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on Cognitive and Behavioural Economics |
| By: | Gerdes, Christer (SOFI, Stockholm University); Gränsmark, Patrik (SOFI, Stockholm University); Rosholm, Michael (Aarhus School of Business) |
| Abstract: | We examine rational learning among expert chess players and how they update their beliefs in repeated games with the same opponent. We present a model that explains how equilibrium play is affected when players change their choice of strategy when receiving additional information from each encounter. We employ a large international panel dataset with controls for risk preferences and playing skills whereby the latter accounts for ability. Although expert chess players are intelligent, productive and equipped with adequate data and specialized computer programs, we find large learning effects. Moreover, as predicted by the model, risk-averse players learn substantially faster. |
| Keywords: | rational learning, risk aversion, beliefs |
| JEL: | C73 D83 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5862&r=cbe |
| By: | Bettina Sonnenberg; Michaela Riediger; Cornelia Wrzus; Gert G. Wagner |
| Abstract: | Since it is still unclear to what extent time allocation retrospectively reported in questionnaires, reflects people¿s actual behavior, examining the accuracy of responses to time use survey questions is of crucial importance. We analyze the congruence of time use information assessed through retrospective questionnaires and through experience sampling methodology. The sample comprised 433 individuals ranging in age from 14 to 86 years. Participants completed standard survey questions on time allocation. In addition, a mobile-phone based experience sampling technology was used over a period of three weeks to obtain snapshots of, on average, 54 momentary activities in which participants participated while pursuing their normal daily routines. Experience sampling assessments were scheduled six times a day over at least nine days, including workdays, Saturdays, and Sundays. Results indicate that the congruence between time allocation assessed with survey questions (i.e. in SOEP) and time allocation assessed with experience sampling methodology depends on the characteristics of the respective activities. Associations between standard survey questions and experience sampling methods are quite substantial for long-lasting and externally structured activities, such as paid work on workdays. In contrast, associations between survey and experience sampling methods are somewhat weaker, though highly statistically significant, for less externally structured, short-term and infrequent activities, such as errands, housework, and leisure. These moderate and relatively small correlations may indicate either an error-prone estimation of the prevalence of shortterm and infrequent activities by experience sampling or respondents¿ overrating of sporadic and short activities in survey questions. We conclude that activities with a long duration, such as paid work, can be measured in a satisfactory manner using short survey questions. Future research is necessary to elucidate which method (experience sampling method or survey questions) delivers more reliable and valid measures for shortterm and sporadic activities. Day Reconstruction Methods (DRM) should be included in this future methodological research. |
| Keywords: | Survey methods, experience sampling method, validity, time use, market work, housework, leisure, German Socio-Economic Panel Study, MMAA, SOEP |
| JEL: | C21 D10 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp390&r=cbe |
| By: | Mark Dean; Daniel Martin |
| Abstract: | In this paper, we introduce a new measure of how close a set of choices are to satisfying the observable implications of rational choice, and apply it to a large balanced panel of household level consumption data. We use this method to answer three related questions: (i) "How close are individual consumption choices to satisfying the model of utility maximization?" (ii) "Are there di¤erences in rationality between di¤erent demographic groups?" (iii) "Can choices be aggregated across individuals under the assumption of homogeneous preferences?" Crucially, in answering these questions, we take into account the power of budget sets faced by each household to expose failures of rationality. To summarize our results we ?nd that: (i) while observed violations of rationality are small in absolute terms, our households are only moderately more rational than the benchmark of random choice; (ii) there are signi?cant di¤erences in the rationality of di¤erent groups, with multi-head households more rational than single head households, and the youngest households more rational than middle age households; (iii) the assumption of homogenous preferences is strongly rejected: choice data that is aggregated across households exhibits high levels of irrationality. |
| Keywords: | # |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2011-11&r=cbe |
| By: | Maxime Merli (LaRGE Research Center, Université de Strasbourg); Tristan Roger (EUROFIDAI-CERAG, Université de Grenoble) |
| Abstract: | This article intends to provide answers concerning what drives individual investor herding behavior. Our empirical study uses transaction records of 87,373 French individual investors for the period 1999-2006. In a ?first part, we show - using both the traditional Lakonishok et al. (1992) and the more recent Frey et al. (2007) measures - that herding is prevalent and strong among French individual investors. We then show that herding is persistent: stocks on which investors concentrate their trades at time t are more likely to be the stocks on which investors herd at time t+1. In a second part, we focus on the motivations of individual herding behavior. We introduce an investor specific measure of herding which allows us to track the persistence in herding of individual investors. Our results highlight that this behavior is influenced by investor-specifi?c characteristics. We also reveal the fact that individual herding behavior is strongly and negatively linked with investors own past performance. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:lar:wpaper:2011-03&r=cbe |
| By: | Dasgupta, Utteeyo; Gangadharan, Lata; Maitra, Pushkar; Mani, Subha; Subramanian, Samyukta |
| Abstract: | This paper combines unique survey and experimental data to examine the determinants of self-selection into a vocational training program. Women residing in selected disadvantaged areas in New Delhi, India were invited to apply for a 6-month long free training program in stitching and tailoring. A random subset of applicants and non-applicants were invited to participate in a set of behavioral experiments and in a detailed socio-economic survey. We find that applicants and non-applicants differ both in terms of observables (captured using survey data) and also in terms of a number of intrinsic traits (captured via the behavioral experiments). Overall our results suggest that there is valuable information to be gained by dissecting the black box of unobservables using behavioral experiments. |
