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on Cognitive and Behavioural Economics |
| By: | Delfgaauw, Josse (Erasmus University Rotterdam); Dur, Robert (Erasmus University Rotterdam) |
| Abstract: | The quality of public management is a recurrent concern in many countries. Calls to attract the economy’s best and brightest managers to the public sector abound. This paper studies self-selection into managerial positions in the public and private sector, using a model of a perfectly competitive economy where people differ in managerial ability and in public service motivation. We find that, if demand for public sector output is not too high, the equilibrium return to managerial ability is always higher in the private sector. As a result, relatively many of the more able managers self-select into the private sector. Since this outcome is efficient, our analysis implies that attracting a more able managerial workforce to the public sector by increasing remuneration to private-sector levels is not cost-efficient. |
| Keywords: | public management, public service motivation, managerial ability, self-selection |
| JEL: | H83 J24 J3 J45 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4766&r=cbe |
| By: | Azar, Ofer H.; Bar-Eli, Michael |
| Abstract: | Mixed-strategy Nash equilibrium (MSNE) is a commonly-used solution concept in game-theoretic models in various fields in economics, management, and other disciplines, but the experimental results whether the MSNE predicts well actual play in games is mixed. Consequently, evidence for naturally-occurring games in which the MSNE predicts the outcome well is of great importance, as it can justify the vast use of MSNE in models. The game between the kicker and goalkeeper in soccer penalty kicks is a real-world game that can be used to examine the application of the MSNE concept or its accuracy because payoffs are a common knowledge, the players have huge incentives to play correctly, the game is simple enough to analyze, its Nash equilibrium is in mixed strategies, and players' actions can be observed. We collected and analyzed data on the direction of kicks and jumps in penalty kicks in various top leagues and tournaments. Our analysis suggests that the MSNE predictions are the closest to the actual sample data, even though some other prediction methods use information on the marginal distribution of kicks or jumps whereas the MSNE does not. |
| Keywords: | Soccer; Football; MSNE; Mixed-strategies; Mixed-strategy Nash equilibrium; Sports; Penalty kicks |
| JEL: | L83 C70 D00 C93 C72 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20964&r=cbe |
| By: | Andreas Freytag (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Sebastian von Engelhardt (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Christoph Schulz (School of Economics and Business Administration, Friedrich-Schiller-University Jena) |
| Abstract: | Open source software (OSS) is marked by free access to the software and its source code. OSS is developed by a 'community' consisting of thousands of contributors from all over the world. Some research was undertaken in order to analyze how global the OSS community actually is, i.e. analyze the geographic origin of OSS developers. But as members of the OSS community differ in their activity levels, information about the allocation of activities are of importance. Our paper contributes to this as we analyze not only the geographic origin of (active) developers but also the geographic allocation of OSS activities. The paper is based on data from the SourceForge research Data Archive, referring to 2006. We exploit information about the developers' IP address, email address and indicated time-zone. This enables us to properly assign 1.3 million OSS developers from SourceForge to their countries, that are 94% of all registered ones in 2006. In addition we have information about the number of posted messages which is a good proxy for activity of each developer. Thus we can provide a detailed picture of the world-wide allocation of open source activities. Such country data about the supply-side of OSS is a valuable stock for both, cross-country studies on OSS, as well as country-specific research and policy advice. |
| Keywords: | Open Source Software, Geographical Location, Open Source Activities |
| JEL: | L17 C81 L86 |
| Date: | 2010–02–24 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-009&r=cbe |
| By: | Jasmina Hasanhodzic; Andrew W. Lo; Emanuele Viola |
| Abstract: | We construct a financial "Turing test" to determine whether human subjects can differentiate between actual vs. randomized financial returns. The experiment consists of an online video-game (http://arora.ccs.neu.edu) where players are challenged to distinguish actual financial market returns from random temporal permutations of those returns. We find overwhelming statistical evidence (p-values no greater than 0.5%) that subjects can consistently distinguish between the two types of time series, thereby refuting the widespread belief that financial markets "look random." A key feature of the experiment is that subjects are given immediate feedback regarding the validity of their choices, allowing them to learn and adapt. We suggest that such novel interfaces can harness human capabilities to process and extract information from financial data in ways that computers cannot. |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1002.4592&r=cbe |
| By: | Bonsang Eric; Adam Stéphane; Perelman Sergio (ROA rm) |
