nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2018‒11‒05
four papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Loss Attitudes in the U.S. Population: Evidence from Dynamically Optimized Sequential Experimentation (DOSE) By Jonathan Chapman; Erik Snowberg; Stephanie Wang; Colin Camerer
  2. Cost-Benefit Analysis in Reasoning By Larbi Alaoui; Antonio Penta
  3. The causal effect of trust By Björn Bartling; Ernst Fehr; David Huffman; Nick Netzer

  1. By: Jonathan Chapman; Erik Snowberg; Stephanie Wang; Colin Camerer
    Abstract: We introduce DOSE - Dynamically Optimized Sequential Experimentation - and use it to estimate individual-level loss aversion in a representative sample of the U.S. population (N = 2;000). DOSE elicitations are more accurate, more stable across time, and faster to administer than standard methods. We find that around 50% of the U.S. population is loss tolerant. This is counter to earlier findings, which mostly come from lab/student samples, that a strong majority of participants are loss averse. Loss attitudes are correlated with cognitive ability: loss aversion is more prevalent in people with high cognitive ability, and loss tolerance is more common in those with low cognitive ability. We also use DOSE to document facts about risk and time preferences, indicating a high potential for DOSE in future research.
    Keywords: dynamic experiments, DOSE, loss aversion, risk preferences, time preferences
    JEL: C81 C90 D81 D90
    Date: 2018
  2. By: Larbi Alaoui; Antonio Penta
    Abstract: When an individual thinks about a problem, his decision to reason further may involve a tradeoff between cognitive costs and a notion of value. But it is not obvious that this is always the case, and the value of reasoning is not well-defined. This paper analyzes the primitive properties of the reasoning process that must hold for the decision to stop thinking to be represented by a cost-benefit analysis. We find that the properties that characterize the cost-benefit representation are weak and intuitive, suggesting that such a representation is justified for a large class of problems. We then provide additional properties that give more structure to the value of reasoning function, including ‘value of information’ and ‘maximum gain’ representations. We show how our model applies to a variety of settings, including contexts involving sequential heuristics in choice, response time, reasoning in games and research. Our model can also be used to understand economically relevant patterns of behavior for which the cost-benefit approach does not seem to hold. These include choking under pressure and (over)thinking aversion.
    Keywords: cognition and incentives, Choice theory, reasoning, fact-free learning, sequential heuristics
    JEL: D01 D03 D80 D83
    Date: 2018–10
  3. By: Björn Bartling; Ernst Fehr; David Huffman; Nick Netzer
    Abstract: Trust affects almost all human relationships – in families, organizations, markets and politics. However, identifying the conditions under which trust, defined as people's beliefs in the trustworthiness of others, has a causal effect on the efficiency of human interactions has proven to be difficult. We show experimentally and theoretically that trust indeed has a causal effect. The duration of the effect depends, however, on whether initial trust variations are supported by multiple equilibria. We study a repeated principal-agent game with multiple equilibria and document empirically that an efficient equilibrium is selected if principals believe that agents are trustworthy, while players coordinate on an inefficient equilibrium if principals believe that agents are untrustworthy. Yet, if we change the institutional environment such that there is a unique equilibrium, initial variations in trust have short-run effects only. Moreover, if we weaken contract enforcement in the latter environment, exogenous variations in trust do not even have a short-run effect. The institutional environment thus appears to be key for whether trust has causal effects and whether the effects are transient or persistent.
    Keywords: Trust, causality, equilibrium selection, belief distortions, incomplete contracts, screening, institutions
    JEL: C91 D02 D91 E02
    Date: 2018–10
  4. By: Maria Terskova (National Research University Higher School of Economics); Elena Agadullina (National Research University Higher School of Economics)
    Abstract: Expectations of people with high and low intelligence differ considerably. High intelligence is associated with several desirable social outcomes, while low intelligence is associated with low social status and poverty. We assumed that attributing high intelligence to a person could lead to a more positive evaluation of them and, as a result, less negative attitudes toward them. In the experimental study (N = 781) we investigated how levels of perceived intelligence impact the long-term stigmatization of dirty workers. The results show that perceived high intelligence of dirty workers decreases long-term stigmatization towards them, but these findings relate only to people performing moral dirty work. Implicit theories about intelligence were controlled as a covariate and had no significant effect. Results are discussed in terms of the positive effect of perceived high intelligence on everyday perception. Limitations and future directions are also discussed.
    Keywords: intelligence, implicit theories, dirty work, stigmatization
    JEL: Z
    Date: 2018

This nep-cbe issue is ©2018 by Marco Novarese. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.