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on Cognitive and Behavioural Economics |
| By: | Julie A. Nelson |
| Abstract: | Economic discourse—or the lack of it—about fear is gendered on at least three fronts. First, while masculine-associated notions of reason and mind have historically been prioritized in mainstream economics, fear—along with other emotions and embodiment—has tended to be culturally associated with femininity. Research on cognitive "gender schema," then, may at least partly explain the near absence of discussions of fear within economic research. Second, in the rare cases where fear is discussed in the contemporary economics literature, there is a tendency to (overly-)strongly associate it with women. Finally, historians and philosophers of science have suggested that the failure to consider the full range of human emotions and experience may be itself rooted in fear: a fear of the feminine. This aversion to discussing fear—especially fear as experienced by men—may contribute to serious problems, especially in regard to financial market instability and ecological threats. |
| Keywords: | cognitive schema, fear, gender, risk aversion, stereotypes |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:mab:wpaper:17&r=cbe |
| By: | Alexia Delfino; Luigi Marengo; Matteo Ploner |
| Abstract: | We experimentally investigate imitation in investment choices and focus on cognitive aspects of decision making. At this aim, we manipulate three main dimensions of choice: time pressure, normative content of social information, and uncertainty of the investment. We document the existence of imitation, with stronger social effects among those who discover to be less cautious than their peers. In line with our hypotheses, a piece of information which is more representative of average group behavior induces stronger imitation. Furthermore, higher time pressure fosters imitation. In contrast to our hypotheses, imitation is weaker for uncertain investments than for risky investments. |
| Keywords: | Peer effects, Investment Decisions, Bounded Rationality, Experiments |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpce:1305&r=cbe |
| By: | W. Brian Arthur |
| Abstract: | This paper provides a logical framework for complexity economics. Complexity economics builds from the proposition that the economy is not necessarily in equilibrium: economic agents (firms, consumers, investors) constantly change their actions and strategies in response to the outcome they mutually create. This further changes the outcome, which requires them to adjust afresh. Agents thus live in a world where their beliefs and strategies are constantly being “tested” for survival within an outcome or “ecology” these beliefs and strategies together create. Economics has largely avoided this nonequilibrium view in the past, but if we allow it, we see patterns or phenomena not visible to equilibrium analysis. These emerge probabilistically, last for some time and dissipate, and they correspond to complex structures in other fields. We also see the economy not as something given and existing but forming from a constantly developing set of technological innovations, institutions, and arrangements that draw forth further innovations, institutions and arrangements. Complexity economics sees the economy as in motion, perpetually “computing” itself— perpetually constructing itself anew. Where equilibrium economics emphasizes order, determinacy, deduction, and stasis, complexity economics emphasizes contingency, indeterminacy, sense-making, and openness to change. In this framework time, in the sense of real historical time, becomes important, and a solution is no longer necessarily a set of mathematical conditions but a pattern, a set of emergent phenomena, a set of changes that may induce further changes, a set of existing entities creating novel entities. Equilibrium economics is a special case of nonequilibrium and hence complexity economics, therefore complexity economics is economics done in a more general way. It shows us an economy perpetually inventing itself, creating novel structures and possibilities for exploitation, and perpetually open to response. |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:thk:rnotes:33&r=cbe |
| By: | Zinn, Jesse |
| Abstract: | In this paper I examine the implications of self-attribution bias on consumption and savings decisions. When self-attributive learning replaces rational expectations in a model of intertemporal choice, two departures from the permanent-income hypotheses manifest. One is that consumers tend to under-save early in life. Another is a relatively high degree of covariance between changes in consumption and changes in income. No other factor on its own has been able to explain both of these empirical anomalies that the permanent-income hypothesis has faced. |
| Keywords: | Cognative Biases, Uncertainty, Consumption, Saving |
| JEL: | D03 E21 |
| Date: | 2013–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:50314&r=cbe |
| By: | Ingmar Schumacher |
