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on Cognitive and Behavioural Economics |
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Issue of 2016‒02‒29
thirteen papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Peter Schwardman (Ludwig Maximilian University of Munich, Germany); Joël van der Weele (University of Amsterdam) |
| Abstract: | We experimentally investigate the determinants of overconfidence and test the hypothesis, advanced by Robert Trivers, that overconfidence serves to more effectively persuade or deceive others. After performing a cognitively challenging task, half of our subjects are informed about the possibility of earning money by convincing others of their high relative performance in a structured face-to-face interaction. Privately elicited beliefs show that informed participants are 50% more overconfident than those in a control condition, and are less responsive to objective feedback on their performance. Using random variation in confidence generated by our feedback mechanism, we find that increased confidence indeed causes higher evaluations in the ensuing interactions, unless the evaluators have been explicitly instructed to watch out for lies. These results support the idea that confidence is a strategic variable in human interaction. |
| Keywords: | Overconfidence; belief formation; self-deception; deception |
| JEL: | C91 D03 D83 |
| Date: | 2016–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20160012&r=cbe |
| By: | Marco Faillo (University of Trento); Matteo Rizzolli (LUMSA University); Stephan Tontrup (New York University) |
| Abstract: | Abstract The institution of property is void without legal and social enforcement against theft. To address wasteful competition over resources, societies have long developed strategies that encompass -inter alia- behavioral traits, social norms and legal institutions to promote the respect and enforcement of property rights. On the other hand, a growing body of biological and ethological evidence suggests that several other animal species establish and respect some forms of property even in the absence of institutions. Would human beings respect others' property in the absence of institutions? Do people posses some innate sense of property, or do they respect property only because of legal and social enforcement? In this study, we explore this issue with a lab experiment that resembles a famous thought experiment proposed by Plato. As Plato sought to understand how one ought to behave when he or sheis completely shielded by the consequences of his actions,we study whether people respect property once full anonymity is granted. In this experiment, we implement a Free-Form Dictator game where participants can both give and take up to five scratchcards from a passive counterpart that they have either previously bought outside the lab with their own money (legal treatments) or gained inside the lab via an effort task (effortful treatments). In conclusion to the experiment, evidence is provided of a (weak) sense of property. We also provide evidence that property in the lab is better established through an effort tasks than through the use of subject's own real property brought from outside the lab. |
| Keywords: | property rights, dictator game, bully game, taking, stealing, anonymity, effort, scratchcards |
| JEL: | C91 D23 K11 P14 P26 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:ent:wpaper:wp58&r=cbe |
| By: | Alisa Frik; Alexia Gaudeul |
| Abstract: | We expose subjects in our experiment to the risk of having to reveal private information to other participants. We show that the decision to incur this risk is driven mainly by their general attitude to monetary risk. Survey attitudes to privacy play only a marginal role in explaining attitudes to privacy risk. Subjects who are more willing to pay or to accept payment for their private information do not appear to be more or less likely to incur privacy risks than others once their overall level of risk aversion is taken into account. We further test the relation between privacy and control, that is, whether depriving subjects of full control over whether their personal information will be revealed leads them to lose interest in protecting it. We find that this is not the case. We finally find that subjects who are asked for their preferences over monetary risk before being asked for their preferences over privacy risks tend to choose riskier options in privacy lotteries. This provides evidence of the importance of framing for privacy decisions; inducing subjects to think of privacy decisions in the context of financial decisions reduces their aversion to privacy risk. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpce:1601&r=cbe |
| By: | Carlos Cueva Herrero (Dpto. Análisis Económico Aplicado); Iñigo Iturbe-Ormaetxe Kortajarene (Universidad de Alicante); Giovanni Ponti (Universidad de Alicante); Josefa Tomás Lucas (Universidad de Alicante) |
| Abstract: | The disposition effect (DE) is a common investment bias consisting of the tendency to sell profitable assets and hold losing assets. We investigate individual determinants of the DE in a standard experimental environment as well as one with transaction costs and one with a competitive payment scheme. Overall DE is positive and significant in all trading environments. In line with previous results in the literature, we find that women are more reluctant to sell losing assets than men in the standard environment. However, this difference disappears in the presence of transaction costs. Contrary to earlier reports, we do not find a significant gender difference in the DE in any environment. Novelly, we find that the most significant psychological predictor of the reluctance to realize losses is the difficulty in recognizing one’s errors. This constitutes novel direct evidence that “investors are also reluctant to accept and realize losses because the very act of doing so proves that their first judgment was wrong” (Gross, 1982, p. 150). |
