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on Cognitive and Behavioural Economics |
| By: | Annamaria Nese; Patrizia Sbriglia |
| Abstract: | In this paper we explore the relationship between the individual’s preference for cooperation and the establishment of cooperative norms. Our aim is to provide an experimental test of the evolutionary hypothesis (see Carpenter, 2004, Fehr and Gachter 2002; Gintis 2000; Boyd, Bowles, Gintis and Richerson 2003; Bowles and Gintis 2004), according to which individuals are prepared to punish defectors in experimental social dilemma games because they want to enforce a social (“altruistic”) norm which may conduce to increasing their future payoffs, as in the case of sanctions against free riding behaviour. According to this line of research , the high levels of cooperation we observe in our societies can, therefore, be strictly related to the establishment of social norms which are able to enforce and maintain cooperation in the long run. We study the results of two experiments in which the individuals decided both whether to participate in a common project and the institutional rule according to which the profits of the project had to be shared among each of the participants in the group. They could choose between 1) a regime where gains were shared equally, regardless of individuals’ contributions and without sanctions and rewards (System A); 2) a regime where individuals were paid according to their marginal contribution, but the profits of the investments were lower than in the other contexts (System B); finally 3) a regime in which gains were shared equally (as in System A), but individuals were allowed to punish (and\or reward) free riding (cooperative) behaviours as in Sefton, Shupp and Walker (2007). Before the experiments took place, our subjects were required to fill a questionnaire composed of four sections, where their attitude to cooperate and their opinions on civic values and free riding behaviours were thoroughly explored. We then monitored the behaviour of potential free riders and cooperators in the game and their institutional choices. Our results partly contradict the evolutionary hypothesis in as much as System A and B received the largest shares of votes in almost all rounds and they were voted by free riders and cooperators alike. Thus, most individuals do not like sanctions (incentives) against defectors and free riders (cooperators), and their institutional preferences do not seem to be related to their willingness to cooperate. The inspection of individual data, however, reveals some interesting points. In fact, we can assert that System C was mostly chosen by cooperative individuals in response to observed free riding behaviour. Furthermore, when a cooperative individual chose C, she would tend to punish free riders and reward cooperators. Our conclusion is that, as far as the institutional choices are concerned, beside the profit motivations underlined in the evolutionary hypothesis, the ethical and cultural unobserved individual preferences play an important role. There is a number of individuals (limited in our experiments, ranging between 15 and 30 per cent of the entire population) who see cooperation as the “right” thing to do, and therefore are prepared to implement institutional rules that may favour this collective outcome. Most people in our experiments did not share these same values. |
| Keywords: | public good games, experiments, voting choices |
| JEL: | C90 C91 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:usi:labsit:025&r=cbe |
| By: | Dohmen Thomas; Falk Armin; Huffman David; Felix Marklein; Sunde Uwe (ROA rm) |
| Abstract: | The ability to process new information and to compute conditional probabilities iscrucial for making appropriate decisions under uncertainty. In this paper, weinvestigate the capability of inferring conditional probabilities in a representativesample of the German population. Our results show that only a small fraction ofthe population responds consistently with Bayes'' rule. Instead, most individualseither neglect the base probability, or the arrival of new information, in theirresponses. The probability to give normatively correct answers decreases with thelevel of education. |
| Keywords: | labour market entry and occupational careers; |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umaror:2009002&r=cbe |
| By: | Pablo Brañas-Garza (Department of Economic Theory and Economic History, GLOBE, University of Granada.) |
| Abstract: | This paper provides novel results for the extensive literature on dictator games: recipients do not expect dictators to behave selfishly, but instead expect the equal split division. We performed a field experiment in Baja California among a population of unexperienced subjects. Using monetary incentives we find that only 10 percent of subjects correctly guessed the expected Nash equilibrium payoff (zero). In sharp contrast, the modal subject predicts the equal split. The predictions made by dictators are notably different: 45% predicted the zero contribution and 40% expected the equal split. Surprisingly, their actions are uncorrelated with their predictions: they choose a donation in the interior of the interval. We conjecture that the equal split is the natural solution to the problem but because the dictators are involved, they also consider the chance of keeping the complete pie for themselves. Dictators solve the puzzle by passing a positive amount of money which reflects the tension between fairness and self-interest. In consequence, any giving smaller than the equal split division may not be considered altruistic behavior. Only a donation larger than the 50/50 split would reflect generosity. |
| Keywords: | expectations, dictator game, equal split, guessing. |
| JEL: | D63 D64 C91 |
| Date: | 2008–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:08/12&r=cbe |
| By: | Gary Charness; Marie Claire Villeval; Antonio Cabrales |