| Abstract: | We study how beliefs affect individuals' willingness to undertake prevention expenditure through a two-type, N-person public good game and test several results empirically. We show analytically that pessimistic agents will invest more in prevention expenditure than optimists. We should how pessimistic beliefs lead to a `double deprivation' and discuss potential issues and remedies. The more optimistic the society the lower will be its total green expenditure. We also demonstrate how small differences in beliefs may induce substantial differences in type-related prevention expenditure. The more atomistic agents are the less they will contribute to the public good. We then use a large international survey to study determinants of prevention expenditure. We proxy beliefs through three variables, namely science optimism, eco optimism and feelings of atomism. For each variable wefind, as predicted by the theoretical model, a significant relationship with the willingness to undertake prevention expenditure. However, environmental education shapes these relationships. While environmental education does not affect the relationship between eco optimism and prevention expenditure, it leads to a stronger relationship between both science optimists, and those who feel atomistic, and prevention expenditure. Finally, we develop a dynamic game with endogenous beliefs based on the static model and discuss the main differences in the optimal choices of the agents. Wefind that pessimistic agents have a higher prevention expenditure compared to the static case since they take the endogenous feedback of the prevention expenditure on their beliefs into account |
| Keywords: | beliefs, environment, public good, Nash game, logit estimation, dynamic game |
| JEL: | H0 R22 Z13 Q50 |
| Date: | 2013–09–11 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:21&r=cbe |
| By: | Pandelis Perakakis (LEE & Department of Economics, Universitat Jaume I, Castellón, Spain); José Vicente Guinot (Laboratorio de Economía Experimental (LEE), Universitat Jaume I, Castellón, Spain); Alfonso Conde (Laboratorio de Economía Experimental (LEE), Universitat Jaume I, Castellón, Spain); Tarek Jaber-López (LEE & Department of Economics, Universitat Jaume I, Castellón, Spain); Aurora García-Gallego (LEE & Department of Economics, Universitat Jaume I, Castellón, Spain); Nikolaos Georgantzis (LEE & Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | The increasing use of physiological recordings in experimental economics requires a precise timing of interesting events, such as the presentation of a set of choices, the decision-making moment and the reception of feedback through the display of a decision outcome. In this note we provide a simple, accurate and inexpensive solution based on the use of external photo-sensors that detect changes in light intensity on the participants’ screens occurring in synchrony with experimental events. This system ensures an accurate communication between standard programs broadly used to run behavioral economic experiments, such as z-Tree, and biosignal acquisition systems recording physiological variables, such as skin conductance, heart rate and electroencephalogram. An example is briefly discussed, offering specific guidelines for the application of this methodology in economic contexts with strategic interaction. |
| Keywords: | Economic experiments, timing of events, psychophysiology, physioeconomics |
| JEL: | C90 C99 C88 B41 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2013/12&r=cbe |
| By: | Aurora García-Gallego (LEE & Department of Economics, Universitat Jaume I, Castellón, Spain); Nikolaos Georgantzís (LEE & Department of Economics, Universitat Jaume I, Castellón, Spain); Ainhoa Jaramillo-Gutiérrez (LEE-Department of Economics, Universitat Jaume I-Castellón, ERICES-University of Valencia, Spain) |
| Abstract: | We study ultimatum bargaining over the wage that should be paid in order to have a subject perform a given real task. Our results are obtained from experiments run in Greece, Spain and the UK. We find significantly higher wage offers and lower acceptance probabilities in the UK than in the other two countries. Interestingly, the combination of these two effects leads to higher wages in the British pool, without reducing market efficiency as compared to Spain and Greece. Country differences in both employer and employee behavior have a clear gender component. |
| Keywords: | ultimatum bargaining, real task, country differences |
| JEL: | C91 D03 J16 J31 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2013/13&r=cbe |
| By: | Rhodes, M. Taylor (Lawrence University); Sarbaum, Jeffrey K. (University of North Carolina at Greensboro, Department of Economics) |
| Abstract: | Conventional pencil and paper wisdom suggests that allowing multiple attempts on homework will lead to more time spent on homework, higher homework grades, and better exam performance. For a variety of reasons, homework is increasingly being auto-administered online. This paper discusses the results of a quasi-experiment designed to evaluate student behavior under single and multiple attempt homework settings using an online homework management system. The paper explores whether multiple attempts lead to more effort and improved performance, and evaluates alternative, less desirable, behaviors that are potentially incentivized. We find that multiple attempts leads to gaming behavior that results in grade inflation without improvement in learning outcomes. The findings are important in that they provide guidance and insight into best practices to maximize student outcomes when choosing online homework settings. |
