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on Cognitive and Behavioural Economics |
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Issue of 2020‒10‒12
eight papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Andersson, Ola (Department of Economics, Uppsala University); Holm, Håkan J. (Department of Economics, Lund University); Tyran, Jean-Robert (University of Vienna); Wengström, Erik (Department of Economics, Lund University, and) |
| Abstract: | Recent experimental evidence suggests that noisy behavior correlates strongly with personal characteristics. Since decision noise leads to bias in most elicitation tasks, there is a risk of falsely interpreting noise-driven relationships as preference driven. This puts previous studies that found a negative relation between personality measures and risk aversion into perspective and in particular raises the question of how to achieve robust inference in this domain. This paper shows, by way of an economic experiment with subjects from all walks of life, that using structural estimation that models heterogeneity of noise in combination with a balanced design allows us to mitigate the bias problem. Our estimations show that cognitive ability is related to noisy behavior rather than risk preferences. We also find age and education to be strongly related to noise, but the personality characteristics obtained using the Big Five inventory are less related to noise and more robustly correlated to risk preferences. |
| Keywords: | Risk preference; Cognitive ability; Experiment; Noise |
| JEL: | C81 C91 D12 D81 |
| Date: | 2020–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1358&r=all |
| By: | İriş, D.; Lee, J.; Tavoni, A. |
| Abstract: | Many public goods cannot be provided directly by interested parties (e.g. citizens), as they entail decision-making at nested hierarchical scales: at a lower level individuals elect a representative, while at a higher scale elected delegates decide on the provision level, with some degree of scrutiny from their constituency. Furthermore, many such decisions involve uncertainty about the magnitude of the contribution that is needed for the good to be provided (or bad to be avoided). In such circumstances delegates can serve as important vehicles for coordination by aggregating societal preferences for provision. Yet, the role of delegation in threshold public goods games is understudied. We contrast the behavior of delegates to that of self-representing individuals in the avoidance of a public bad in an experimental setting. We randomly assign twelve subjects into four teams and ask each team to elect a delegate via majority voting. The elected delegates play several variants of a one-shot public goods game in which losses can ensue if the sum of their contributions falls short of a threshold. We find that when delegation is coupled with a mild form of public pressure, it has a significantly negative effect on contributions, even though the non-delegates can only signal their preferred levels of public good contributions. The reason is that delegates give more weight to the least cooperative suggestion: they focus on the lower of the two public good contributions recommended by their teammates. |
| Keywords: | delegation; cooperation; threshold public goods game; climate experiment |
| JEL: | C72 C92 D81 H40 Q54 |
| Date: | 2019–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:102313&r=all |
| By: | Matthew Embrey (Department of Economics, University of Sussex); Christian Seel (Maastricht University); J. Philipp Reiss (Karlsruhe Institute of Technology) |
| Abstract: | This paper investigates whether contest schemes induce excessive risk-taking by implementing in the laboratory a novel stopping task based on the contest model of Seel and Strack (2013). In this stylized setting, managers who face contest payoffs have an incentive to delay halting projects with negative drift, with the induced inefficiency being highest for a moderately negative expectation. The experimental design systematically varies the negative drift (between-subjects) and the payoff incentives (within-subject). We find evidence for excessive risk-taking in all our treatment conditions, with the non-monotonicity being at least as problematic as predicted. Contrary to the theoretical predictions, this aggregate pattern of behaviour is seen even without contest incentives. Further analysis suggests that many subjects display behaviour consistent with some intrinsic motivation for taking risk in the stopping task. This intrinsic motive and the strategic motive for excessive risk-taking appear to reinforce the non-monotonicity in subtly different ways. The experiment uncovers an interesting behavioural nuance in which contest incentives might crowd out an intrinsic inclination to gamble. |
| Keywords: | Contests; Relative performance pay; Risk-taking Behaviour; Laboratory Experiment |
| JEL: | C72 C92 D81 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susewp:1620&r=all |
| By: | Elisa Hofmann (International Max Planck Research School "Adapting Behavior in a Fundamentally Uncertain World", Friedrich Schiller University Jena) |
| Abstract: | Individual decision-making in Pay-What-You-Want settings is prone to social influence. Es pecially payment observability and the social relationship with other buyers during the payment decision are two important components of social influence. In practical applications of Pay-What-You-Want both phenomena often occur together while not being investigated yet for more than two types of social relationships. Thus, it is not clear how the presence of various types of social relationships influence voluntary payments and how they relate to payment observability. This study examines both drivers of social influence and investigates how payment observability (audience effect) and different types of social relationships (closeness effect) affect voluntary payments at the American Museum of Natural History. 1034 subjects participated in the study. I find that both, payment observability and interpersonal closeness, significantly increase payments. Voluntary payments are significantly higher if observed by other buyers and if visitors are surrounded by interpersonally close others. A high level of consistency between beliefs and behavior with increasing interpersonal closeness is discussed as potential explanation of the closeness effect. The study results are robustly confirmed in a replication study with 995 subjects. |
| Keywords: | social influence, interpersonal closeness, social image concerns, experiments, Pay-What-You-Want |
