Problems, Methods and Tools in Experimental and Behavioral Economics

The aim of the chapter is to show the differences between mainstream economics and behavioral economics. This allowed showing weaknesses of economics resulting from the shortcomings of the mainstream economics paradigm. The assumed goal was achieved by means of a critical analysis of the national and foreign subject literature in the field of economic sciences. The text presents the issues of mainstream economics and behavioral economics. Then, a critical view of mainstream economics from the perspective of behaviorists was presented and so was the view of behavioral economics from the point of view of mainstream economists. In the following parts, aspects that differentiate mainstream economics and behavioral economics were highlighted.

Economic results of a company mostly depend on proper cost management that determines its competitive position. The condition for an effective cost management is possession of information provided by cost accounting. The nature and scope of information regarding costs depend on the chosen model of cost accounting. Therefore, an economic entity should attempt to create such a cost accounting model that will ensure not only the fulfillment of duties resulting from the provisions of the Accounting Act, but also the provision of information necessary for decision-making. However, the shape of cost accounting model, information about costs and managing them are all influenced by human behavior. The aim of the chapter is to present the areas of influence of behavioral factors on effective cost management, especially on planning and controlling costs. Therefore, the following topics are presented in the chapter: For the purpose of the chapter, the following methods are used: literature analysis, source analysis method, as well as inductive and deductive reasoning methods.

This chapter is the theoretical discussion based on the literature on the subject. The elements of behavioral economics and behavioral finances are key tools that help to identify and explain motivating processes that occur when household members take financial decisions. As far as economic determinants are concerned, income generated by a household is undoubtedly the most important factor in determining consumer behavior. Income, along with savings and debt level, defines the final amount of money spent on consumption. The aim is to present characteristic patterns in the financial management of modern households in light of changes in these patterns that are attributed to the development of economic psychology and behavioral economics.

The main aim of the chapter is a discussion of the prospect theory in context of propensity to risk. In prospect theory and, generally, in behavioural economics, there are many methodological attitudes. Propensity theory gives possibility to standardise them, and this is the general motivation of the chapter. Presented methods of analysing propensity could help operationalise the prospect theory and other behavioural economics concepts. In the first part, general definition of propensity, as well as methods of measuring propensities is shortly discussed. In the next part of the chapter, propensity to risk is analysed in context of the prospect theory. Frequency measures of propensity to risk are used to specify a value function in the prospect theory. The first measure is based on nominal scale. This method might be useful when we have two outputs (safe and risky one), such as in the first version of the prospect theory (Kahneman and Tversky in Econometrica 47:2, 1979). Also, method of measuring propensity to risk that is based on game against nature is proposed. This method might be used in case of cumulative prospect theory, where we have more than two outputs.

Behavioral economics is closely related to the theoretical aspects that result from it. An especially important aspect is the problem of equilibrium. Experience shows that stock market investors often behave irrationally. Nevertheless, it was noted that in the long term, their activity is related to the equilibrium surface, which is a rotary cone. The chapter shows how using the method of least squares you can get a spiral line of the vector \( [q_{i} ,p_{i} ,t_{i} ] \) (p_i—means the price of the ith good, q_i—means the amount of the ith good, t_i—time characterizing a certain economic process) using a hyperbolic spiral which in space creates a equilibrium surface that is a cone. Having a general solution, we can experiment by adopting certain values that are coordinates of the vector, \( [q_{i} ,p_{i} ,t_{i} ] \), obtaining different cones of economic equilibrium. An important tool used in behavioral economics is game theory. The stock market can be treated as a game without the possibility of concluding a coalition. The chapter shows how to find the stock exchange state number, knowing the stock exchange information matrix and vice versa, how to find the state form of the stock exchange, knowing the stock market state number. In addition, the matrix boundary for the stock market is given, which is also the equilibrium matrix for the ideal economy. According to E. Noether’s theorem, certain principles of conservation are associated with every symmetry. There is no equilibrium without symmetry. The third part of the work presents the problem of symmetry of economic quantities using the Shubnikov method. In addition, this chapter discusses the symmetry groups of some of the equilibrium surfaces encountered in economics.