| Abstract: | We devise an experiment to explore the effect of different degrees of bargaining power on the design and the selection of contracts in a hidden-information context. In our benchmark case, each principal is matched with one agent of unknown type. In our second treatment, a principal can select one of three agents, while in a third treatment an agent may choose between the contract menus offered by two principals. We first show theoretically how different ratios of principals and agents affect outcomes and efficiency. Informational asymmetries generate inefficiency. In an environment where principals compete against each other to hire agents, these inefficiencies remain. In contrast, when agents compete to be hired, efficiency improves dramatically, and it increases in the relative number of agents because competition reduces the agents’ informational monopoly power. However, this environment also generates a high inequality level and is characterized by multiple equilibria. In general, there is a fairly high degree of correspondence between the theoretical predictions and the contract menus actually chosen in each treatment. There is, however, a tendency to choose more ‘generous’ (and more efficient) contract menus over time. We find that competition leads to a substantially higher probability of trade, and that, overall, competition between agents generates the most efficient outcomes. |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdaddt:2009-08&r=cbe |
| By: | Enrique Fatás (LINEX, University of Valencia.); Juan A. Lacomba (Department of Economic Theory and Economic History, University of Granada.); Francisco M. Lagos (Department of Economic Theory and Economic History, University of Granada.); Ana I. Moro (Department of Economic Theory and Economic History, University of Granada.) |
| Abstract: | As part of the current debate on the reform of pension systems, this article examines the potential effects on consumption behaviour of implementing a lump-sum payment in a public pension system. This work explores an experimental investigation into retirement consumption behaviour with two central features: first, there exists a decreasing probability of surviving; second, there are two sequences of income, one when individual works and another when she is retired. The results show how subjects seem to plan their consumption and saving choices conditionated by both the long horizon with no incomes and the lump-sum payment. This yields, in the majority of periods, a surprising over-saving behaviour. |
| Keywords: | Experimental test, consumption, savings, lump-sum payment. |
| JEL: | C91 H55 J26 |
| Date: | 2008–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:08/14&r=cbe |
| By: | Shchetinin, Oleg |
| Abstract: | I develop a model of contracting under reciprocal altruism accounting for some evidence which is paradoxical from the point of view of neoclassical models with selfish actors. My model predicts the crowding-out effect observed in the Trust Game with the possibility of a fine; for the Control Game the model predicts that an equilibrium can exhibit "no effect of control", "hidden cost of control", or "positive effect of control", depending on the characteristics of the actors, as observed in the lab. This suggests that reciprocal altruism modeling could be fruitful more generally in applications of contract theory. |
| Keywords: | Reciprocal Altruism; Extrinsic and intrinsic motivation; Behavioral Economics; Signaling; Contract Theory. |
| JEL: | M54 D82 C72 |
| Date: | 2009–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:13457&r=cbe |
| By: | Zarri, Luca (Associazione Italiana per la Cultura della Cooperazione e del Non Profit) |
| Abstract: | We set up an analytical framework focusing on the problem of interaction over time when economic agents are characterized by various types of distributional social preferences. We develop an evolutionary approach in which individual preferences are endogenous and account for the evolution of cooperation when all the players are initially entirely selfish. In particular, within motivationally heterogeneous agents embedded in a social network, we adopt a variant of the indirect evolutionary approach, where material payoffs play a critical role, and assume that a coevolutionary process occurs in which subjective preferences gradually evolve due to a key mechanism involving behavioral choices, relational intensity and degree of social openness. The simulations we carried out led to strongly consistent results with regard to the evolution of player types, the dynamics of material payoffs, the creation of significant interpersonal relationships among agents and the frequency of cooperation. In the long run, cooperation turns out to be the strategic choice that obtains the best performances, in terms of material payoffs, and "nice guys", far from finishing last, succeed in coming out ahead. |
| Keywords: | Behavioral Economics; Cooperation; Prisoner's Dilemma; Social Evolution; Heterogeneous Social Preferences; Indirect Evolutionary Approach |
| JEL: | B41 C73 D74 Z13 |
| Date: | 2008–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:ris:aiccon:2008_051&r=cbe |
| By: | Borghans, Lex (Maastricht University); Golsteyn, Bart (Maastricht University); Heckman, James J. (University of Chicago); Meijers, Huub (Maastricht University) |
| Abstract: | This paper demonstrates gender differences in risk aversion and ambiguity aversion. It also contributes to a growing literature relating economic preference parameters to psychological measures by asking whether variations in preference parameters among persons, and in particular across genders, can be accounted for by differences in personality traits and traits of cognition. Women are more risk averse than men. Over an initial range, women require no further compensation for the introduction of ambiguity but men do. At greater levels of ambiguity, women have the same marginal distaste for increased ambiguity as men. Psychological variables account for some of the interpersonal variation in risk aversion. They explain none of the differences in ambiguity. |
| Keywords: | gender, risk aversion, ambiguity aversion |
| JEL: | J24 D80 |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3985&r=cbe |