a disappointment, the DM lowers his threshold for elation and becomes more risk averse; similarly, after an elating outcome, the DM raises his threshold for elation and becomes less risk averse. This makes disappointment more likely after elation and vice-versa, leading to statistically cycling risk attitudes. Second, the DM displays a primacy effect: early outcomes have the strongest effect on risk attitude. Hence disappointment cycles moderate with experience. "Gray areas" in the elation-disappointment assignment are connected to optimism and pessimism in determining endogenous reference points.
    Keywords: History dependent disappointment aversion, Disappointment cycles, Overreaction to news, Primacy effect, Endogenous reference dependence, Optimism, Pessimism
    JEL: D81 D91
    Date: 2010–08
  3. By: Lorenz Goette; David Huffman
    Abstract: Traditionally, models of economic decision-making assume that individuals are rational and emotionless. This chapter argues that the neglect of emotion in economic models explains their inability to predict important aspects of the labor market. We focus on one example: the scarcity of nominal wage cuts. [IZA Discussion Paper No. 1895]
    Keywords: wage rigidity, affect, emotions, money illusion, loss aversion
    Date: 2010
  4. By: James Heckman (Institute for Fiscal Studies and University of Chicago); Seong Hyeok Moon; Rodrigo Pinto; Peter Savelyev; Adam Yavitz
    Abstract: <p><p><p><p>Social experiments are powerful sources of information about the effectiveness of interventions. In practice, initial randomization plans are almost always compromised. Multiple hypotheses are frequently tested. "Significant" effects are often reported with p-values that do not account for preliminary screening from a large candidate pool of possible effects. This paper develops tools for analyzing data from experiments as they are actually implemented.</p> </p><p></p><p></p><p><p>We apply these tools to analyze the influential HighScope Perry Preschool Program. The Perry program was a social experiment that provided preschool education and home visits to disadvantaged children during their preschool years. It was evaluated by the method of random assignment. Both treatments and controls have been followed from age 3 through age 40.</p> </p><p></p><p></p><p><p>Previous analyses of the Perry data assume that the planned randomization protocol was implemented. In fact, as in many social experiments, the intended randomization protocol was compromised. Accounting for compromised randomization, multiple-hypothesis testing, and small sample sizes, we find statistically significant and economically important program effects for both males and females. We also examine the representativeness of the Perry study.</p><p><a href="/wps/cwp2210_app.pdf">Download appendix</a></p></p>
    Date: 2010–08

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