ALESSANDRO INNOCENTI - Academia.edu (original) (raw)

Papers by ALESSANDRO INNOCENTI

The Experiment in the History of Economics, 2005

The necessary consequence of the reason why we use competition is that, in those cases in which i... more The necessary consequence of the reason why we use competition is that, in those cases in which it is interesting, the validity of the theory can never be proved empirically. We can test it on conceptual models, and we might conceivably test it in artificially created real situations where the facts which competition is intended to discover are already known to the observer. But in such cases it is of no practical value, so that to carry out the experiment would hardly be worth the expense… The peculiarity of competition-which it has in common with the scientific method-is that its performance cannot be tested in particular instances where it is significant, but is shown only by the fact that the market will prevail in comparison with any alternative arrangements. (Friedrich A.Hayek 1968, p. 180) …experiments are designed to enable us to predict outcomes under controlled conditions and to make it possible to conclude from those to wider applications. There are, of course, limits to experiments in economics, but in a sense any variation in taxation, in foreign exchange rates, in tariffs, etc. etc., can be viewed as a coarse experiment whose result can lead to new theories and hence to better prediction when the new occasion comes around. (Oskar Morgenstern 1972, p. 710) 4.1 Introduction It has been argued that the emergence and early progress of experimental economics are related to the work of Oskar Morgenstern (Schotter 1992). Although he did not publish

Paradoxes versus formalism in economics. Evidence from the

The paper analyzes the case of Belgium to provide insight into the relationships among ethnic het... more The paper analyzes the case of Belgium to provide insight into the relationships among ethnic heterogeneity, voting participation and local economic growth. We find that heterogeneity, and external and internal mobility reduce immigrants’ voting participation, while we do not find support for the hypothesis that voting participation is related to local economic growth, with the exception of Flanders, which is the most ethnically homogeneous region of Belgium. This finding is interpreted as showing that an increase in ethnic heterogeneity prevails over other factors in determining local economic performance via a decline in social capital.

Index 1. Cognitive and behavioural economics 2. Experimental economics 2.1 Laboratory methods 2.2... more Index 1. Cognitive and behavioural economics 2. Experimental economics 2.1 Laboratory methods 2.2 Biases in judgment 2.3 Choice under risk and uncertainty 2.4 Choice anomalies 3. Constructive reactions 3.1 Prospect theory 3.2 Connessionism and neural networks 3.3 Artificial intelligence 4. Neuroeconomics 4.1 Definitions and tools 4.2 Intertemporal Choice and self-control 4.3 Decision-making under risk and uncertainty 4.4 Mirror neurons and strategic choice 4.5 Trust game and brain activation 4.6 Oxytocin and trusting behavior Main References

Riding the Hype Cycle: The Resurgence of Virtual Worlds, 2013

Substantial evidence from social and cognitive psychology suggests that lot of behaviors are driv... more Substantial evidence from social and cognitive psychology suggests that lot of behaviors are driven by processes operating outside of awareness. Many implicit or indirect measures to capture such processes have been proposed. The aim of the Albo Project is verify, both theoretically and experimentally, if the traditional instruments for assessing work-related stress (questionnaires, checklists and interviews) are inappropriate to detect the individual perception of psycho-social risk factors in work environments. It is also claimed that Virtual Reality simulations permits a better assessment of the potential factors of stress in workplaces. Game simulations based on the techniques of Virtual Reality are potent tools to provide a substantial improvement in the quality and quantity of information and awareness on the safety and psycho-social risks existing inside organizations. Also, the Virtual Reality exposure (virtual movies) can facilitate the objectivity in judgment of audience. Alternation between compact learning units and practical application of knowledge deepens the acquired know-how and creates a long lasting experience. The final product has been administered in some companies to test it. The result of the first step of the project is the demo version including scenarios of virtual work environments. The final product will be used for assessing job stress and for designing training experiences in workplaces on online platforms.

Research in Economics, 2019

We assess in the laboratory the impact of promises on group decision-making. The gift-exchange ga... more We assess in the laboratory the impact of promises on group decision-making. The gift-exchange game provides the testing ground for our experiment. When played between groups, inter-group cooperation and reciprocity represent a condition for efficiency in overall decision making. We find that promises have a significant positive effect on aggregate profits. We interpret these findings as if promises act as a trigger of social conformity, according to which groups adopt socially more desirable behavior even without face-to-face communication or discussion.

