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on Cognitive and Behavioural Economics |
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Issue of 2015‒04‒11
twelve papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale “Amedeo Avogadro” |
| By: | Jocelyn Donze; Trude Gunnes |
| Abstract: | In this article, we propose to view the firm as a locus of socialization in which employees with heterogeneous work attitudes can be motivated and coordinated through adherence to a social ideal of effort. We develop an agency model in which employees have both a personal and a social ideal of effort. The firm does not observe the personal ideals, but can make its workforce more sensitive to the social ideal by fostering interaction in the workplace. We show that there are two reasons why the firm invests in social bonding. First, it reinforces the effectiveness of monetary incentives. Second, strengthening the social ideal reduces the adverse selection problem and the need to devise distorted payment schemes. We also show that the firm allocates more time to social interaction when personal ideals of effort are low or heterogeneous. |
| Keywords: | agency theory, social interaction, social norms, norm regulation. |
| JEL: | D2 D8 J3 M5 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2015-09&r=cbe |
| By: | Sergio Beraldo (Università di Napoli Federico II and CSEF) |
| Abstract: | In this paper the principle of gratuitousness and its relationships with other principles which motivate behaviour, such as those inspired by reciprocity, is analyzed. The basic premise is that gratuitousness is a feature acquired by an action by virtue of the intentions that inspire the action itself. In this respect, the search for gratuitousness may require to discriminate among aestetically equivalent actions on the basis of the psychological disposition of the actor. The main claim of the paper is that in economically relevant situations gratuituousness is to be conceived as a modality of cooperation, emerging as the outcome of a team reasoning perspective and motivating such a perspective without any need for reciprocity. This claim is analyzed with regard to blood donations and, more generally, with regard to the voluntary provision of goods. |
| Keywords: | Gratuituousness, reciprocity, team reasoning |
| JEL: | D03 D63 D64 |
| Date: | 2015–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:398&r=cbe |
| By: | Ungureanu, S. |
| Abstract: | The paper shows that bounded rationality, in the form of limited knowledge of utility, is an explanation for common stylized facts of prospect theory like loss aversion, status quo bias and non-linear probability weighting. Locally limited utility knowledge is considered within a classical demand model framework, suggesting that costs of inefficient search for optimal consumption will produce a value function that obeys the loss aversion axiom of Tversky and Kahneman (1991). Moreover, since this adjustment happens over time, new predictions are made that explain why the status quo bias is reinforced over time. This search can also describe the behavior of a consumer facing an uncertain future wealth level. The search cost justifies non-linear forms of probability weighting. The effects that have been observed in experiments will follow as a consequence. |
| Keywords: | status quo bias; reference dependence; loss aversion; cost of choice; search costs; probability weighting; transaction costs; bounded rationality. |
| Date: | 2015–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:cty:dpaper:8124&r=cbe |
| By: | Philippe Aghion; Ernst Fehr; Richard Holden; Tom Wilkening |
| Abstract: | In this paper we conduct a laboratory experiment to test the extent to which Moore and Repullo's subgame perfect implementation mechanism induces truth-telling in practice, both in a setting with perfect information and in a setting where buyers and sellers face a small amount of uncertainty regarding the good's value. We find that Moore-Repullo mechanisms fail to implement truth-telling in a substantial number of cases even under perfect information about the valuation of the good. This failure to implement truthtelling is due to beliefs about the irrationality of one's trading partner. Therefore, although the mechanism should - in theory - provide incentives for truth-telling, many buyers in fact believe that they can increase their expected monetary payoff by lying. The deviations from truth-telling become significantly more frequent and more persistent when agents face small amounts of uncertainty regarding the good's value. Our results thus suggest that both beliefs about irrational play and small amounts of uncertainty about valuations may constitute important reasons for the absence of Moore-Repullo mechanisms in practice. |
| Keywords: | Implementation theory, incomplete contracts, experiments |
| JEL: | D23 D71 D86 C92 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:189&r=cbe |