| Keywords: | Behavioral Finance, Experimental Economics, Disposition effect, Transaction costs, Gender differences |
| JEL: | C91 D70 D81 D91 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2016-01&r=cbe |
| By: | Marc Höglinger; Ben Jann |
| Abstract: | Social desirability and the fear of sanctions can deter survey respondents from responding truthfully to sensitive questions. Self-reports on norm breaking behavior such as shoplifting, non-voting, or tax evasion may therefore be subject to considerable misreporting. To mitigate such misreporting, various indirect techniques for asking sensitive questions, such as the randomized response technique (RRT), have been proposed in the literature. In our study, we evaluate the viability of several variants of the RRT, including the recently proposed crosswise-model RRT, by comparing respondents’ self-reports on cheating in dice games to actual cheating behavior, thereby distinguishing between false negatives (underreporting) and false positives (overreporting). The study has been implemented as an online survey on Amazon Mechanical Turk (N = 6,505). Our results indicate that the forced-response RRT and the unrelated-question RRT, as implemented in our survey, fail to reduce the level of misreporting compared to conventional direct questioning. For the crosswise-model RRT, we do observe a reduction of false negatives (that is, an increase in the proportion of cheaters who admit having cheated). At the same time, however, there is an increase in false positives (that is, an increase in non-cheaters who falsely admit having cheated). Overall, our findings suggest that none of the implemented sensitive questions techniques substantially outperforms direct questioning. Furthermore, our study demonstrates the importance of distinguishing false negatives and false positives when evaluating the validity of sensitive question techniques. |
| Keywords: | Sensitive Questions, Online Survey, Amazon Mechanical Turk, Randomized Response Technique, Crosswise Model, Dice Game, Validation |
| JEL: | C81 C83 |
| Date: | 2016–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:bss:wpaper:18&r=cbe |
| By: | Persson, Emil (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Anger can be a strong behavioral force, with important consequences for human interaction. For example, angry individuals may become hostile in their dealings with others, and this has strategic consequences. Battigalli, Dufwenberg, and Smith (2015; BDS) develop a formal framework where frustration and anger affect interaction and shape economic outcomes. This paper designs an experiment testing the predictions based on central concepts of their theory. The focus is on situations where other-responsibility is weak or nonexistent, and in this specific context I find only limited support for the theory: While unfulfilled expectations about material payoffs seem to generate negative emotions in subjects, which is in line with BDS' conceptualization of frustration, behavior is generally not affected by these emotions to the extent predicted by the theory. |
| Keywords: | Emotion; Anger; Blame; Psychological games; Experiment |
| JEL: | C72 C91 D03 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0647&r=cbe |
| By: | Tinghög, Gustav (Division of Economics, Department of Management and Engineering, Linköping University); Andersson, David (Division of Economics, Department of Management and Engineering, Linköping University) |
| Abstract: | According to luck egalitarianism, inequalities should be deemed fair as long as they follow from individuals’ deliberate and fully informed choices, i.e. option luck – while inequalities should be deemed unfair if they follow from choices over which the individual has no control, i.e. brute luck. This study investigates if individuals’ fairness preferences correspond with the luck egalitarian fairness position. More specifically, in a laboratory experiment we test how individuals choose to redistribute gains and losses that stem from option luck compared to brute luck. A two-stage experimental design with real incentives was employed. In total, 226 subjects were randomly assigned to either the brute luck or option luck treatment. Treatments were identical except for how monetary compensation for participation in the experiment was settled in stage one. In the option luck treatment, subjects were given the option to chose between a safe option (50 SEK) and a risky option (a 50/50 gamble between 0 SEK and 150 SEK). In the brute luck treatment no such choice was given, instead all subjects were compensated based on outcome of the risky option. In the second stage, subjects were asked to distribute additional endowments (100 SEK) in an anonymous dictator game using the strategy method, i.e. making decisions contingent on the recipient losing or wining in the gamble. Individuals change their action associated with re-allocation depending on the underlying conception of luck. Subjects in the brute luck treatment equalized outcomes to larger extent (p=0.0069). Thus, subjects redistributed a larger amount to unlucky losers and a smaller amount to lucky winners compared to equivalent choices made in the option luck treatment. We find strong support for people having a fairness preference not just for outcomes, but also for how those outcomes are reached. Our findings are potentially important for understanding the role citizens assign individual responsibility for life outcomes, i.e. health and wealth. |
| Keywords: | fairness; luck egalitarianism; brute luck; option luck; dictator game; laboratory experiment |
| JEL: | D03 |
| Date: | 2016–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:liuewp:0001&r=cbe |