The paper analyzes physiological responses to different visual representations of stressful work ... more The paper analyzes physiological responses to different visual representations of stressful work activities. A between-subject experiment was conducted to analyze differences in heart rate (HR) and electromyography (EMG) between subjects watching videos featuring real actors and virtual videos with avatars representing the same situation. Findings show that exposure to real videos is associated with greater physiological activations than exposure to virtual videos. This evidence may suggest that, by inducing less emotional involvement, low-immersive virtual environments activate different cognitive mechanisms of stress perception.

This paper provides evidence of the positive correlation between participation in the European IC... more This paper provides evidence of the positive correlation between participation in the European ICT-RTD Programmes, the innovation capacity of the EU regions and the growth of regional added value adjusted by worked hours, We also offer additional support to the findings of previous studies concerning the raionale of the geographical concentration of innovation activities in some core areas of Europe. This evidence calls for a further integration of EU ICT-RTD policies at regional rather than national level, particularly encouraging the participation of regional organizations in multiple and related instruments.

SSRN Electronic Journal, 2004

This paper argues that the acceptance of two recent methodological advances in economics, namely ... more This paper argues that the acceptance of two recent methodological advances in economics, namely game theory and laboratory experimentation, was affected by the history dependence constraining the formalization of economics. After an early period in which the two methods were coolly received by economists because their applications challenged some basic hypotheses of mainstream economics, their subsequent acceptance was the result of the corroboration of those same hypotheses. However, the recent emergence of some paradoxes has finally revealed that the effectiveness of game theory and experimental techniques in economics is improved when descriptively implausible and normatively unsatisfactory assumptions such as the centrality of individual maximization in decision theory and the definition of rationality as consistency in preferences are revised.

SSRN Electronic Journal, 2004

This paper compares outsourcing processes in France, Italy and Japan in two types of firms, large... more This paper compares outsourcing processes in France, Italy and Japan in two types of firms, large firms and also small firms. It is shown that outsourcing has increased over the last two decades in both small and large firms in all three countries and that mainly in the last decade the tendency has been to increasingly involve some of the suppliers in product development. We interpret this evidence by means of a cognitive framework related to the activity of information management. Specifically, we show that the more the relationships among suppliers and users are characterised by two-way communication, decentralised information processing, and accordingly balanced contractual power, the more the incentives to create knowledge and to innovate autonomously are guaranteed.

SSRN Electronic Journal, 2012

The paper analyses a case study of time lag in processing market-sensitive information with intra... more The paper analyses a case study of time lag in processing market-sensitive information with intraday data. On February 2011, the Italian Parliament approved the so called Milleproroghe decree issued by the Government, which included, among others, a new important rule for banks transforming the deferred tax assets into tax credits. Although information on the approval of the law had been available since February 8, on February 15 the market took twelve minutes to react to the news and almost an hour to fully absorb it. This delay created significant arbitrage opportunities that can be explained with traders' inability to process immediately technical and complex matters. Failure to comply with these cognitive limitations prevents traders from incorporating promptly new information in market prices.

SSRN Electronic Journal, 2010

Intra-day anomalies in the relationship between U.S. futures and European stock indexes

This paper investigates the validity of the model of dual processing by means of eyetracking meth... more This paper investigates the validity of the model of dual processing by means of eyetracking methods. In this theoretical framework, gaze direction may be a revealing signal of how automatic detection is modified or sustained by controlled search. We performed an experiment by using a stylized decisional framework, i.e. informational cascade, proposed by economists to investigate the rationality of imitative

Computational Intelligence and Neuroscience, 2014

A circuit of evaluation and selection of the alternatives is considered a reliable model in neuro... more A circuit of evaluation and selection of the alternatives is considered a reliable model in neurobiology. The prominent contributions of the literature to this topic are reported. In this study, valuation and choice of a decisional process during Two-Alternative Forced-Choice (TAFC) task are represented as a two-layered network of computational cells, where information accrual and processing progress in nonlinear diffusion dynamics. The evolution of the response-to-stimulus map is thus modeled by two linked diffusive modules (2LDM) representing the neuronal populations involved in the valuation-and-decision circuit of decision making. Diffusion models are naturally appropriate for describing accumulation of evidence over the time. This allows the computation of the response times (RTs) in valuation and choice, under the hypothesis of ex-Wald distribution. A nonlinear transfer function integrates the activities of the two layers. The input-output map based on the infomax principle ma...

