nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2005‒10‒08
two papers chosen by
Marco Novarese
Universita del Piemonte Orientale

  1. Playing the wrong game: An experimental analysis of relational complexity and strategic misrepresentation By Giovanna Devetag; Massimo Warglien
  2. Neural correlates of the affect heuristic during brand choice By Hilke Plassmann; Peter Kenning; Michael Deppe; Harald Kugel; Wolfram Schwindt

  1. By: Giovanna Devetag; Massimo Warglien
    Abstract: It has been suggested that players often produce simplified and/or misspecified mental representations of interactive decision problems (Kreps, 1990). We submit that the relational structure of players’ preferences in a game induces cognitive complexity, and may be an important driver of such simplifications. We provide a formal classification of order structures in two-person normal form games based on the two properties of monotonicity and projectivity, and present experiments in which subjects must first construct a representation of games of different relational complexity, and subsequently play the games according to their own representation. Experimental results support the hypothesis that relational complexity matters. More complex games are harder to represent, and this difficulty is correlated with measures of short term memory capacity. Furthermore, most erroneous representations are less complex than the correct ones. In addition, subjects who misrepresent the games behave consistently with such representations according to simple but rational decision criteria. This suggests that in many strategic settings individuals may act optimally on the ground of simplified and mistaken premises.
    Keywords: pure motive, mixed motive, preferences, bi-orders, language, cognition, projectivity, monotonicity, short term memory, experiments
    JEL: C70 C72 C91
    Date: 2005
  2. By: Hilke Plassmann (Stanford NeuroEconomics Lab, Stanford University); Peter Kenning (Department of General Management,); Michael Deppe (Department of Neurology, University of Muenster); Harald Kugel (Department of Radiology, University of Muenster); Wolfram Schwindt (Department of Radiology, University of Muenster)
    Abstract: In this working paper it is investigated how affect and cognition interact in consumer decision making. The research framework is multidisciplinary by applying a neuroscientific method to answer the question which information is processed during brand choice immediately when the decision is computed in the test person’s brain. In a neuroscientific experiment test persons perform binary decision-making tasks between different brands of the same product class. The results suggest that the presence of the respondent’s first choice brand leads to a specific modulation of the neural brain activity, which can be described as neural correlate of Slovic’s affect heuristic concept.
    Keywords: Neuroeconomics, brand choice, cognition, affect
    JEL: C9
    Date: 2005–09–29

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