| Abstract: | This paper analyzes the effect of retirement on cognitive functioning using two large scale surveys. On the one hand the HRS, a longitudinal survey among individuals aged 50+ living in the United States, allows us to control for individual heterogeneity and endogeneity of the retirement decision by using the eligibility age for Social Security as an instrument. On the other hand, a comparable international European survey, SHARE, allows us to identify the causal effect of retirement on cognitive functioning by using the cross-country differences in the age-pattern of retirement. The results highlight in both cases a significant negative, and quantitatively comparable, effect of retirement on cognitive functioning. Our results suggest that promoting labor force participation of older workers is not only desirable to insure the viability of retirement schemes, but it could also delay cognitive decline, and thus the occurrence of associated impairments at older age. |
| Keywords: | education, training and the labour market; |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umaror:2010001&r=cbe |
| By: | Johnston, David W. (Queensland University of Technology); Nicholls, Michael E. R. (Melbourne Institute of Applied Economic and Social Research); Shah, Manisha (University of California, Irvine); Shields, Michael A. (University of Melbourne) |
| Abstract: | Using data from the US National Longitudinal Survey of Youth, and fitting family fixed-effects models of child health and cognitive development, we test if left-handed children do significantly worse than their right-handed counterparts. The health measures cover both physical and mental health, and the cognitive development test scores span (1) Memory, (2) Vocabulary, (3) Mathematics, (4) Reading and (5) Comprehension. We find that while left-handed children have a significantly higher probability of suffering an injury needing medical attention, there is no difference in their experience of illness or poor mental health. We also find that left-handed children have significantly lower cognitive development test scores than right-handed children for all areas of development with the exception of reading. Moreover, the left-handedness disadvantage is larger for boys than girls, and remains roughly constant as children grow older for most outcomes. We also find that the probability of a child being left-handed is not related to the socioeconomic characteristics of the family, such as income or maternal education. All these results tend to support a difference in brain functioning or neurological explanation for handedness differentials rather than one based on left-handed children living in a right-handed world. |
| Keywords: | handedness, children, health, cognitive development, family fixed-effects |
| JEL: | I12 J10 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4774&r=cbe |
| By: | Luis Roberto Martínez; Christian Jaramillo; Nicolas De Roux; Juan-Camilo Cárdenas |
| Abstract: | The house-money effect –people’s tendency to be more daring with easily-gotten money– is a behavioral pattern that poses questions about the external validity of experiments in economics: to what extent do people behave in experiments like they would have in a real-life situation, given that they play with easily-gotten house money? We ran an economic experiment with 66 students to measure the house-money effect on their risk preferences. They received an amount of money with which they made risky decisions involving losses and gains; a treatment group got the money 21 days in advance and a control group got it the day of the experiment. We find that, when facing possible losses, people in the treatment group showed a lower tolerance to risk than people in the control group. If the players are assumed to have a CRRA utility function and to behave according to expected-utility theory, the risk-attitude adjustment corresponds to an average increase of 1 in their risk aversion coefficient. While the exact pattern of this house-money adjustment differs by gender, it is not possible to determine the sign of this gender effect unambiguously. In any case, it is advisable to include credible controls for the house-money effect in experimental work in economics. |
| Date: | 2010–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:006712&r=cbe |
| By: | Dannenberg, Astrid; Riechmann, Thomas; Sturm, Bodo; Vogt, Carsten |
| Abstract: | In this paper, we analyse if individual inequality aversion measured with simple experimental games depends on whether the monetary endowment in these games is either a windfall gain (“house money”) or a reward for a certain effort-related performance. Moreover, we analyse whether the way of preference elicitation affects the explanatory power of inequality aversion in social dilemma situations. Our results indicate that individual inequality aversion is not generally robust to the way endowments emerge. Furthermore, the use of money earned by real efforts instead of house money does not improve the generally low predictive power of the inequality aversion model. Hypotheses based on the inequality aversion model lose their predictive power when preferences are elicited with earned money. -- |
| Keywords: | individual preferences,inequality aversion,experimental economics,prisoner's dilemma,house money |
| JEL: | C91 C92 H41 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:10006&r=cbe |
| By: | Meier, Stephan (Columbia University); Sprenger, Charles (University of California, San Diego) |
| Abstract: | Individuals frequently face intertemporal decisions. For the purposes of economic analysis, the preference parameters assumed to govern these decisions are generally considered to be stable economic primitives. However, evidence on the stability of time preferences is notably lacking. In a large field study conducted over two years with about 1,400 individuals, time preferences are elicited using incentivized choice experiments. The aggregate distributions of discount factors and the proportion of present-biased individuals are found to be unchanged over the two years. At the individual level, the one year correlations in measured time preference parameters are found to be high by existing standards, though some individuals change their intertemporal choices potentially indicating unstable preferences. By linking time preference measures to tax return data, we show that identified instability is uncorrelated with socio-demographics and changes to income, future liquidity, employment and family composition. |