SSRN Electronic Journal, 2000

An historical overview of experimental economics points out significant analogies between its ori... more An historical overview of experimental economics points out significant analogies between its origins and the contemporary emergence of game theory. In both cases, their effective introduction in economics was postponed until the 1960s. Such a delay cannot be ascribed to the supposed division between empirical and theoretical work but to the fact that in the 1950s experimental methodologies, such as game theory, were mainly developed by scholars of other social sciences which forced a re-examination of the prevailing postulates of economic theory. This interdisciplinary community gave rise to two different approaches: the sociopsychological one represented by experimental games, and the economic-managerial one represented by business games. Although both approaches were an outgrowth of game theory, the prevalence of the first had important consequences on subsequent developments.

SSRN Electronic Journal, 2011

This paper provides laboratory evidence on the efficiency-enhancing properties of the Tiebout mod... more This paper provides laboratory evidence on the efficiency-enhancing properties of the Tiebout model as a decentralized system of public goods provision. Tiebout (1956) shows that if a sufficient number of local communities exist to accommodate different types of preferences, individuals sort themselves in a way that provides an efficient allocation of public goods and taxes. Our experiment aims to disentangle the effect of voting participation and is composed of two treatments. In the non-participation treatment, local public good provision is chosen by only one subject, while the other members of the community can only stay in or moves to another community. In the participation treatment, all the community members have the right to vote as well as to move to another community and collective decisions are taken by majority rule. Our findings show that social welfare is greater in the participation than in the non-participation treatment. We conclude that voting with one"s feet increases efficiency if all the community members vote and that the influence of voting participation on the allocation of local public goods should be taken into account to assess the viability of the Tiebout model.

SSRN Electronic Journal, 2009

This study applies experimental methods to analyze travel mode choice. Two different scenarios ar... more This study applies experimental methods to analyze travel mode choice. Two different scenarios are considered. In the first scenario, subjects have to decide whether to commute by car or by metro. Metro costs are fixed, while car costs are uncertain and determined by the joint effect of casual events and traffic congestion. In the second scenario, subjects have to decide whether to travel by car or by bus, both modes in which costs are determined by the combination of chance and congestion. Subjects receive feedback information on the actual travel times of both modes. We find that individuals exhibit a marked preference for cars, are inclined to confirm their first choice and demonstrate travel mode stickiness. We conclude that travel mode choice is subject to heuristics and biases that lead to robust deviations from rational choice.

SSRN Electronic Journal, 2012

SSRN Electronic Journal, 2013

The paper examines in the laboratory how risk-taking situations are affected by the conditions of... more The paper examines in the laboratory how risk-taking situations are affected by the conditions of observing other's choices (observer) and being observed by others (source). By extending Yechiam et al.'s (2008) experimental design to the domain of gains we find that observers are more probable than sources to choose risky alternatives producing rare gains than equiprobable gains. The impact of social exposure is also analyzed and interpreted in the context of personality traits to assess how heterogeneity influences risky decisions.

Research in Economics, 2009

This experimental study aims to clarify to what extent and in which direction investors react to ... more This experimental study aims to clarify to what extent and in which direction investors react to CSR (Corporate Social Responsibility) initiatives meant to upgrade the ethical standards of firms beyond the minimal requirements of law. Subjects in the laboratory were invited to invest their endowment in a portfolio of financial assets. We provided information on the expected returns of each stock and on its inclusion in an ethical index, or exclusion from it. Our findings show that subjects' behavior appears to be a function not only of their individual pay-offs but also of the information on the ethical standards of the firms issuing stocks. Most of them, however, did not show a fully irrational behavior as they consistently correlated the share of stocks with their expected returns. We may conclude that the sizeable reaction of our sample's investors to the inclusion of a stock in the ethical index, or its exclusion from it, is the fruit of a deliberate choice.

