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on Cognitive and Behavioural Economics |
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Issue of 2024‒10‒28
seven papers chosen by Marco Novarese, Università degli Studi del Piemonte Orientale |
| By: | Timothy W. Shields (Argyros College of Business and Economics, Economic Science Institute, Chapman University); James Wilhelm (Argyros College of Business and Economics, Economic Science Institute, Chapman University) |
| Abstract: | A robust finding in managerial accounting research is that participants prefer economically equivalent contracts framed as bonuses to penalties. Another finding is that participants put forth more effort when facing penalty contracts than equivalent bonus contracts. Both results are commonly described as due to loss aversion, an integral portion of Prospect Theory. We test whether loss aversion is correlated with higher effort in an experiment with two parts. In the first part, we elicit individual participants' loss aversion using two measures. In the second part of the experiment, participants choose costly efforts to increase the likelihood of high versus low state-contingent payoffs framed as bonuses or penalties. We find significant differences in the effort chosen between treatments: participants put in significantly more effort when facing penalty contracts. However, we find no evidence that either measure's degree of loss aversion correlates with effort choices as predicted by Prospect Theory. We find that only a quarter of participants are consistent with the Prospect Theory, and for those, we see little evidence of the commonly cited features of loss aversion. While the most cited reason for framing incentives changing participant behavior is loss aversion, our results suggest that this reason is falsified. While the results from prior studies are replicable, the untested underlying mechanism is not loss aversion. |
| Keywords: | contract framing, loss-aversion, bonus, penalty, utility preference, model selection |
| JEL: | C92 D82 D81 M40 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:chu:wpaper:24-14 |
| By: | Ban, Kitti; Tóth-Fáber, Eszter; Kóbor, Andrea (Research Centre for Natural Sciences); Lages, Martin (University of Glasgow) |
| Abstract: | Do we preferentially learn from positive rather than negative decision outcomes? Previous studies indicated that such bias characterises learning during simple reward learning tasks. However, no research has yet confirmed whether learning bias is also present during sequential decision making under uncertainty. To fill this gap, we utilised a complex yet ecologically valid paradigm, the Balloon Analogue Risk Task (BART), which measures risk-taking propensity under uncertainty in everyday decision making. Comparing learning from positive and negative outcomes in the BART has been made possible by the Scaled Target Learning model, which characterises both risk-taking propensity and sensitivity to wins and losses. For the first time, we applied this model to a modified BART paradigm with different levels of perceived uncertainty. Crucially, our analyses revealed learning bias during high levels of uncertainty, under which condition bias was negatively tied to task performance. Furthermore, increased sensitivity to wins compared to losses was linked to more risk-seeking behaviour across all conditions, suggesting that learning bias could mediate risky behaviour. Overall, our results contribute to a more accurate characterisation of reward learning behaviour and suggest that learning bias arises when the level of perceived uncertainty surges. |
| Date: | 2024–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:3cvqk |
| By: | Tobias Werner; Ivan Soraperra; Emilio Calvano; David C. Parkes; Iyad Rahwan |
| Abstract: | Conversational AI models are becoming increasingly popular and are about to replace traditional search engines for information retrieval and product discovery. This raises concerns about monetization strategies and the potential for subtle consumer manipulation. Companies may have financial incentives to steer users toward search results or products in a conversation in ways that are unnoticeable to consumers. Using a behavioral experiment, we show that conversational AI models can indeed significantly shift consumer preferences. We discuss implications and ask whether regulators are sufficiently prepared to combat potential consumer deception. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.12143 |
| By: | Christoph Riedl; Eric Bogert |
