nep-neu New Economics Papers
on Neuroeconomics
Issue of 2016‒04‒23
three papers chosen by

  1. Not All Income is the Same to Everyone: Cognitive Ability and the House Money Effect in Public Goods Games By Hackinger, Julian
  2. Network Cognition By Roberta Dessi; Edoardo Gallo; Sanjeev Goyal;
  3. Locus of Control and Performance Appraisal By John S. Heywood; Uwe Jirjahn; Cornelia Struewing

  1. By: Hackinger, Julian
    Abstract: The provision of public goods often suffers from a social dilemma generating too little contributions. Yet, it remains an open question how positive contributions materialise. Existing studies suggest that individuals' decisions on how much to contribute depend on cognitive skills. Furthermore, mental accounting research indicates that the source of income matters for economic decision making. I show experimentally that subjects' contributions in a one-shot linear public goods game depend on an interplay of the two factors. While a house money effect exists for subjects with low cognitive skills there is no such effect for those with high cognitive skills. My findings have important implications for taxation, redistribution, and voting behaviour, as well as past and future experiments.
    Keywords: Public Goods; Experiment; Cognitive Skills; House Money Effect; Mental Accounting; Endowment Source;
    JEL: C91 D03 H41
    Date: 2016–04–19
  2. By: Roberta Dessi; Edoardo Gallo; Sanjeev Goyal;
    Abstract: We study individual ability to memorize and recall information about friendship networks using a combination of experiments and survey-based data. In the experiment subjects are shown a network, in which their location is exogenously assigned, and they are then asked questions about the network after it disappears. We find that subjects exhibit three main cognitive biases: (i) they underestimate the mean degree compared to the actual network; (ii) they overestimate the number of rare degrees; (iii) they underestimate the number of frequent degrees. We then analyse survey data from two `real' friendship networks from a Silicon Valley firm and from a University Research Center. We find, somewhat remarkably, that individuals in these real networks also exhibit these biases. The experiments yield three further: findings: (iv) network cognition is a affected by the subject's location, (v) the accuracy of network cognition varies with the nature of the network, and (vi) network cognition has a significant effect on economic decisions.
    Date: 2014–08–27
  3. By: John S. Heywood; Uwe Jirjahn; Cornelia Struewing
    Abstract: This work contributes to the literature demonstrating an important role for psychological traits in labor market decisions. We show that West German workers with an internal locus of control sort into jobs with performance appraisals. Appraisals provide workers who believe they control their environment a tool to demonstrate their value and achieve their goals. We confirm that workers who are risk tolerant also sort into jobs with performance appraisals but explain why the influence of the locus of control and risk tolerance should not be additive. We demonstrate this by estimating a routinely large and significantly negative interaction in our sorting equations. We also show that important patterns of sorting are revealed only when taking into account the interaction of locus of control and risk tolerance.
    Keywords: Locus of control, risk attitude, performance appraisal, performance pay, sorting, extrinsic rewards, intrinsic motivation
    JEL: D03 J33 M52
    Date: 2016

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.