The Experiment in the History of Economics, 2005

The necessary consequence of the reason why we use competition is that, in those cases in which i... more The necessary consequence of the reason why we use competition is that, in those cases in which it is interesting, the validity of the theory can never be proved empirically. We can test it on conceptual models, and we might conceivably test it in artificially created real situations where the facts which competition is intended to discover are already known to the observer. But in such cases it is of no practical value, so that to carry out the experiment would hardly be worth the expense… The peculiarity of competition-which it has in common with the scientific method-is that its performance cannot be tested in particular instances where it is significant, but is shown only by the fact that the market will prevail in comparison with any alternative arrangements. (Friedrich A.Hayek 1968, p. 180) …experiments are designed to enable us to predict outcomes under controlled conditions and to make it possible to conclude from those to wider applications. There are, of course, limits to experiments in economics, but in a sense any variation in taxation, in foreign exchange rates, in tariffs, etc. etc., can be viewed as a coarse experiment whose result can lead to new theories and hence to better prediction when the new occasion comes around. (Oskar Morgenstern 1972, p. 710) 4.1 Introduction It has been argued that the emergence and early progress of experimental economics are related to the work of Oskar Morgenstern (Schotter 1992). Although he did not publish

Paradoxes versus formalism in economics. Evidence from the

The paper analyzes the case of Belgium to provide insight into the relationships among ethnic het... more The paper analyzes the case of Belgium to provide insight into the relationships among ethnic heterogeneity, voting participation and local economic growth. We find that heterogeneity, and external and internal mobility reduce immigrants’ voting participation, while we do not find support for the hypothesis that voting participation is related to local economic growth, with the exception of Flanders, which is the most ethnically homogeneous region of Belgium. This finding is interpreted as showing that an increase in ethnic heterogeneity prevails over other factors in determining local economic performance via a decline in social capital.

Index 1. Cognitive and behavioural economics 2. Experimental economics 2.1 Laboratory methods 2.2... more Index 1. Cognitive and behavioural economics 2. Experimental economics 2.1 Laboratory methods 2.2 Biases in judgment 2.3 Choice under risk and uncertainty 2.4 Choice anomalies 3. Constructive reactions 3.1 Prospect theory 3.2 Connessionism and neural networks 3.3 Artificial intelligence 4. Neuroeconomics 4.1 Definitions and tools 4.2 Intertemporal Choice and self-control 4.3 Decision-making under risk and uncertainty 4.4 Mirror neurons and strategic choice 4.5 Trust game and brain activation 4.6 Oxytocin and trusting behavior Main References

Riding the Hype Cycle: The Resurgence of Virtual Worlds, 2013

Substantial evidence from social and cognitive psychology suggests that lot of behaviors are driv... more Substantial evidence from social and cognitive psychology suggests that lot of behaviors are driven by processes operating outside of awareness. Many implicit or indirect measures to capture such processes have been proposed. The aim of the Albo Project is verify, both theoretically and experimentally, if the traditional instruments for assessing work-related stress (questionnaires, checklists and interviews) are inappropriate to detect the individual perception of psycho-social risk factors in work environments. It is also claimed that Virtual Reality simulations permits a better assessment of the potential factors of stress in workplaces. Game simulations based on the techniques of Virtual Reality are potent tools to provide a substantial improvement in the quality and quantity of information and awareness on the safety and psycho-social risks existing inside organizations. Also, the Virtual Reality exposure (virtual movies) can facilitate the objectivity in judgment of audience. Alternation between compact learning units and practical application of knowledge deepens the acquired know-how and creates a long lasting experience. The final product has been administered in some companies to test it. The result of the first step of the project is the demo version including scenarios of virtual work environments. The final product will be used for assessing job stress and for designing training experiences in workplaces on online platforms.

Research in Economics, 2019

We assess in the laboratory the impact of promises on group decision-making. The gift-exchange ga... more We assess in the laboratory the impact of promises on group decision-making. The gift-exchange game provides the testing ground for our experiment. When played between groups, inter-group cooperation and reciprocity represent a condition for efficiency in overall decision making. We find that promises have a significant positive effect on aggregate profits. We interpret these findings as if promises act as a trigger of social conformity, according to which groups adopt socially more desirable behavior even without face-to-face communication or discussion.