| By: | Lauren Larrouy (University of Nice Sophia Antipolis, France; GREDEG CNRS) |
| Abstract: | The purpose of this contribution is to illustrate how both Schelling and Bacharach’s methodologies can help scholars bring a new approach to behavioral game theory in which the nature of usual standard methodological individualism is insufficiently questioned. I aim to show that both Schelling and Bacharach question the nature of interactive rationality. They provide original insight concerning (i) the conditions of possibility of the existence of determinate solutions and (ii) the resolution process of games. Furthermore, their questioning of the methodological implications of the well-known trio of standard game theory (common knowledge, the transparency of reasons and the reduction of "strategic uncertainty" to "physical uncertainty") offers some ideas on how to build an alternative theory of games. As forerunners, they open an ongoing research program which can still be a fruitful source of methodological innovation regarding interactive rationality and its collective determinants. |
| Keywords: | game theory, interactive rationality, framing, focal point, team reasoning, methodological individualism |
| JEL: | B21 B41 C72 D03 D79 D81 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2015-14&r=cbe |
| By: | Carpenter, Jeffrey P. (Middlebury College); Matthews, Peter Hans (Middlebury College) |
| Abstract: | There has been little systematic study of the mechanisms typically used to raise money for charity. One of the most common is the simple raffle in which participants purchase chances to win a prize at a constant price. We conduct a field experiment randomly assigning participants to four raffle treatments to examine the effectiveness of alternative incentive schemes designed to encourage either participation or volume. Our results confirm the importance of incentives in that we find revenue gains are available on both margins. Our experiment, and others like it, illustrates the power of field experiments to inform fundraising choices. |
| Keywords: | philanthropy, fundraising, incentives, public good, raffle, Tullock contest, field experiment |
| JEL: | H41 D03 D64 C93 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8952&r=cbe |
| By: | Jacob LaRiviere (Department of Economics, University of Tennessee); Mikolaj Czajkowski (University of Warsaw, Department of Economic Sciences, Poland); Nick Hanley (Department of Geography and Sustainable Development, University of St. Andrews); Katherine Simpson (Economics Division, University of Stirling, Scotland) |
| Abstract: | We use a novel field experiment which jointly tests two implicit assumptions of updating models in a joint framework: that new information leads to new knowledge and that new knowledge can affect economic decisions. In the experiment, we elicit subjects’ prior knowledge state about a good’s attributes, exogenously vary how much new information about good attributes we provide to subjects, elicit subjects’ valuation for the good, and elicit posterior knowledge states about the same good attributes. Testing for changes in knowledge jointly with changes in preferences allows us to horserace updating models more completely than previous studies since we observe ex ante and ex post knowledge states. Our results are consistent with a model of incomplete learning, fatigue and either confirmation bias or costly search coupled with unbiased priors. |
| Keywords: | Learning, Information, Bayesian Updating, Behavioral Economics |
| JEL: | D83 D81 Q51 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:sss:wpaper:2015-09&r=cbe |
| By: | Martin Daniel Siyaranamual (Department of Economics, Padjadjaran University) |
| Abstract: | Social interactions may encourage the cooperative behaviours by triggering either self-image concerns (when one sees others’ decisions without being seen) or social-image concerns (when one’s decision is seen by others). A laboratory experiment is designed to compare these two concerns directly, using a four-players finitely repeated public goods experiment on two directed star networks, self-image and social-image networks. The comparison of the players voluntary contributions in both types of networks reveals that their contributing behaviours are statistically indistinguishable. However, the players who belong to the self-image network are more willing to conform with the group behaviours, meaning that they will increase (reduce) the contributions if theirs are below (above) their groups average. Furthermore, I also find evidence that the contributing behaviours are more stable in the self-image networks than in the social-image network. |
| Keywords: | Social-image; Self-image; Directed network; Public good experiment |
| JEL: | C92 D19 H41 Z13 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:unp:wpaper:201501&r=cbe |
| By: | Richard Arena (University of Nice Sophia Antipolis, France; GREDEG CNRS); Lauren Larrouy (University of Nice Sophia Antipolis, France; GREDEG CNRS) |
