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MindReader Weekly – 1st – Why economists should study meteorology and when more competitors mean less competition.

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Potentially MindShifting Papers:*

  • Hui-Chu Shu and Mao-Wei Hung (2009):

„Environmental psychology studies have found evidence that wind speed has a strong influence on mood and comfort. This study investigated the relationship between wind speed and daily stock market returns across 18 European countries from 1994 to 2004. A significant and pervasive wind effect was found on stock returns. This finding was supported by psychological literature claiming that mood affects judgement and decision-making in situations involving uncertainty and risk, and coincides with the argument of misattribution. This investigation also found strong seasonality effect and temperature effect in European stock markets. Specifically, the influence of wind on stock returns is demonstrated to be more significant than that of sunlight, indicating that wind might exert a stronger impact on mood than sunshine and hence be a better proxy for mood than sunshine. Above all, our findings contradict the rational asset-pricing hypothesis and contribute to the behavioural finance literature.“

  • Shinsuke Ikeda, Myong-Il Kang, and Fumio Ohtake (2009):

„In view of the finding that debtors are likely to be more obese than nondebtors, we investigate whether interpersonal differences in body mass are, as in the case of debt behavior, related to those in time discounting and time discounting anomalies. The effects of time discounting on body mass index (BMI) and the probabilities of being obese, severely obese, and underweight are detected by incorporating three properties of intertemporal preferences: (i) impatience, measured by the level of the respondents‘ discount rate; (ii) hyperbolic discounting, where discount rates for the discounting of immediate future payoffs are higher than those of distant future payoffs; and (iii) the sign effect, wherein future negative payoffs are discounted at a lower rate than are future positive payoffs. We also find that body mass is non-monotonically correlated with age, income, and working hours. As a policy implication, body mass can potentially be controlled by changing the intertemporal structure of medical care costs.“

  • Christopher Boyce, Gordon Brown, and Simon Moore (2010):

„Does money buy happiness, or does happiness come indirectly from the higher rank in society that money brings? We tested a rank-income hypothesis, according to which people gain utility from the ranked position of their income within a comparison group. The rank hypothesis contrasts with traditional reference-income hypotheses, which suggest that utility from income depends on comparison to a social reference-group norm. We found that the ranked position of an individual’s income predicts general life satisfaction, whereas absolute income and reference income have no effect. Furthermore, individuals weight upward comparisons more heavily than downward comparisons. According to the rank hypothesis, income and utility are not directly linked: Increasing an individual’s income will increase his or her utility only if ranked position also increases and will necessarily reduce the utility of others who will lose rank.“

  • Hadas Gips, Konstantin Zaitsev, and Jehuda Hiss (2010):

Sudden death of cardiac patients related to sexual activity has been widely reported in the medical and forensic literature, specifically of male partners in heterosexual relationships, usually with extramarital partners. We present a unique case of a 46 year old woman who died during a sexual encounter with her lover. Cause of death was an acute cardiac failure due to hypertensive chronic cardiovascular disease, following sexual activity. The factors which contributed to her death are discussed and reviewed in light of similar reports in men.“

  • Alfonso Garcia-Rosa, Hubert Kiss, and Ismael Rodriguez-Lara (2010):

We develop … a stereotypical environment that allows for co-ordination breakdown, leading to a bank run. Three depositors are located at the nodes of a network and have to decide whether to keep their funds deposited or to withdraw. One of the depositors has immediate liquidity needs, whereas the other two depositors do not. Depositors act sequentially and observe others’ actions only if connected by the network. Theoretically, a link connecting the first two depositors to decide is sufficient to avoid a bank run. However, our experimental evidence shows that subjects’choice is not affected by the existence of the link per se. Instead, being observed and the particular action that is observed determine subjects’choice. Our results highlight the importance of initial decisions in the emergence of a bank run. In particular, Bayesian analysis reveals that subjects clearly depart from predicted behavior when observing a withdrawal.“

„This paper describes a series of school-based randomized trials in over 250 urban schools designed to test the impact of financial incentives on student achievement. In stark contrast to simple economic models, our results suggest that student incentives increase achievement when the rewards are given for inputs to the educational production function, but incentives tied to output are not effective. Relative to popular education reforms of the past few decades, student incentives based on inputs produce similar gains in achievement at lower costs. Qualitative data suggest that incentives for inputs may be more effective because students do not know the educational production function, and thus have little clue how to turn their excitement about rewards into achievement. Several other models, including lack of self-control, complementary inputs in production, or the unpredictability of outputs, are also consistent with the experimental data.“