The paper analyzes physiological responses to different visual representations of stressful work ... more The paper analyzes physiological responses to different visual representations of stressful work activities. A between-subject experiment was conducted to analyze differences in heart rate (HR) and electromyography (EMG) between subjects watching videos featuring real actors and virtual videos with avatars representing the same situation. Findings show that exposure to real videos is associated with greater physiological activations than exposure to virtual videos. This evidence may suggest that, by inducing less emotional involvement, low-immersive virtual environments activate different cognitive mechanisms of stress perception.

This paper provides evidence of the positive correlation between participation in the European IC... more This paper provides evidence of the positive correlation between participation in the European ICT-RTD Programmes, the innovation capacity of the EU regions and the growth of regional added value adjusted by worked hours, We also offer additional support to the findings of previous studies concerning the raionale of the geographical concentration of innovation activities in some core areas of Europe. This evidence calls for a further integration of EU ICT-RTD policies at regional rather than national level, particularly encouraging the participation of regional organizations in multiple and related instruments.

SSRN Electronic Journal, 2004

This paper argues that the acceptance of two recent methodological advances in economics, namely ... more This paper argues that the acceptance of two recent methodological advances in economics, namely game theory and laboratory experimentation, was affected by the history dependence constraining the formalization of economics. After an early period in which the two methods were coolly received by economists because their applications challenged some basic hypotheses of mainstream economics, their subsequent acceptance was the result of the corroboration of those same hypotheses. However, the recent emergence of some paradoxes has finally revealed that the effectiveness of game theory and experimental techniques in economics is improved when descriptively implausible and normatively unsatisfactory assumptions such as the centrality of individual maximization in decision theory and the definition of rationality as consistency in preferences are revised.

SSRN Electronic Journal, 2004

This paper compares outsourcing processes in France, Italy and Japan in two types of firms, large... more This paper compares outsourcing processes in France, Italy and Japan in two types of firms, large firms and also small firms. It is shown that outsourcing has increased over the last two decades in both small and large firms in all three countries and that mainly in the last decade the tendency has been to increasingly involve some of the suppliers in product development. We interpret this evidence by means of a cognitive framework related to the activity of information management. Specifically, we show that the more the relationships among suppliers and users are characterised by two-way communication, decentralised information processing, and accordingly balanced contractual power, the more the incentives to create knowledge and to innovate autonomously are guaranteed.

SSRN Electronic Journal, 2012

The paper analyses a case study of time lag in processing market-sensitive information with intra... more The paper analyses a case study of time lag in processing market-sensitive information with intraday data. On February 2011, the Italian Parliament approved the so called Milleproroghe decree issued by the Government, which included, among others, a new important rule for banks transforming the deferred tax assets into tax credits. Although information on the approval of the law had been available since February 8, on February 15 the market took twelve minutes to react to the news and almost an hour to fully absorb it. This delay created significant arbitrage opportunities that can be explained with traders' inability to process immediately technical and complex matters. Failure to comply with these cognitive limitations prevents traders from incorporating promptly new information in market prices.

SSRN Electronic Journal, 2010

Intra-day anomalies in the relationship between U.S. futures and European stock indexes

This paper investigates the validity of the model of dual processing by means of eyetracking meth... more This paper investigates the validity of the model of dual processing by means of eyetracking methods. In this theoretical framework, gaze direction may be a revealing signal of how automatic detection is modified or sustained by controlled search. We performed an experiment by using a stylized decisional framework, i.e. informational cascade, proposed by economists to investigate the rationality of imitative

Computational Intelligence and Neuroscience, 2014

A circuit of evaluation and selection of the alternatives is considered a reliable model in neuro... more A circuit of evaluation and selection of the alternatives is considered a reliable model in neurobiology. The prominent contributions of the literature to this topic are reported. In this study, valuation and choice of a decisional process during Two-Alternative Forced-Choice (TAFC) task are represented as a two-layered network of computational cells, where information accrual and processing progress in nonlinear diffusion dynamics. The evolution of the response-to-stimulus map is thus modeled by two linked diffusive modules (2LDM) representing the neuronal populations involved in the valuation-and-decision circuit of decision making. Diffusion models are naturally appropriate for describing accumulation of evidence over the time. This allows the computation of the response times (RTs) in valuation and choice, under the hypothesis of ex-Wald distribution. A nonlinear transfer function integrates the activities of the two layers. The input-output map based on the infomax principle ma...

