nep-neu New Economics Papers
on Neuroeconomics
Issue of 2015‒05‒02
four papers chosen by

  1. Overconfident People Are More Exposed to "Black Swan" Events: A Case Study of Avalanche Risk By Bonini, Nicolao; Pighin, Stefania; Rettore, Enrico; Savadori, Lucia; Schena, Federico; Tonini, Sara; Tosi, Paolo
  2. The sound of others: suprising evidence of conformist behavior By Crosetto, P.; Filippin, A.
  3. The Gender Wage Gap in France: the Role of Non-Cognitive Characteristics By Isabelle Bensidoun; Danièle Trancart
  4. Does Time Pressure Impair Performance? An Experiment on Queueing Behavior By Anna Conte; Marco Scarsini; Oktay Sürücü

  1. By: Bonini, Nicolao (University of Trento); Pighin, Stefania (University of Trento); Rettore, Enrico (University of Padova); Savadori, Lucia (University of Trento); Schena, Federico (University of Trento); Tonini, Sara (University of Trento); Tosi, Paolo (University of Trento)
    Abstract: Overconfidence is a well-established bias in which someone's subjective confidence in their own judgments is systematically greater than their objective accuracy. There is abundant anecdotal evidence that overconfident people increase their exposure to risk. In this paper, we test whether overconfident people underestimate the probability of incurring an avalanche accident. An avalanche accident is a typical "black swan" event because it has a low probability of occurring but has potential dramatic consequences. To test whether the overconfidence bias affects the decision of backcountry skiers to go on a ski trip under different levels of avalanche risk, we measured individual cognitive traits and then used a random effect logit model to measure their effects on the probability to take the tour, by controlling for other observable characteristics of the respondent. We show that 1) overconfidence is widespread even in our sample and 2) practitioners who are more prone to overestimate their knowledge are also more likely to take the risk associated with a ski trip exposed to avalanche danger. This suggests that overconfident people are more exposed to black swan events.
    Keywords: cognitive bias, risky decision, backcountry skiing, measurement errors, logit model
    JEL: D83 D84 C2
    Date: 2015–04
  2. By: Crosetto, P.; Filippin, A.
    Abstract: It has been shown that subjects tend to follow others’ behavior even when the external signals are uninformative. In this paper we go one step further, showing that conformism occurs even when the choices of others are not even presented to the subjects, but just indirectly perceived. We use the “Click” version of the Bomb Risk Elicitation Task, in which subjects can infer the behavior of others only from the mass of clicks heard. This signal is payoff-irrelevant and largely uninformative about the actual choices of the other participants. Moreover, it is never mentioned in the instructions and therefore it must be spontaneously (and possibly unconsciously) perceived in order to be used. We control the exposure of subjects to clicks by implementing treatments with and without earmuffs. Moreover, we test whether the introduction of a minimal form of commonality, i.e., facing a common rather than individual resolution of uncertainty, makes conformism more likely to emerge. We find strong evidence of conformist behavior even in such an adverse environment. Simply hearing the others clicking affects subjects’ behavior. Introducing a common random draw results in a further dramatic shift of the average choices, in particular by women.
    JEL: C81 C91 D81
    Date: 2015
  3. By: Isabelle Bensidoun (Centre d’études de l’emploi, PSL, Université Paris-Dauphine, LEDa, IRD UMR DIAL); Danièle Trancart (Centre d’études de l’emploi)
    Abstract: (english) Differences between men and women in non-cognitive skills could be the reason why the gender gap closing didn’t improve since the middle of the nineties. To investigate this issue in the case of France we used the "Génération 1998 à 10 ans" database conducted by the Céreq. This survey provides information on gender preferences differences in terms of career versus family, risk attitudes or the vision individuals have of their professional futures. As these non-cognitive factors are likely to influence wages but also occupational choices, the decomposition of wage differentials proposed by Brown, Moon and Zoloth (1980) is implemented. This makes it possible to consider this indirect mechanism by which non-cognitive variables can determine wages, but also the potentially discriminatory nature of occupational segregation. We find that differences in non-cognitive skills matter, 6.3% of the total gender wage gap, that is almost twice as experience, but a large part, 60% of the gap, remains unexplained by the characteristics considered in this work. _________________________________ (français) La réduction des écarts de salaires entre les hommes et les femmes est depuis maintenant deux décennies au point mort. Le fait que les unes et les autres se distinguent en matière de caractéristiques non cognitives constitue une des raisons qui pourrait expliquer qu’il en soit ainsi. Dans ce travail, à partir de l’enquête Génération 1998 à 10 ans réalisée par le Céreq, le rôle que les préférences en termes de carrière versus famille, l’attitude face au risque ou le rapport à son avenir professionnel peuvent avoir sur les écarts de salaires est examiné. Comme ces facteurs non cognitifs sont susceptibles d’influencer les salaires mais aussi les choix professionnels, la décomposition des écarts de salaires proposée par Brown, Moon et Zoloth (1980) est mise en oeuvre. Celle-ci permet de tenir compte de ce mécanisme indirect par lequel les variables non cognitives peuvent déterminer les salaires, mais aussi du caractère potentiellement discriminatoire de la ségrégation occupationnelle. Si les différences de caractéristiques non cognitives comptent, 6,3 % de l’écart de salaires total, soit près de deux fois plus que l’expérience, 60 % restent inexpliqués par les caractéristiques retenues.
    Keywords: gender wage gap, Brown-Moon and Zoloth wage decomposition, noncognitive factors, occupational segregation.
    JEL: J16 J24 J31 J38 J71
    Date: 2015–04
  4. By: Anna Conte (University of Westminster); Marco Scarsini; Oktay Sürücü (Center for Mathematical Economics, Bielefeld University)
    Abstract: We experimentally explore the effects of time pressure on decision making. Under different time allowance conditions, subjects are presented with a queueing situation and asked to join one of two queues that differ in length, server speed, and entry fee. The results can be grouped under two main categories. The first one concerns the factors driving customers' decisions in a queueing system. Only a proportion of subjects behave rationally and use the relevant information efficiently. The rest of the subjects seem to adopt a rule of thumb that ignores the information on server speed and follows the shorter queue. The second category is related to the effects of time pressure on decision performance. A significant proportion of the population is not affected by time limitations and shows a consistent behavior throughout the treatments. On the other hand, the majority of subjects' performance is impaired by time limitations. More importantly, this impairment is not due to the stringency of the limitation but mainly due to the fact that being exposed to a time limitation, even to a loose one, brings along stress and panic, and causes subjects to use time inefficiently.
    Keywords: Time pressure, queues with entry fee, join the shortest queue, experimentation, decision times
    JEL: C91 L00 C33 C35
    Date: 2015–03

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