Market analysis is one of the basic and essential stages in the process of estimating the market value of real property. In this context, both the legal provisions in force in Poland and the methodological guidelines contained in the valuation standards leave appraisers with considerable flexibility in the use of specific methods. The research referred to only that part of the market analysis which focuses on a dependency study and ultimately aimed at determining materiality and subsequently the magnitude of the impact of market characteristics on the differentiation of transaction prices. The chapter analyzes the methods used by Polish real estate appraisers and the context of using the conclusions resulting from the analyses. The study provided the response on the appraisers’ preference for valuation approaches and methods. On the basis of the conclusions of the study, a critical assessment of the causes influencing the range of applied analytical tools identified was also carried out. In summary, on the basis of the collected results, recommendations regarding possible changes to legal regulations and professional norms relating to the studied area of professional activity were presented.

Recently, the market for in-game advertising is growing very dynamically. In 2015, profits out of this business were above 2.75 mio USD, and it is expected to be doubled by 2020. The proper location of the in-game commercial (billboard) is significantly important for the promotion of a given product (service). The paper presents the use of eye tracker and GSR to register behaviors and perception of the in-game advert placed in the computer game simulating car driving.

Multi-step models of advertising impact on the recipient (e.g., AIDA) are often used to design social issue advertising. The effectiveness of achieving desired objectives of some steps can be analyzed applying modern cognitive neuroscience techniques (EEG, GSR, HR). They enable to read and analyze the pulses generated by the brain, myocardium, or skin surface while watching advertisements. Thus, there is the opportunity to monitor emotions, level of interests, or level of memorization of the subsequent advert sequences.

In the case of social campaigns, the often-used method of increasing their impact is appealing to the negative emotions of recipients. This is quite a controversial approach, because the results of some studies indicate that when the emotions are too negative (this is particularly true in case of fear), the effect may be counterproductive and lead to the emergence of defensive mechanisms in the audience. It is important, therefore, to evoke emotions of adequate intensity. Thanks to the use of cognitive neuroscience tools (electroencephalography, measurement of galvanic skin response and heart rate), the researchers can check reactions to different media messages (varying in intensity of negative emotions) which go beyond declaration of recipient and ascertain which ones are the most effective in terms of increasing awareness of the problem and the involvement of the recipient. These additional methods of measuring the effectiveness (apart from questionnaires) offer new possibilities in conducting social campaigns research. The chapter presents a scenario of the experiment aimed to check whether the relationship between the intensity of negative emotions in the media message of the social campaign and its effectiveness is consistent with the curvilinear model proposed in the literature. The study is prepared for a campaign concerning road safety.

The chapter presents an example of analysis of the game created for the purpose of social campaign, taking into consideration its playability and impact of the message included in the game. Methods of cognitive neuroscience were used for the analysis. The recording included what the player was looking at, the GSR signal and EEG, on the basis of which the Memorization Index was calculated. It allowed to specify, which parts of the game were boring, as well as what parts of the message in the game might have been remembered by the player.

The obstacles in finding a job by the long-term unemployed people are their behaviours resulting from cognitive and emotional mistakes. Long-term unemployment results in depreciation of the human capital and discouragement to further job searching. In order to lead the effective social policy, identification of threatened group is essential. The goal of the research was estimation of the influence of gender, age and education on the probability of exit from the long-term registered unemployment and resignation from the labour office mediation. Due to the fact that there were censored observations, survival analysis methods were used. Survival trees were built by means of the Kaplan–Meier estimators, and the statistics of the log-rank test were used as splitting criteria. They are the example of methods of recursive binary partitioning, which aim in creation of homogeneous subsets with respect to the analysed response variables. In the analysis, the conditional inference trees were used.

Multi-criteria decision-making methods are widely used for comparing alternatives when there are multiple objectives. There are many alternative methods differing in their ease of use, validity, results, and appropriateness to resource planning. This chapter describes the results of a laboratory study which investigates preference in decision-making under certainty with multiple conflicting objectives and continuous decision variables. Techniques for solving such problems are taken from the fields of decision analysis and optimization: direct rating technique (SMART-like) and AHP. The purpose of the experiment was to determine the ability of each method to correctly express the decision-maker’s preferences. If multi-criteria methods always support the decision-making process and better reflect to existing pattern of preferences of decision-maker, choices made in the decision-making process, obtained through multi-criteria methods, should be closer than the overall assessment. The results obtained in the experiment indicate that this is not the case. Furthermore, the research shows that the AHP method does not better reflect preferences. The results obtained by the AHP method significantly differ from the results obtained by the direct rating and overall assessment method.

