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on Cognitive and Behavioural Economics |
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Issue of 2024‒01‒22
six papers chosen by |
| By: | Kai Barron (WZB Berlin); Tilman Fries (LMU Munich) |
| Abstract: | Modern life offers nearly unbridled access to information; it is the harnessing of this information to guide decision-making that presents a challenge. We study how one individual may try to shape the way another person interprets objective information by proposing a causal explanation (or narrative) that makes sense of this objective information. Using an experiment, we examine the use of narratives as a persuasive tool in the context of financial advice where advisors may hold incentives that differ from those of the individuals they are advising. Our results reveal several insights about the underlying mechanisms that govern narrative persuasion. First, we show that advisors construct self-interested narratives and make them persuasive by tailoring them to fit the objective information. Second, we demonstrate that advisors are able to shift investors’ beliefs about the future performance of a company. Third, we identify the types of narratives that investors find convincing, namely those that fit the objective information well. Finally, we evaluate the efficacy of several potential policy interventions aimed at protecting investors. We find that narrative persuasion is difficult to protect against. |
| Keywords: | narratives; beliefs; financial advice; conflicts of interest; behavioral finance; |
| JEL: | D83 G40 G50 C90 |
| Date: | 2023–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:469&r=cbe |
| By: | Charlotte Cordes (LMU Munich); Jana Friedrichsen (Kiel University, CESifo); Simeon Schudy (Ulm University, CESifo) |
| Abstract: | Traditionally, economic models have attributed procrastination to present bias. However, procrastination may also arise when individuals derive anticipatory utility from holding motivated, overly optimistic beliefs about the workload they need to complete. This study provides a rigorous empirical test for this notion of `motivated procrastination'. In a longitudinal experiment over four weeks, individuals have to complete a cumbersome task of unknown length. They are exposed to exogenous variation in i) their expectation regarding their workload and ii) scope for motivated reasoning. We find that scope for motivated reasoning allows workers to hold substantially more optimistic beliefs and identify a causal link between the exogenous variation in beliefs and the deferral of work to the future. This systematic belief-based delay of work (motivated procrastination) turns out to be robust to accounting for decision-makers' time preferences and emotional responses, and looms largest for decision makers who tend to not acquire information that may include negative news. |
| Keywords: | anticipatory utility; beliefs; memory; motivated cognition; procrastination; real effort; task allocation; |
| JEL: | C91 D83 D84 D90 D91 |
| Date: | 2023–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:471&r=cbe |
| By: | David Gill; Zachary Knepper; Victoria Prowse; Junya Zhou |
| Abstract: | We explore the influence of cognitive ability and judgment on strategic behavior in the beauty contest game. Using the level-k model of bounded rationality, cognitive ability and judgment both predict higher level strategic thinking. However, individuals with better judgment choose the Nash equilibrium action less frequently, and we uncover a novel dynamic mechanism that sheds light on this pattern. Taken together, our results indicate that fluid (i.e., analytical) intelligence is a primary driver of strategic level-k thinking, while facets of judgment that are distinct from fluid intelligence drive the lower inclination of high judgment individuals to choose the equilibrium action. |
| Keywords: | cognitive ability; judgment; fluid intelligence; matrix reasoning; beauty contest; strategic sophistication; level-k; experiment; game theory |
| JEL: | C92 C72 D91 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:pur:prukra:1337&r=cbe |
| By: | Hanshu Zhang; Frederic Moisan (EM - emlyon business school); Palvi Aggarwal; Cleotilde Gonzalez |
| Abstract: | Previous research has discussed the effects of monetary incentives and prosociality on deceptive behavior. However, research has not comprehensively investigated the relationship between these two factors. In the current research, we introduce a repeated two-player sender–receiver binary choice task, where players in the role of senders or receivers receive asymmetric information regarding payoffs, offering the opportunity to explore the effects of economic incentives to lie according to the players' prosociality. In Experiment 1, players are paired to play the game as a sender or receiver online. We find that economic incentives determine the likelihood of deception from senders and the likelihood that receivers will deviate from the received suggestions. Moreover, prosociality is related to players' behavior: Prosocial senders send less deceptive messages and prosocial receivers choose options that benefit senders more. Furthermore, senders display consistent behavior when interacting with receivers, and they do not change their deceptive behavior even if detected by receivers. Experiment 2 further investigates how the players' behavior corresponds to their understanding and interpretation of the other players' actions, by pairing players with computer algorithms that display consistent probabilistic behaviors. We observe that senders deceive receiver algorithms by sending truthful messages when they expect the message not to be followed, and receivers follow the received messages by choosing the option that benefits "honest" sender algorithms. While we find a consistent result that prosocial senders send fewer deceptive messages than they should when telling the truth is costly, prosocial receivers are less considerate of sender payoffs in algorithms' interaction. |
| Keywords: | Deception, Sender-receiver game, Social preferences, Social value orientation, Human machine interaction |
| Date: | 2022–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04325602&r=cbe |
| By: | Yansong Li; Zhenliang Liu; Yuqian Wang; Edmund Derrington; Frederic Moisan (EM - emlyon business school); Jean-Claude Dreher |
| Abstract: | "There is growing evidence that risky cooperation is regulated by the experience of previous interactions with others. However, it is unclear how the evaluation of outcomes from competitive interactions can affect individuals' subsequent cooperative behavior. To address this issue, we examined how participants cooperated with a partner having just competed with them. While competing, participants (N = 164) were randomly assigned to receive one of four types of outcome feedback regarding their performance (victory vs. defeat vs. uncertain vs. no competition (control)). We found that both the experience of defeats and of uncertainty as competitive outcomes exerted a negative impact on the extent to which participants then engaged in cooperative behavior with their recent opponents. This only occurred when such subsequent cooperative behavior involved a high potential for incurring personal costs but not when there was no risk of incurring personal costs and a positive return. Finally, mediation analysis revealed that the effect of defeat was mediated by participants' level of interpersonal trust and the extent to which participants were willing to cooperate, while the effect of the uncertain competitive outcome was mediated only by the extent to which participants were willing to cooperate. These findings offer novel insights into how risky cooperation is modulated by previous competition." |
| Date: | 2023–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04325682&r=cbe |
| By: | Saulo Dubard-Barbosa (EM - emlyon business school); Brett Smith |
| Abstract: | "Research on the relationship between religion and entrepreneurship has produced mixed findings. We argue such equivocal findings are partly the result of under-specification of the role of religion in entrepreneurial action. To address this issue, we build on the process perspective of entrepreneurial cognition by simultaneously incorporating mental representations and cognitive resources. Specifically, we theorize a cognitive process that incorporates both framing effects of opportunity cues and religious belief integration based on sanctification into the assessment of feasibility and desirability of entrepreneurial action. Through two within-subject experiments, we find (i) positively framed opportunity cues yield more favorable assessments of entrepreneurial action than negatively framed opportunity cues, and (ii) religious belief integration moderates the relationship between framing and assessments of entrepreneurial action, enhancing perceived feasibility and desirability when information framing is negative. We discuss the implications of our model to research the theological turn of entrepreneurship and a cognitive perspective of entrepreneurial action." |
| Keywords: | Opportunity evaluation, Entrepreneurial action, Religion, Religious belief integration, Theological turn, Information framing, Opportunity cues |
| Date: | 2023–11–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04348222&r=cbe |