| Keywords: | Student effort and performance; Assessment settings; Multiple attempts |
| JEL: | A22 C93 D01 I21 |
| Date: | 2013–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:ris:uncgec:2013_014&r=cbe |
| By: | Hennig-Schmidt, Heike (University of Bonn); Irlenbusch, Bernd (University of Cologne); Rilke, Rainer Michael (University of Cologne); Walkowitz, Gari (University of Cologne) |
| Abstract: | We experimentally investigate multiple notions of equity in ultimatum bargaining with asymmetric outside options. Building on the generalized equity principle formulated by Selten (1978), we derive three different equity rules that can explain 43% of all offers. Our within-subject design further allows us to show that proposers use different equity rules and apply them in a self-serving manner. They tend to follow the rules that suggest the highest payoff for them. Responders exhibit a similar pattern of behavior. Combined, these tendencies lead to high inefficiencies due to frequent rejections. |
| Keywords: | Outside Options, Equity Principle, Ultimatum Game |
| JEL: | C71 C72 C78 C91 D63 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7625&r=cbe |
| By: | Piotr Ćwiakowski (Faculty of Economic Sciences, University of Warsaw); Marek Giergiczny (Faculty of Economic Sciences, University of Warsaw); Michał Krawczyk (Faculty of Economic Sciences, University of Warsaw) |
| Abstract: | We report a laboratory experiment aimed at investigating factors affecting choice between different versions of a full-length movie. In particular, we estimate the willingness to pay for a legal, rather than pirated copy and compare it to the impact of such characteristics as picture quality or delay in delivery. We find a modest but highly significant preference for the authorized version. By conducting otherwise identical choice experiments both with and without actual experiential and monetary consequences, we conclude that the method does not seem to suffer from hypothetical bias. We also find that when the proceeds from legal sale are transferred to a good cause, willingness to pay for the unauthorized copy is reduced. |
| Keywords: | digital piracy, choice experiments |
| JEL: | D01 D12 C91 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2013-25&r=cbe |
| By: | Wojciech Hardy (Faculty of Economic Sciences, University of Warsaw); Michał Krawczyk (Faculty of Economic Sciences, University of Warsaw); Joanna Tyrowicz (Faculty of Economic Sciences, University of Warsaw; National Bank of Poland) |
| Abstract: | This study employs a vignette experiment to inquire, which features of online “piracy†make it ethically discernible from a traditional theft. This question is pertinent since the social norm concerning traditional theft is starkly different from the evidence on ethical evaluation of online “piracyâ€. We specifically distinguish between contextual features of theft, such as for example the physical loss of an item, breach of protection, availability of alternatives, emotional proximity to the victim of theft, etc. We find that some of these dimensions have more weight in ethical judgment, but there are no clear differences between online and traditional theft which could explain discrepancy in the frequency of commitment. |
| Keywords: | vignette experiment, illegal downloading, digital piracy, illegal download, downloading behaviour, P2P network |
| JEL: | A13 C93 D12 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2013-24&r=cbe |
| By: | James Bland (Department of Economics, Purdue University); Nikos Nikiforakis (Max Planck Institute for Research on Collective Goods, Bonn) |
| Abstract: | When agents face coordination problems their choices often impose externalities on third parties. We investigate whether such externalities can affect equilibrium selection in a series of one-shot coordination games varying the size and the sign of the externality. We fi?nd that third-party externalities have a limited effect on decisions. A large majority of participants in the experiment are willing to take an action that increases their income slightly, even if doing so causes substantial inequalities and reductions in overall efficiency. Individuals revealed to be other-regarding in a non-strategic allocation task often behave as-if sel?fish when trying to coordinate. |
| Keywords: | social preferences, efficiency, externalities, tacit coordination, equilibrium selection, efficiency. |
| JEL: | D63 D01 D62 C90 D03 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2013_19&r=cbe |
| By: | Andreas Orland; Michael W.M. Roos |
| Abstract: | Fairness considerations are important determinants of behavior in unstructured bargaining situations with equal bargaining power. If the surplus over which the bargaining takes place was created by separate, individual efforts, several entitlement-related fairness ideals might be relevant. In our experiment we first elicit subjects’ fairness ideals using a questionnaire. In the following production phase each player generates output by luck, individual effort and talent. We analyze whether the elicited fairness ideals guide subjects’ behavior in the subsequent bargaining in which the joint output is distributed among two individuals. We find that bargaining claims deviate significantly from the elicited fairness ideals and are strongly related to performance if one individual had produced more than the partner. These findings contrast the previous literature on fairness ideals and enrich the findings on self-serving fairness. |