| Abstract: | In this contribution we relate the respective works of two important economists, Friedrich von Hayek and Michael Bacharach, namely one of the main intellectual leaders of the Austrian Schools and one of the most original game theorists. Hayek and Bacharach are two authors - few in number – who do not conceive that economic analysis could be built without the help of psychology. They both considered that subjective perceptions of the real world provide the first stage of decision processes and that, within this stage, psychological factors played a fundamental role. Therefore, they both proposed how perceptions, economic rationality and social coordination could be combined. However economists who really accept to take psychology into account often face new difficulties. The incorporation of subjectivity in economic behaviour can make much more complex the analysis of economic and social coordination. To overtake these new difficulties we will see that both Hayek and Bacharach integrate a specific approach to human cognition and resort to an evolutionary explanation of social coordination. This is the main message we deliver in this contribution. |
| Keywords: | Austrian economic theory, game theory, cognitive psychology, subjectivism, social coordination |
| JEL: | B21 B40 B53 C72 D01 D11 D50 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2015-15&r=cbe |
| By: | Görlitz, Katja (Free University of Berlin); Tamm, Marcus (RWI) |
| Abstract: | This study analyzes how risk attitudes change when individuals become parents using longitudinal data for a large and representative sample of individuals. The results show that men and women experience a considerable increase in risk aversion which already starts as early as two years before becoming a parent, is largest shortly after giving birth and disappears when the child becomes older. These findings show that parenthood leads to considerable changes in individual risk attitudes over time. Thus, analyses using risk preferences as the explanatory variable for economic outcomes should be careful in interpreting the findings as causal effects. |
| Keywords: | risk aversion, risk preferences, preference stability, parenthood, children, gender differences |
| JEL: | D1 D81 J13 J16 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8947&r=cbe |
| By: | James C. Cox; Wafa Hakim Orman |
| Abstract: | Trust and trustworthiness are crucial to amelioration of social dilemmas. Distrust and malevolence aggravate social dilemmas. We use an experimental moonlighting game with a sample of the U.S. population, oversampling immigrants, to observe interactions between immigrants and native-born Americans in a social dilemma situation that can elicit both benevolent and malevolent actions. We survey participants in order to relate outcomes in the moonlighting game to demographic characteristics and traditional, survey-based measures of trust and trustworthiness and show that they are strongly correlated. Overall, we find that immigrants are as trusting as native-born U.S. citizens when they interact with native-born citizens but do not trust other immigrants. Immigrants appear to be less trustworthy overall but this finding disappears when we control for demographic variables. Women and older people are less likely to trust but no more or less trustworthy. Highly religious immigrants are less trusting and less trustworthy than both other immigrants and native-born Americans. |
| Keywords: | experiment, trust, trustworthiness, religiosity, immigrants, native-born |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2015-03&r=cbe |
| By: | Jacob LaRiviere (Department of Economics, University of Tennessee); Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw); Nick Hanley (Department of Geography and Sustainable Development, University of St Andrews); Katherine Simpson (Economics Division, University of Stirling) |
| Abstract: | We use a novel field experiment which jointly tests two implicit assumptions of updating models in a joint framework: that new information leads to new knowledge and that new knowledge can affect economic decisions. In the experiment, we elicit subjects’ prior knowledge state about a good’s attributes, exogenously vary how much new information about good attributes we provide to subjects, elicit subjects’ valuation for the good, and elicit posterior knowledge states about the same good attributes. Testing for changes in knowledge jointly with changes in preferences allows us to horserace updating models more completely than previous studies since we observe ex ante and ex post knowledge states. Our results are consistent with a model of incomplete learning, fatigue and either confirmation bias or costly search coupled with unbiased priors. |
| Keywords: | Learning, Information, Bayesian Updating, Behavioral Economics |
| JEL: | D83 D81 Q51 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2015-14&r=cbe |