| Abstract: | Can human decision-makers learn from AI feedback? Using data on 52, 000 decision-makers from a large online chess platform, we investigate how their AI use affects three interrelated long-term outcomes: Learning, skill gap, and diversity of decision strategies. First, we show that individuals are far more likely to seek AI feedback in situations in which they experienced success rather than failure. This AI feedback seeking strategy turns out to be detrimental to learning: Feedback on successes decreases future performance, while feedback on failures increases it. Second, higher-skilled decision-makers seek AI feedback more often and are far more likely to seek AI feedback after a failure, and benefit more from AI feedback than lower-skilled individuals. As a result, access to AI feedback increases, rather than decreases, the skill gap between high- and low-skilled individuals. Finally, we leverage 42 major platform updates as natural experiments to show that access to AI feedback causes a decrease in intellectual diversity of the population as individuals tend to specialize in the same areas. Together, those results indicate that learning from AI feedback is not automatic and using AI correctly seems to be a skill itself. Furthermore, despite its individual-level benefits, access to AI feedback can have significant population-level downsides including loss of intellectual diversity and an increasing skill gap. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.18660 |
| By: | Katrin M Smolka (WBS - Warwick Business School - University of Warwick [Coventry]); Thijs H J Geradts; Peter W van der Zwan (Universiteit Leiden = Leiden University); Andreas Rauch (Audencia Business School) |
| Abstract: | The proliferation of entrepreneurship education in business schools suggests that it is commonly believed to foster venture creation. At the same time, research on entrepreneurship education is growing. However, further studies are needed to determine the effectiveness of compulsory entrepreneurship education (CEE) by providing evidence on the specific type of entrepreneurial behavior it elicits and when these effects occur. To address this gap, this study evaluates different behavioral outcomes of CEE over time while building on social cognitive career theory to account for mediating effects of entrepreneurial intentions and entrepreneurial self-efficacy. We conduct a field quasi-experiment by following university business students (1, 387 observations for 450 individuals) over 24 months post-treatment. Our findings reveal that CEE effectively increases entrepreneurial behavior in the short term but does not extend much beyond that. A follow-up study (N = 395) adds confidence to the generalizability of the results. We contribute to research on entrepreneurship education and policy. |
| Keywords: | Compulsory) entrepreneurship education entrepreneurship policy entrepreneurial behavior entrepreneurial intentions entrepreneurial self-efficacy, Compulsory) entrepreneurship education, entrepreneurship policy, entrepreneurial behavior, entrepreneurial intentions, entrepreneurial self-efficacy |
| Date: | 2023–08–17 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04701309 |
| By: | Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This review explores the social determinants of unethical behavior through a review of the recent experimental literature. It examines how decision-making environments, encompassing institutional frameworks, organizational structures, incentive schemes, peer influences, and social norms, affect unethical behaviors such as lying, corruption, tax evasion, or asset destruction. Key areas include the cultural roots of unethical behavior, the influence of markets and organizational cultures on moral values, the impact of competitive and cooperative incentive schemes, and the role of peer effects and social norms, social image and guilt. By analyzing the interaction between social determinants and individual behavior, the chapter highlights the complex dynamics that lead to unethical actions and suggests ways to harness these determinants to foster ethical conduct. The chapter concludes on interventions aimed at promoting ethical behavior, such as moral appeals and norm nudges. |
| Keywords: | Unethical behavior, dishonesty, moral values, social norms, experiments |
| Date: | 2024–07–03 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04706356 |
| By: | Brice Corgnet (EM - EMLyon Business School, GATE - Groupe d'analyse et de théorie économique - UL2 - Université Lumière - Lyon 2 - ENS LSH - Ecole Normale Supérieure Lettres et Sciences Humaines - CNRS - Centre National de la Recherche Scientifique); Camille Cornand; Nobuyuki Hanaki |
| Abstract: | We design a novel experiment to assess investors' behavioural and physiological reactions to negative tail events. Investors who observed, without suffering from, tail events decreased their bids whereas investors suffering tail losses increased them. However, the increase in bids after tail losses was not observed for those who exhibited no emotional arousal. This suggests that emotions are key in explaining Prospect Theory prediction of risk seeking in the loss domain. |
| Keywords: | tail events, emotions, risk |
| Date: | 2023–09–28 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04228190 |