| By: | Zhixin Dai (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Fabio Galeotti (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | The concentration of high frequency controls in a limited period of time (" crackdowns ") constitutes an important feature of many law-enforcement policies around the world. In this paper, we offer a comprehensive investigation on the relative efficiency and effectiveness of various crackdown policies using a lab-in-the-field experiment with real passengers of a public transport service. We introduce a novel game, the daily public transportation game, where subjects have to decide, over many periods, whether to buy or not a ticket knowing that there might be a control. Our results show that (a) concentrated crackdowns are less effective and efficient than random controls; (b) prolonged crackdowns reduce fare-dodging during the period of intense monitoring but induces a burst of fraud as soon as they are withdrawn; (c) pre-announced controls induces more fraud in the periods without control. Overall, we also observe that real fare-dodgers fraud more in the experiment than non-fare-dodgers. |
| Keywords: | Crackdowns, fraud, risk, monitoring, transportation, field experiment |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01270808&r=cbe |
| By: | Lise Vesterlund |
| Abstract: | Real-effort experiments are frequently used when examining a response to incentives.For any particular real-effort task to be well-suited for such an exercise subjects’ cost for exertingeffort must result in an interior effort choice. The popular slider task in Gill and Prowse (2012)has been characterized as satisfying this requirement, and the task has been increasingly used to investigatethe response to changes in both monetary and non-monetary incentives. However, despiteits increasing use, a simple between-subject examination of the slider task’s response to incentiveshas not been conducted. We provide such an examination with three different piece-rate incentives:half a cent, two cents, and eight cents per slider completed. We find that participants in the threetreatments completed on average 26.1, 26.6 and 27.3 sliders per round, respectively. The one-sliderincrease in observed performance is small, not only relative to the sixteen-fold increase in the incentives,but also relative to the observed heterogeneity across subjects, rates of learning, and evenidiosyncratic variation. Our paper cautions that the slider task will be underpowered for uncoveringa response to incentives in between-subject designs. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:5661&r=cbe |
| By: | Alger, Ingela; Juarez, Laura; Juarez-Torres, Miriam; Miquel-Florensa, Josepa |
| Abstract: | How does informal risk sharing affect incentives to avoid risk? While moral hazard is expected under formal insurance, theory suggests that the incentive effects of informal risk sharing are ambiguous: internalization of the external effects of transfers on others may reduce or enhance incentives to avoid risk. To study this issue, which is particularly relevant for developing economies, we designed a novel real-effort lab experiment and conducted it in 16 small villages in rural Mexico. We find that subjects internalize the effects of transfers enough for the presence of transfers to significantly increase effort compared to autarky situations. |
| Keywords: | informal insurance, effort, moral hazard, free-riding effect, empathy effect |
| JEL: | C93 D64 O12 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:30190&r=cbe |
| By: | Jonathan de Quidt (Institute for International Economic Studies, Stockholm University); Francesco Fallucchi (School of Economics, University of East Anglia); Felix Koelle (Center for Social and Economic Behavior, University of Cologne); Daniele Nosenzo (School of Economics, University of Nottingham); Simone Quercia (Institute for Applied Microeconomics, University of Bonn) |
| Abstract: | We study the relative effectiveness of contracts that are framed either in terms of bonuses or penalties. In one set of treatments subjects know at the time of effort provision whether they have achieved the bonus / avoided the penalty. In another set of treatments subjects only learn the success of their performance at the end of the task. We fail to observe a contract framing effect in either condition: effort provision is statistically indistinguishable under bonus and penalty contracts. We discuss possible reasons for this null result. |
| Keywords: | contract framing; bonus; penalty; fine; loss aversion |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2016-01&r=cbe |
| By: | Buyukboyaci, Muruvvet; Kucuksenel, Serkan |
| Abstract: | In this paper, we experimentally compare the effect of costless direct and indirect messages on the risky action choices, hence on coordinations in stag-hunt games. We show that there is no effect of costless indirect messages on the frequency of risky action choices and hence on coordination on the payoff-dominant equilibrium. With direct messages, however, we find that there is a significant effect of pre-play communication on efficient coordination. One potential reason of not seeing a significant effect of indirect messages is the difference in agents' message-interpretations. Another potential reason may be the existence of lie-averse agents. |
| Keywords: | coordination, cheap talk, risk information, costless messages |
| JEL: | C72 C91 D82 D84 |
| Date: | 2016–01–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:68964&r=cbe |
| By: | Akerlof, George A.; Snower, Dennis J. |
| Abstract: | Standard economics omits the role of narratives (the stories that people tell themselves and others) when they make all kinds of decisions. Narratives play a role in understanding the environment; focusing attention; predicting events; motivating action; assigning social roles and identities; defining power relations; and establishing and conveying social norms. This paper describes the role narratives play in decision making, as it also juxtaposes this description against the backdrop of the Bolshevik-spawned narrative that played a critical role in the history of Russia and the Soviet Union in the 20th Century. |
| Keywords: | narrative,motivation,attention,prediction,identity,social assignment |
| JEL: | A12 A13 A14 D03 D04 D20 D23 D30 D62 D71 D72 D74 E02 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkwp:2022&r=cbe |