The consumer is a key element in the marketing. Examining consumer behavior allows for a better understanding and forecasting factors influencing purchasing decisions, which in turn facilitates the formulation of effective marketing strategies. The aim of this study was to work out methodological basis for analyzing consumer behavior with application of agent-based simulation (ABS) as well as conducting simulation experiments using the elaborated methodology. The chapter presents ABS in the context of its applications in marketing research, proposes the methodology for consumer behavior analysis with the use of ABS, describes the concept of agent-based simulation model for investigating consumer behavior, and finally shows the results of simulation experiments executed for a case study. The case study focuses on the consumer behavior to buy electric appliances in Basra city and experiments relates to five exemplary marketing strategies. The results of the experiments confirm that the agent-based model can be a powerful tool for examining alternative marketing strategies rapidly, relatively cheaply, without requiring the actual commitment of resources.

Medical doctors’ behaviour, including communication patterns, proves to be the most important set of variables affecting trust in the patient–doctor relationship. Therefore, the aim of the chapter is empirical verification of the relationship between doctor’s communication and trust in doctors in the dimension of competence, benevolence and integrity. The research assumptions have been verified based on CATI, conducted on representative sample of Polish patients. The empirical findings support the hypothesis that there is a correlation between quality of communication and trust in all of the identified dimensions of patient–doctor relationship. The most prominent impact of the communication has been revealed in the dimension of benevolence.

The twenty-first century is the time of unlimited inflow of the huge amount of information, which the average person is no longer able to fully receive. That is why it becomes so important that the provided information have not only relevant content, but also be presented in a suitable and easy-to-interpret way. This aspect has influence on information assimilation among recipients, which is also one of the factors of useful information and besides it is explaining what work or costs must be borne by the user, to be able to take full advantage from provided information. This chapter presents analysis and methodology of information assimilation evaluation on websites, which is one of the factors determining the behavior of recipients and further use of the acquired information for decision-making, consumption, or informative purposes. Furthermore, the study describes the basic methodological assumptions, the research procedure of information assimilation evaluation, and the results of data analysis from the study conducted on a group of respondents. In order to determine the factors that have the greatest impact on information assimilation and learning newly learned content, the data obtained from the study were analyzed using cognitive walkthrough method, methodology for testing respondents before and after the research, and knowledge growth evaluation indicator. Results of research presented in the chapter can be useful in creating assumptions for ways of content presentation for the needs of websites.

Particular importance in the public sector takes on framing theory, indicating that ‘the way in which the problem is shown to the decision-makers will have an impact on its performance’. The purpose of this study is to present the application of behavioural methods (the framing theory in particular) in shaping local communities’ public funding decisions with the use of participatory budgeting. The following problems are discussed in the chapter: (1) Theoretical assumptions of the application of behavioural theories in shaping the decisions of local communities; (2) The participatory budget theory as the subject of behavioural economics influence (theoretical approach); (3) A practical example of using a behavioural approach in public policies of local communities—an example of the City of Szczecin and the Police commune. To realise the purpose, the authors have analysed of competitions announced as part of the procedure of preparing the budget of the local government unit for the selection of projects covered by the participatory budget, projects submitted to participatory budgets in the form of civic projects, types of behaviour of local communities as part of the adopted procedure for selecting projects for inclusion in the participatory budget.

Professional sportsmen all over the world are subjects of many ratings and grades, especially when they have big contracts. Journalists try to find the best player and the spectators (fans) try to believe that their football star is proper position. But is this valuation free from external pulling power of media and sponsors? The last five years in football is dominated by two players: Cristiano Ronaldo and Lionel Messi. But the question is that is it really proper classification, reflecting their performance on the football pitch? The hypothesis raised in the research is that the market value of the player has a strong impact on the classification. The verification of the hypothesis will be based on the classification methods and a process of eliminating of diagnostic variables. The sample taken into the research will consist of series of 25 most valuable forward players from seasons 2016–2017 and 2017–2018. The final analysis will be limited to the top players and compared with the results of France Football’s plebiscite called Golden Ball and FIFA’s Golden Boot.

When a company utilises the shared storage, then the selection of locations in the process of order-picking is not an easy task. In the literature of the subject, there are several take-out strategies, but none of them considers it as the multiple-criteria decision-making problem. The goal of the chapter was to compare the results of designations of the picker’s route obtained by means of the two take-out strategies (priority of partial units and quantity adjustment) with the results obtained by using the Taxonomic Measure of Location’s Attractiveness (polish abbreviation—TMAL) method with three decision criteria: distance from the I/O point, degree of demand satisfaction and the number of other picked products in the neighbourhood of analysed location. After selection of locations, the picker’s route will be designated by means of the s-shape heuristics. The analysis will be performed by means of the simulation experiment, where one hundred of ten-element orders will be generated for each method and the picker’s route length and time will be compared.