| Keywords: | Fairness; unstructured bargaining; self-serving fairness; opportunism |
| JEL: | C91 D39 D63 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0439&r=cbe |
| By: | Batista, Catia (Universidade Nova de Lisboa); Silverman, Dan (Arizona State University); Yang, Dean (University of Michigan) |
| Abstract: | We investigate the determinants of giving in a lab-in-the-field experiment with large stakes. Study participants in urban Mozambique play dictator games where their counterpart is the closest person to them outside their household. Dictators share more with counterparts when they have the option of giving in kind (in the form of goods), compared to giving that must be in cash. Qualitative post-experiment responses suggest that this effect is driven by a desire to control how recipients use gifted resources. Standard economic determinants such as the rate of return to giving and the size of the endowment also affect giving, but the effects of even large changes in these determinants are significantly smaller than the effect of the in-kind option. Our results support theories of giving where the utility of givers depends on the composition (not just the level) of gift-recipient expenditures, and givers thus seek control over transferred resources. |
| Keywords: | sharing, altruism, giving, dictator game, inter-household transfers, Mozambique |
| JEL: | C92 C93 D01 D03 D64 O17 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7629&r=cbe |
| By: | Ralf Bergheim; Michael W.M. Roos |
| Abstract: | This paper focuses on information acquisition and individual decision making in ambiguous situations and presents a novel experimental design which may help to tackle open questions from a fresh perspective. Instead of giving subjects the choice between risky and ambiguous Ellsberg urns, we let them choose between a safe option and a risky lottery, whose risk is a priori unknown to subjects. By acquiring information about the probability distribution of the lottery’s payoffs, subjects can reduce or even eliminate the ambiguity and turn the decision situation into one of risk. Under the assumption that an ambiguity averse subject should reduce ambiguity within a decision process we predicted that these subjects would request more information. Moreover, we investigate whether the relation between attitudes towards risk and ambiguity is linked to intuitive and deliberate thinking. Based on a detailed analysis of subjects’ information acquisition and decision processes we do not find that those subjects showing ambiguity aversion in an urn experiment based on Halevy (2007) significantly reduce the ambiguity more than others. More intuitive subjects acquire less information and are more likely to avoid the risky lottery. Intuition seems to be negatively correlated with risk aversion, but not with ambiguity aversion. Moreover, we find a positive correlation between risk and ambiguity aversion. |
| Keywords: | Ambiguity aversion; risk aversion; uncertainty; experiment; decision making; binary system of thinking |
| JEL: | C91 D03 D81 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0440&r=cbe |
| By: | Marco Kleine (Max Planck Institute for Research on Collective Goods, Bonn); Pascal Langenbach (Max Planck Institute for Research on Collective Goods, Bonn); Lilia Zhurakhovska (Max Planck Institute for Research on Collective Goods, Bonn) |
| Abstract: | The opportunity to voice one’s opinion about a decision is a fundamental aspect of procedural fairness and applies to a large variety of economic interactions. Voice may influence decision makers, but at the same time it shapes behavior of those who can voice their opinion. We study the latter effect in a laboratory experiment. More precisely, we analyze the impact of voicing one’s opinion in a decision making process on people’s attitude towards an impartial decision maker whose judgment is not biased by any personal stake. The attitude is measured by generosity towards the decision maker in a dictator game that follows the decision making process. We show that voice procedures substantially improve the attitude towards the decision maker: average transfers are 90% higher in voice treatments than in baseline. And importantly, these positive voice effects in terms of higher transfers occur irrespectively of the decision made by the decision maker. Hence, subjects seem to derive utility merely from stating their opinion rather than from influencing the decision in their favor. In that regard, our results are in contrast to previous findings from settings with self-interested decision makers (e.g., principal-agent relationships), in which voice fosters positive reciprocal behavior for favorable outcomes, as well as negative reciprocal behavior for unfavorable outcomes. |
| Keywords: | fairness, Communication, voice, procedure, impartial decision maker, participative decision making, laboratory experiment |
| JEL: | D63 K23 D23 K40 C91 D03 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2013_11&r=cbe |