| Keywords: | Labor Market Training Programs; Selection; Survey Data; Field Experiments; Risk; Competition |
| JEL: | J24 C81 C93 |
| Date: | 2011–07–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32383&r=cbe |
| By: | Anja Sautmann |
| Abstract: | This paper experimentally tests the predictions of a principal-agent model in which the agent has biased beliefs about his ability. Overcondent workers are found to earn lower wages than undercondent ones because they overestimate their expected payo, and principals adjust their oers accordingly. Moreover, the prot-maximizing contract distorts eort by varying incentives according to self-condence, although only the most successful principals use this strategy. These ndings have implications for the labor market; in particular, self-condence is often correlated with gender, implying that principals would prefer to hire men over women simply because they are more overcondent. |
| Keywords: | # |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2011-10&r=cbe |
| By: | Boettke, Peter |
| Abstract: | Deirdre McCloskey’s Bourgeois Dignity (2010) represents another breakthrough work in her career, and the second volume in a multi-volume work on the economic and intellectual history of western civilization. In a sense, the subtitle of the book explains well what this volume is all about--why economics can’t explain the modern world. An important modifier would be – modern economics can’t explain the modern world – because much of what McCloskey argues is the resurrection of an older argument that was associated with classical liberal political economists from Smith, Bastiat, Mises, Hayek and Friedman. Fundamentally, she reasserts the power of ideas to shape the world. McCloskey’s narrative is simple and compelling -- materialist stories (whether technological, genetic, or institutional) do not work; incentive based stories do not provide a complete picture of why some countries grew rich while others remained poor, let alone for the exact timing for the divergence in the wealth and poverty of nations with the Industrial Revolution in the 18th and 19th century. McCloskey proposes that incentive based explanations must reside within a broader narrative that addresses values and beliefs, as well as institutions, technologies, and material conditions. In doing so, McCloskey paves the way for a true behavioral approach to a political and economic inquiry into the nature and causes of the wealth of nations. |
| Keywords: | Economic History; Economic Development; Industrial Revolution |
| JEL: | O10 N00 P10 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32376&r=cbe |
| By: | Heinz, Matthias; Juranek, Steffen; Rau, Holger A. |
| Abstract: | We analyze dictator allocation decisions in an experiment where the recipients have to earn the pot to be divided with a real-effort task. As the recipients move before the dictators, their effort decisions resemble the first move in a trust game. Depending on the recipients' performance, the size of the pot is either high or low. We compare this real-effort treatment to a baseline treatment where the pot is a windfall gain and where a lottery determines the pot size. In the baseline treatment, reciprocity cannot play a role. We find that female dictators show reciprocity and decrease their taking-rates significantly in the real-effort treatment. This treatment effect is larger when female dictators make a decision on recipients who successfully generated a large pot compared to the case where the recipients performed poorly. By contrast, there is no treatment effect with male dictators, who generally exhibit more sefish behavior. -- |
| Keywords: | Gender,Reciprocity,Dictator Game,Real Effort |
| JEL: | C72 C91 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:24&r=cbe |
| By: | Torero, Maximo; Viceisza, Angelino |
| Abstract: | We conduct framed trust games using contract dairy farmers in Vietnam as first movers to assess the impact of potential collusion on trust. Disaggregated analysis suggests that female farmers are more likely to trust overall, but are also more responsive to the addition of a third party and potential collusion. A third party induces them to trust at higher levels, but potential collusion between the trustee and the third party also induces them to trust at lower levels. Our findings corroborate well with existing studies on gender differences in decision making, which suggest that women's social preferences are more context-specific than men's. |
| Keywords: | collusion, field experiment, Gender, trust game, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1100&r=cbe |
| By: | Baddeley, M. |
| Abstract: | Psychological and sociological factors constrain economic decision-making in many contexts including the online world. Behavioural economics and economic psychology emphasise that people will make mistakes in processing information and in planning for the future; these mistakes will also distort learning processes. Emotions and visceral factors will play a key role - not only aecting people's actions but also distorting the interactions between information, learning and choices. This will have wide-ranging implications for online behavior and information security management, making people more vulnerable to security/privacy abuses including hacking, spam attacks, phishing, identity theft and online financial exploitation. These vulnerabilities raise crucial policy questions - recently made more pressing in the light of recent phone-hacking scandals in the UK. This paper outlines some of the behavioural factors affecting people's online behaviour and analyses real-world reactions to online fraud using evidence from the British Crime Survey 2009-10. |
| JEL: | D18 D83 K42 |
| Date: | 2011–07–25 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1147&r=cbe |
| By: | Bernard, Tanguy; Dercon, Stefan; Taffesse, Alemayehu Seyoum |
| Abstract: | Fatalism is considered pervasive, especially in many poor communities. In this paper, we explore whether fatalistic beliefs have implications for the attitudes and behavior of poor rural households toward investment in the future. To explore the idea of fatalism, we draw inspiration from theories in psychology focusing on the role of locus of control and self-efficacy and also from the theoretical framework of aspiration failure as developed in recent economic literature. Using survey data from rural Ethiopia, we find evidence of fatalistic beliefs among a substantial group of rural households, as well as indicators consistent with narrow aspirations gap and low self-efficacy. We also find that such beliefs consistently correlate with lower demand for credit, in terms of loan size, repayment horizon, and productive purposes. |
| Keywords: | aspirations, aspirations failure, aspirations gap, aspirations window, fatalism, self-efficacy, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1101&r=cbe |