  • Stephen Garcia and Avishalom Tor (2009):

„This article introduces the N-effect—the discovery that increasing the number of competitors (N) can decrease competitive motivation. Studies 1a and 1b found evidence that average test scores (e.g., SAT scores) fall as the average number of test takers at test-taking venues increases. Study 2 found that individuals trying to finish an easy quiz among the top 20% in terms of speed finished significantly faster if they believed they were competing in a pool of 10 rather than 100 other people. Study 3 showed that the N-effect is strong among individuals high in social-comparison orientation and weak among those low in social-comparison orientation. Study 4 directly linked the N-effect to social comparison, ruling out ratio bias as an explanation of our results and finding that social comparison becomes less important as N increases. Finally, Study 5 found that the N-effect is mediated by social comparison. Limitations, future directions, and implications are discussed.“

  • Anh Le, Paul Miller, Wendy Slutske, and Nicholas Martin (2010):

This study employs multiple regression models based on DeFries and Fulker (1985), and a large sample of twins, to assess heritability in attitudes towards economic risk, and the extent to which this heritability differs between males and females. Consistent with Cesarini, Dawes, Johannesson, Lichtenstein and Wallace (2009), it is found that attitudes towards risk are moderately heritable, with about 20 percent of the variation in these attitudes across individuals being linked to genetic differences. This value is less than one-half the estimates reported by Zyphur, Narayanan, Arvey and Alexander (2009) and Zhong, Chew, Set, Zhang, Xue, Sham, Ebstein and Israel (2009). While females are more risk averse than males, there is no evidence that heritability in attitudes towards risk differs between males and females. Even though heritability is shown to be important to economic risk taking, the analyses suggest that multivariate studies of the determinants of attitudes towards risk which to not take heritability into consideration still provide reliable estimates of the partial effects of other key variables, such as gender and educational attainment.“

  • Jeffrey Quinn, Anthony Pascoe, Wendy Wood, and David Neal (2010):

What strategies can people use to control unwanted habits? Past work has focused on controlling other kinds of automatic impulses, especially temptations. The nature of habit cuing calls for certain self-control strategies. Because the slow-to-change memory trace of habits is not amenable to change or reinterpretation, successful habit control involves inhibiting the unwanted response when activated in memory. In support, two episode-sampling diary studies demonstrated that bad habits, unlike responses to temptations, were controlled most effectively through spontaneous use of vigilant monitoring (thinking „don’t do it“ watching carefully for slipups). No other strategy was useful in controlling strong habits, despite that stimulus control was effective at inhibiting responses to temptations. A subsequent experiment showed that vigilant monitoring aids habit control, not by changing the strength of the habit memory trace but by heightening inhibitory, cognitive control processes. The implications of these findings for behavior change interventions are discussed.“

  • Pieter Gautier, Michael Svarer, and Coen Teulings (2010):

„Based on Danish register data, this paper shows that of the marriages formed in the city, those couples who remain in the city have a 23% higher divorce rate than those who move out. In this paper, we test whether this observation is due to sorting of more stable marriages into rural areas or if there exists a causal effect of living in urban areas on marriage instability. Our identification strategy supplements the timing-of-events approach with an instrumental variable. Our findings suggest that the effect of living in an urban area on the divorce risks drops substantially and loses statistical significance once we address sorting.“

  • Katie Liljenquist, Chen-Bo Zhong, and Adam Galinsky (2010): The Smell of Virtue: Clean Scents Promote Reciprocity and Charity.

* If you can‘t get any of the mentioned papers, please, contact me. If there is a bunch of curious students interested in discussing the topics published in MindReader, the debate will be held by myself or by Petr Koblovský, Ph.D. in „my“ restaurant every month starting from 19:00, May 3, 2010. Discussion will be in Czech (unless notified otherwise). If you are interested to participate, please send me an e-mail before May 1.

Call for papers/Conferences/Colloquiums:

  • Joint conference of the International Association for Research in Economic Psychology (IAREP) and the Society for the Advancement of Behavioral Economics (SABE), September 5-8, 2010, University of Cologne, Germany. Submission Deadline is April 30, 2010Registration & Call for Papers.
  • Second Annual Meeting of the Academy of Behavioral Finance & Economics, September 15-17, 2010, Chicago, Illinois. Submission Deadline is May 15, 2010Call for Papers and Participation.
  • 9th Tiber Symposium on Psychology and Economics, The Tilburg Institute for Behavioral Economics Research, August 27, 2010, Amsterdam, Netherlands. Deadline for submission of abstracts is June 1, 2010General Information.