The chapter presents a modern simulation game “Step into the future”—played using Facebook—which can be successfully used as an instrument of experimental economics. Conclusions resulting from the achieved effects of the game emphasize its suitability for economic research.

Behavioral aspects might be among causes of differences between the value of trade in goods shipped from Poland and acquired from Polish firms by contractors throughout EU that exist in public statistics databases. The need for profit in the short term may result in reporting unreliable data to public statistics entities. The aim of the chapter is to point out some of possible irregularities in economic activities’ evidence of Polish taxpayers whose businesses depend on intra-community trade. These anomalies consist of hiding transactions by avoiding statistical declarations or late declaring which has an immediate impact on aggregated statistical data. As a result, there are huge differences between datasets containing the same data reported by both sides of transactions, i.e., as intra-community supplies (ICS), by Polish businesses and as intra-community acquisitions (ICA) from Polish businesses. At least some of such anomalies can be linked with tax fraud. Another group of anomalies includes specific schemes that can be observed in declared data. The authors have studied the above-mentioned differences and found irregularities within ICS and ICA for Combined Nomenclature chapters and positions. The structures of such differences have been compared for years 2010–2016. In the second part of the chapter, we discuss specific schemes in declared data that may indicate participation in VAT fraud. We explain the outcomes based on behavioral factors.

Altruism and behavioral impact on economic decisions became the center of the interest for experimental and behavioral economy. The literature widely reports the results of variety types of dictator games (DG) and cognitive reflection tests (CRT). There is a broad research on donated sum, anonymity of the receiver and dictators’ position (giving vs. taking) in dictator games. Separately research on the CRT evolves from 3 questions to 7 questions variant. However, there is an evident gap in the literature for data that combines these two tools (DG and CRT) in one setup. In this study, we extend existing research on the relationship between cognitive performance on the CRT and dictator decisions taking into account such factors as donated sum, anonymity of the receiver and dictators’ position (giving vs. taking). The main goal is to find out if the cognitive reflection test (CRT) helps to predict rational (or selfish) behavior in a DG. In our investigation, we asked 511 participants to respond to 6 types of dictator games and CRT test. For statistical analysis of the received results, we applied correlation, descriptive statistics, the t-student test and the Mann–Whitney test. Our results show that cognitive reflection was positively correlated with rational (selfish) behavior in DGs. Those dictators who scored high on the CRT (reflective dictators) kept more money for themselves than those who achieved lower scores on the CRT (altruistic, impulsive dictators). Our results confirm an inequity aversion attitude among altruistic, impulsive dictators and selfish, reflective dictators.

The aim of this chapter is to present a proposal for a research model that will be used to examine the impact of security measures and travel costs on the decision of a tourist when choosing a tourist destination, in the context of increased terrorism risks. The increase in terrorist attacks in the world, migration problems in Europe and the more frequent targeting of tourist destinations has meant that the inhabitants of the European Union becoming more aware of terrorist threats in the tourism sector. For some people this may be the reason for avoiding tourist destinations that are considered dangerous, traveling rather to “generally considered more secure places,” while for others it is an opportunity to travel cheaper as prices to these less secure destinations are often discounted. The pilot survey, which was used to determine the declared preferences of tourists in Lithuania and Poland, indicated that they are different. In the context of the emerging new field of science, which is neurotourism, it was decided to use a scientific experiment using cognitive neuroscience methods to assess the preferences of tourists at the subconscious level. In addition, the chapter will indicate the reasons why such methods are recommended for this type of study (supported by the results of pilot surveys).

The aim of the paper is to identify the role of emotional factors in the analysis of socioeconomic phenomena in tourism and the resulting distortions of test results obtained with the help of the questionnaire tool. The authors also tried to show the usefulness of the application of new, non-standard research methods to study socioeconomic phenomena in tourism. In accomplishing this goal, a critical analysis of professional literature and empirical studies based on primary sources of data from pilot surveys conducted by the authors of the paper among students of one of the universities in Vilnius (Lithuania) and in Szczecin (Poland) was carried out. To pilot survey research, simple elements of descriptive statistics research and testing of the difference between two population proportions were used in the paper. The results of the research indicated that the above phenomena also occur among tourists. The imperfection of the methods used in this new field of science, neuro-tourism, is also presented, which requires further research on this issue.