nep-neu New Economics Papers
on Neuroeconomics
Issue of 2014‒11‒12
three papers chosen by

  1. Payment Scheme Changes and Effort Provision: The Effect of Digit Ratio By Neyse, Levent; Friedl, Andreas; Schmidt, Ulrich
  2. Changing Behavior beyond the Here and Now By Rogers, Todd; Frey, Erin
  3. Focal Points Revisited: Team Reasoning, the Principle of Insufficient Reason and Cognitive Hierarchy Theory By Bardsley, Nicholas; Ule, Aljaz

  1. By: Neyse, Levent; Friedl, Andreas; Schmidt, Ulrich
    Abstract: Economic experiments report that individuals perform better under a piece rate payment scheme in comparison to a fixed payment scheme. The reason is straightforward: incentives motivate people, and without incentives they decrease their effort. Yet women are prone to choose a fixed payment over a piece rate payment scheme. We aim to find out if this gender effect is related to prenatal exposure to testosterone, which by nature is sexually dimorphic and has permanent effects on human brain development with an impact on cognitive and physical skills, as well as behavior. We investigate the effect of prenatal testosterone exposure on performance adjustment in a real effort task. Each subject is salaried under either a fixed rate or piece rate payment scheme for five periods and subsequently encounters the alternative payment method for another five periods. To observe the prenatal testosterone levels that the participants were exposed to during pregnancy, we use the so-called digit ratio as an indirect measurement method. It uses the length-ratio between the participants’ index and ring fingers to infer about their in utero testosterone exposure. Our results confirm the previous findings indicating that individuals perform better when incentivized by a piece rate payment scheme. Subjects who are paid piece rate in the first half of the experiment immediately decrease their performance at the beginning of the second half when paid under a fixed payment scheme. In contrast, subjects increase their effort if the payment method is switched from fixed rate to piece rate in the second half of the experiment. Subjects who were exposed to higher levels of prenatal testosterone provide significantly lower effort when the payment scheme is switched from piece rate to fixed rate.
    Keywords: Digit Ratio; 2D:4D; Real Effort Task; Payment Schemes; Incentives
    JEL: C91 D87 J33
    Date: 2014–10–28
  2. By: Rogers, Todd (Harvard University); Frey, Erin (Harvard University)
    Abstract: Behavioral science is increasingly being used to develop interventions to influence important behaviors throughout society. We explore three ways that time interacts with psychological processes to affect the impact of behavioral interventions. The first is how and when there would be a lag between the moment in which an intervention is administered and the moment in which the target behavior is to be performed. The second is when and why there would be marginal benefits to continued administration of treatment over time. The third is how behavioral interventions might generate persistent treatment effects even after the intervention is discontinued. Our hope is that scholars find these frameworks productive for advancing and organizing future research, and that they help those who develop behavioral interventions to make them more effective.
    Date: 2014–02
  3. By: Bardsley, Nicholas; Ule, Aljaz
    Abstract: Coordination on focal points in one shot games can often be explained by team reasoning, a departure from individualistic choice theory. However, a less exotic explanation of coordination is also available based on best-responding to uniform randomisation. We test the team reasoning explanation experimentally against this alternative, using coordination games with variable losses in the off-diagonal cells. Subjects’ responses are observed when the behaviour of their partner is determined in accordance with each theory, and under game conditions where behaviour is unconstrained. The results are more consistent with the team reasoning explanation. Increasing the difficulty of the coordination tasks produces some behaviour suggestive of response to randomisation, but this effect is not pronounced.
    Keywords: coordination, team reasoning, cognitive hierarchy theory
    JEL: C91 D01
    Date: 2014

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