| Keywords: | experimental economics, time preferences, preference stability |
| JEL: | C93 D01 D11 D91 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4756&r=cbe |
| By: | Laure Cabantous (Nottingham University Business School); Denis Hilton (CLLE, Universite Toulouse II-Le Mirail); Howard Kunreuther (Center for Risk Management and Decision Processes The Wharton School, University of Pennsylvania); Erwann Michel-Kerjan (Center for Risk Management and Decision Processes The Wharton School, University of Pennsylvania) |
| Abstract: | Testing whether risk professionals (here insurers) behave differently under risk and ambiguity when they cover catastrophic risks (floods and earthquakes) and non-catastrophic risks (fires), this paper reports the results of the first field experiment in the United States designed to distinguish two sources of ambiguity: imprecise ambiguity (outside experts agree on a range of probability, but not on any point estimate) versus conflict ambiguity (each expert group provides precise probability estimates which differ from one group to another). Insurers charge higher premiums when faced with ambiguity than when the probability of a loss is well specified. Furthermore they charge more for conflict ambiguity than imprecise ambiguity for flood and hurricane hazards, but less so in the case of fire. The source of ambiguity also impacts causal inferences insurers make to reduce their uncertainty. |
| Keywords: | Ambiguity, Source of Uncertainty, Insurance Pricing, Decision-Making |
| JEL: | C93 D81 D83 |
| Date: | 2010–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:bbr:workpa:7&r=cbe |
| By: | Kobi Kriesler; Shmuel Nitzan (Department of Economics, Bar Ilan University) |
| Abstract: | In this study we propose an axiomatic theory of decision-making under risk that is based on a new approach to the modeling of framing that focuses on the subjective statistical dependence between prizes of compared lotteries. Unlike existing models that allow objective statistical dependence, as in Regret Theory, in our model the emphasis is on alternative subjective statistical dependence patterns that are induced by alternative descriptions of the lotteries, i.e., by alternative framing. A distinct advantage of the proposed general descriptive model of choice is its ability to adequately explain a wide variety of behaviors and, in particular, several well-known paradoxes of different types. |
| Keywords: | framing, statistical dependence, non-expected utility, expected value of lottery interchange |
| JEL: | D81 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:biu:wpaper:2009-17&r=cbe |
| By: | Wichert, Laura; Pohlmeier, Winfried |
| Abstract: | This paper investigates the relationship between personality traits and female labor force participation. While research on the role of cognitive skills for individual labor market success has a long tradition in economics, comparatively little is known about the channels through which non-cognitive skills affect individual labor market behavior. There is striking evidence that personality traits play a major role in explaining individual differences in school attendance and school performance. However, comparatively little is known about how and which personality traits effect labor supply decisions. In this paper, we relate personality traits to preference parameters using a conventional structural framework of labor force participation. This allows us to separate the direct effects of personality traits affecting the individual participation decision through different individual preferences from the indirect effects through wages. We can show that personality traits play an important role in the female labor force participation decision. The channels through which personality traits effect labor force participation are manifold and depend on the specific trait. Aggregation of traits to a single index is therefore a suboptimal strategy. -- |
| Keywords: | personality traits,female labor supply,wages |
| JEL: | C35 J22 J24 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:10003&r=cbe |
| By: | Holt, Charles A.; Johnson, Cathleen; Mallow, Courtney; Sullivan, Sean P. |
| Abstract: | This paper uses laboratory experiments to investigate the effects of alternative solutions to a common-pool resource with a unidirectional flow. The focus is on the comparative economic efficiency of communications, bilateral “Coasian” bargaining, auctions and price-based allocations. All treatments improve allocative efficiency relative to a baseline environment. Communication and bilateral bargaining are not generally as effective as market allocations. An exogenously imposed, optimal fee results in the greatest efficiency gain, followed by auction allocations that determine the usage fee endogenously. |
| Keywords: | externalities; experiments; auctions; Coasian bargaining; common pool resource |
| JEL: | C92 H23 |
| Date: | 2010–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20838&r=cbe |
| By: | Geoffrey M. Hodgson |
| Abstract: | There has been a remarkable growth in evolutionary economics since the 1980s. But despite this outward success there has been inner disagreement on fundamental issues including the building blocks of evolutionary theory and the very meaning of ‘evolution’ itself. This essay provides a philosophical perspective on both the defining agreements and ongoing disputes within evolutionary economics. Its primary emphasis is on ontology. It shows that some major disputes derive not from incompatible propositions but the choice of different levels of analysis. A route toward reconciliation of different viewpoints is thus exposed. |
| Keywords: | Length 20 pages |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2010-01&r=cbe |