| JEL: | C90 D01 D91 L11 |
| Date: | 2020–09–26 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2020-016&r=all |
| By: | Silvia Saccardo; Marta Serra-Garcia |
| Abstract: | Do people anticipate the conditions that enable them to manipulate their beliefs when confronted with unpleasant information? We investigate whether individuals seek out the “cognitive flexibility” needed to distort beliefs in self-serving ways, or instead attempt to constrain it, committing to unbiased judgment. Experiments with 6500 participants, including financial and legal professionals, show that preferences are heterogeneous: over 40% of advisors prefer flexibility, even if costly. Actively seeking flexibility does not preclude belief distortion. Individuals anticipate the effects of cognitive flexibility and their choice to pursue it responds to incentives, suggesting some sophistication about the cognitive constraints to belief distortion. |
| Keywords: | belief distortion, morality, sophistication, commitment, experiments |
| JEL: | D83 D91 C91 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8529&r=all |
| By: | Pugatch, Todd (Oregon State University); Wilson, Nicholas (Reed College) |
| Abstract: | More than two of every five students who enroll in college fail to graduate within six years. Prior research has identified ineffective study habits as a major barrier to success. We conducted a randomized controlled advertising experiment designed to increase demand for academic support services among more than 2,100 students at a large U.S. public university. Our results reveal several striking findings. First, the intervention shifted proxies of student attention, such as opening emails and self-reported awareness of service availability. However, the experimental variation indicates that approximately one-third of students are never attentive to student services. Second, advertising increased the use of extra practice problems, but did not affect take-up of tutoring and coaching, the other two services. Structural estimates suggest that transaction costs well in excess of plausible opportunity costs explain the differences in service use. Third, the characteristics of advertising messages matter. Several common nudging techniques—such as text messages, lottery-based economic incentives, and repeated messages—either had no effect or in some cases reduced the effectiveness of messaging. |
| Keywords: | email, higher education, incentives, nudges, text, randomized control trial |
| JEL: | A22 D91 I23 M31 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13732&r=all |
| By: | Arslan, Ruben C. (Max Planck Institute for Human Development); Brümmer, Martin (University of Leipzig); Dohmen, Thomas (University of Bonn and IZA); Drewelies, Johanna (Humboldt University Berlin); Hertwig, Ralph (Max Planck Institute for Human Development); Wagner, Gert G. (Max Planck Institute for Human Development) |
| Abstract: | People differ in their willingness to take risks. Recent work found that revealed preference tasks (e.g., laboratory lotteries)—a dominant class of measures—are outperformed by survey-based stated preferences, which are more stable and predict real-world risk taking across different domains. How can stated preferences, often criticised as inconsequential "cheap talk," be more valid and predictive than controlled, incentivized lotteries? In our multimethod study, over 3,000 respondents from population samples answered a single widely used and predictive risk-preference question. Respondents then explained the reasoning behind their answer. They tended to recount diagnostic behaviours and experiences, focusing on voluntary, consequential acts and experiences from which they seemed to infer their risk preference. We found that third- party readers of respondents' brief memories and explanations reached similar inferences about respondents' preferences, indicating the intersubjective validity of this information. Our results help unpack the self perception behind stated risk preferences that permits people to draw upon their own understanding of what constitutes diagnostic behaviours and experiences, as revealed in high-stakes situations in the real world. |
| Keywords: | risk preferences, self-report, self-perception |
| JEL: | D80 D81 D91 D01 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13723&r=all |
| By: | Ruben C. (Center for Adaptive Rationality, Max Planck Institute for Human Development, Berlin, Germany); Martin Brümmer (University of Leipzig, Germany); Thomas Dohmen (Institute for Applied Microeconomics, University of Bonn, Germany; Institute of Labor Economics (IZA), Bonn, Germany; Maastricht University, The Netherlands; German Institute for Economic Research, Berlin, Germany; CESifo, Munich, Germany); Johanna Drewelies (Humboldt University of Berlin, Germany); Ralph Hertwig (Center for Adaptive Rationality, Max Planck Institute for Human Development, Berlin, Germany); Gert G. Wagner (Center for Adaptive Rationality, Max Planck Institute for Human Development, Berlin, Germany; Institute of Labor Economics (IZA), Bonn, Germany; German Institute for Economic Research, Berlin, Germany; CESifo, Munich, Germany) |
| Abstract: | People differ in their willingness to take risks. Recent work found that revealed preference tasks (e.g., laboratory lotteries)—a dominant class of measures—are outperformed by survey-based stated preferences, which are more stable and predict real-world risk taking across different domains. How can stated preferences, often criticised as inconsequential “cheap talk,” be more valid and predictive than controlled, incentivized lotteries? In our multimethod study, over 3,000 respondents from population samples answered a single widely used and predictive risk preference question. Respondents then explained the reasoning behind their answer. They tended to recount diagnostic behaviours and experiences, focusing on voluntary, consequential acts and experiences from which they seemed to infer their risk preference. We found that third-party readers of respondents’ brief memories and explanations reached similar inferences about respondents’ preferences, indicating the intersubjective validity of this information. Our results help unpack the self-perception behind stated risk preferences that permits people to draw upon their own understanding of what constitutes diagnostic behaviours and experiences, as revealed in high-stakes situations in the real world. |
| Keywords: | risk preferences, self-report, self-perception |
| JEL: | D80 D81 D91 D01 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:031&r=all |