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on Cognitive and Behavioural Economics |
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Issue of 2020‒07‒27
six papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Dainis Zegners; Uwe Sunde; Anthony Strittmatter |
| Abstract: | This paper presents novel evidence for the prevalence of deviations from rational behavior in human decision making – and for the corresponding causes and consequences. The analysis is based on move-by-move data from chess tournaments and an identification strategy that compares behavior of professional chess players to a rational behavioral benchmark that is constructed using modern chess engines. The evidence documents the existence of several distinct dimensions in which human players deviate from a rational benchmark. In particular, the results show deviations related to loss aversion, time pressure, fatigue, and cognitive limitations. The results also demonstrate that deviations do not necessarily lead to worse performance. Consistent with an important influence of intuition and experience, faster decisions are associated with more frequent deviations from the rational benchmark, yet they are also associated with better performance. |
| Keywords: | rational strategies, artificial intelligence, behavioural bias |
| JEL: | D01 D90 C70 C80 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8341&r=all |
| By: | Chowdhury, Shyamal (University of Sydney, IZA Bonn); Sutter, Matthias (Max Planck Institute for Research on Collective Goods Bonn, University of Cologne and University of Innsbruck); Zimmermann, Klaus F. (Maastricht University, UNU-MERIT and GLO) |
| Abstract: | Economic preferences are important for lifetime outcomes such as educational achievements, health status, or labour market success. We present a holistic view of how economic preferences are related within families. In an experiment with 544 families (and 1,999 individuals) from rural Bangladesh we find a large degree of intergenerational persistence of economic preferences. Both mothers’ and fathers’ risk, time and social preferences are significantly (and largely to the same degree) positively correlated with their children’s economic preferences, even when controlling for personality traits and socio-economic background data. We discuss possible transmission channels for these relationships within families and find indications that there is more than pure genetics at work. Moving beyond an individual level analysis, we are the first to classify a whole family into one of two clusters, with either relatively patient, risk-tolerant and pro-social members or relatively impatient, risk averse and spiteful members. Socio-economic background variables correlate with the cluster to which a family belongs to. |
| Keywords: | Economic preferences within families, intergenerational transmission of preferences, time preferences, risk preferences, social preferences, family clusters, socio-economic status, Bangladesh, experiment |
| JEL: | C90 D1 D90 D81 D64 J13 J24 J62 |
| Date: | 2020–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2020030&r=all |
| By: | Anja Achtziger; Carlos Alós-Ferrer; Alexander Ritschel |
| Abstract: | Intuitive decision making has a large and often negative impact in economic decisions, but its measurement and quantification remains challenging. Following research from psychology, behavioral economists have often attempted to causally manipulate the balance of intuition and deliberation by relying on experimental manipulations as cognitive load. However, these attempts have resulted in mixed success, with many null results and no clear general pattern. We explain the possible reasons behind these developments and offer avenues for improvement. First, we show that a very simple formal model of decision processes offers a straightforward test to determine whether cognitive load has been successfully induced, hence disentangling failed inductions and true null results. Specifically, cognitive load in economically-relevant tasks must result in shorter response times. Second, we show that the intuitive arguments on the behavioral implications of cognitive load do not hold on closer, formal examination, unless strong assumptions are made that may or may not hold in typical economic experiments. We then report on seven economic experiments (joint N = 628) using different cognitive load manipulations and confirm the implications of the model. While the effect on response times is strong and pervasive, behavioral effects are weak and elusive. Our research serves as a warning on the differences between economic tasks and psychological experiments and the difficulties associated with importing methods uncritically. |
| Keywords: | Cognitive load, intuition, response times, economics and psychology |
| JEL: | C90 D03 D87 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:354&r=all |
| By: | Bogliacino, Francesco (Universidad Nacional de Colombia); Montealegre, Felipe (Universidad Nacional de Colombia) |
| Abstract: | Households are frequently subject to income and asset shocks. We performed a lab experiment, inducing losses on a real effort task, after which we measured cognitive performance, loss aversion and cheating behavior. We found that asset losses, but not income losses, act as a cognitive load, by decreasing accuracy and increasing response times. We did not detect any change in dishonesty or loss aversion. |
| Date: | 2020–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:y4zaw&r=all |
| By: | Roc Armenter; Michèle Müller-Itten; Zachary Stangebye |
| Abstract: | We present a novel approach to finite Rational Inattention (RI) models based on the ignorance equivalent, a fictitious action with state-dependent payoffs that effectively summarizes the optimal learning and conditional choices. The ignorance equivalent allows us to recast the RI problem as a standard expected utility maximization over an augmented choice set called the learning-proof menu, yielding new insights regarding the behavioral implications of RI, in particular as new actions are added to the menu. Our geometric approach is also well suited to numerical methods, outperforming existing techniques both in terms of speed and accuracy, and offering robust predictions on the most frequently implemented actions. |
| Keywords: | Rational inattention; information acquisition; learning. |
| JEL: | D81 D83 C63 |
| Date: | 2020–06–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:88228&r=all |
| By: | Armin Falk; Fabian Kosse; Hannah Schildberg-Hörisch; Florian Zimmermann |
| Abstract: | This study presents descriptive and causal evidence on the role of the social environment in shaping the accuracy of self-assessment. We introduce a novel incentivized measurement tool to measure the accuracy of self-assessment among children and use this tool to show that children from high socioeconomic status (SES) families are more accurate in their self-assessment, compared to children from low SES families. To move beyond correlational evidence, we then exploit the exogenous variation of participation in a mentoring program designed to enrich the social environment of children. We document that the mentoring program has a causal positive effect on the accuracy of children’s self-assessment. Finally, we show that the mentoring program is most effective for children whose parents provide few social and interactive activities for their children. |
| Keywords: | self-assessment, beliefs, experiments, randomized intervention, children |
| JEL: | D03 C21 C91 I24 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8308&r=all |