SSRN Electronic Journal, 2000

An historical overview of experimental economics points out significant analogies between its ori... more An historical overview of experimental economics points out significant analogies between its origins and the contemporary emergence of game theory. In both cases, their effective introduction in economics was postponed until the 1960s. Such a delay cannot be ascribed to the supposed division between empirical and theoretical work but to the fact that in the 1950s experimental methodologies, such as game theory, were mainly developed by scholars of other social sciences which forced a re-examination of the prevailing postulates of economic theory. This interdisciplinary community gave rise to two different approaches: the sociopsychological one represented by experimental games, and the economic-managerial one represented by business games. Although both approaches were an outgrowth of game theory, the prevalence of the first had important consequences on subsequent developments.

SSRN Electronic Journal, 2011

This paper provides laboratory evidence on the efficiency-enhancing properties of the Tiebout mod... more This paper provides laboratory evidence on the efficiency-enhancing properties of the Tiebout model as a decentralized system of public goods provision. Tiebout (1956) shows that if a sufficient number of local communities exist to accommodate different types of preferences, individuals sort themselves in a way that provides an efficient allocation of public goods and taxes. Our experiment aims to disentangle the effect of voting participation and is composed of two treatments. In the non-participation treatment, local public good provision is chosen by only one subject, while the other members of the community can only stay in or moves to another community. In the participation treatment, all the community members have the right to vote as well as to move to another community and collective decisions are taken by majority rule. Our findings show that social welfare is greater in the participation than in the non-participation treatment. We conclude that voting with one"s feet increases efficiency if all the community members vote and that the influence of voting participation on the allocation of local public goods should be taken into account to assess the viability of the Tiebout model.

SSRN Electronic Journal, 2009

This study applies experimental methods to analyze travel mode choice. Two different scenarios ar... more This study applies experimental methods to analyze travel mode choice. Two different scenarios are considered. In the first scenario, subjects have to decide whether to commute by car or by metro. Metro costs are fixed, while car costs are uncertain and determined by the joint effect of casual events and traffic congestion. In the second scenario, subjects have to decide whether to travel by car or by bus, both modes in which costs are determined by the combination of chance and congestion. Subjects receive feedback information on the actual travel times of both modes. We find that individuals exhibit a marked preference for cars, are inclined to confirm their first choice and demonstrate travel mode stickiness. We conclude that travel mode choice is subject to heuristics and biases that lead to robust deviations from rational choice.

SSRN Electronic Journal, 2012

SSRN Electronic Journal, 2013

The paper examines in the laboratory how risk-taking situations are affected by the conditions of... more The paper examines in the laboratory how risk-taking situations are affected by the conditions of observing other's choices (observer) and being observed by others (source). By extending Yechiam et al.'s (2008) experimental design to the domain of gains we find that observers are more probable than sources to choose risky alternatives producing rare gains than equiprobable gains. The impact of social exposure is also analyzed and interpreted in the context of personality traits to assess how heterogeneity influences risky decisions.

Research in Economics, 2009

This experimental study aims to clarify to what extent and in which direction investors react to ... more This experimental study aims to clarify to what extent and in which direction investors react to CSR (Corporate Social Responsibility) initiatives meant to upgrade the ethical standards of firms beyond the minimal requirements of law. Subjects in the laboratory were invited to invest their endowment in a portfolio of financial assets. We provided information on the expected returns of each stock and on its inclusion in an ethical index, or exclusion from it. Our findings show that subjects' behavior appears to be a function not only of their individual pay-offs but also of the information on the ethical standards of the firms issuing stocks. Most of them, however, did not show a fully irrational behavior as they consistently correlated the share of stocks with their expected returns. We may conclude that the sizeable reaction of our sample's investors to the inclusion of a stock in the ethical index, or its exclusion from it, is the fruit of a deliberate choice.