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on Cognitive and Behavioural Economics |
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Issue of 2021‒09‒20
thirteen papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | Felix Holzmeister (Department of Economics, University of Innsbruck); Christoph Huber (Institute of Markets and Strategy, Vienna University of Economics and Business); Stefan Palan (Institute of Banking and Finance, University of Graz) |
| Abstract: | Risk is one of the key aspects in financial decision-making and therefore an integral part of the behavioral economics and finance literature. Focusing on the conceptualization of the term ``risk'', which researchers have addressed from numerous angles, this comment aims to offer a critical perspective on the interactions between risk preferences (a latent trait), risk perceptions (how individuals judge whether something is risky), and risk-taking behavior as distinct concepts, and hence to guide future research on (individual-level) decision-making processes in this direction. |
| Date: | 2021–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:grz:wpsses:2021-06&r= |
| By: | Kettlewell, Nathan (University of Technology, Sydney); Tymula, Agnieszka (University of Sydney) |
| Abstract: | This paper describes the Australian Twins Economic Preferences Survey (ATEPS). The dataset comprises a wide variety of preference and behavioral measures (risk aversion, impatience, ambiguity aversion, trust, confidence) elicited using incentivised decision tasks. 1,120 Australian adult twins (560 pairs) completed the survey, making it one of the largest datasets containing incentivised preference measures of twins. As the survey was conducted during the COVID-19 pandemic, we also collected information on experiences related to the pandemic, along with a variety of questions on political attitudes and mental wellbeing. We hope that ATEPS can make a valuable contribution to social science and genetics research. |
| Keywords: | economic preferences, twins, twin study |
| JEL: | D90 D91 I10 Y90 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14702&r= |
| By: | Griesoph, Amelie; Hoffmann, Stefan; Merk, Christine; Rehdanz, Katrin; Schmidt, Ulrich |
| Abstract: | Social norms, also called social comparison nudges, have been shown to be particularly effective in promoting healthy food choices and environmentally friendly behaviors. However, there is limited evidence on the effectiveness of these nudges for promoting sustainable and climate-friendly food choices and their potential to reduce greenhouse gas emissions and support the related SDGs. The paper reports a field experiment that tests the effectiveness of two social norms in a real-life setting based on revealed preferences. The study distinguishes between the widely researched descriptive norms and guessed norms, the latter being tested in this context for the first time. While descriptive norms communicate typical patterns of behavior (e.g., 50% of canteen visitors choose vegetarian meals), guessed norms are determined by the individual’s best guess about the norm in a specific context. The results confirm a remarkable nudging effect of guessed norms: The higher the presumed proportion of vegetarian dishes sold, the lower the probability of choosing a vegetarian dish. Surprisingly, this effect is independent of the respective norm specification (meat or vegetarian norm). The paper provides advice for policy makers about when and how to use guessed norms. |
| Keywords: | climate-friendly behavior,field experiment,guessed norm,nudging,social norms |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkie:240210&r= |
| By: | Peter Andre |
| Abstract: | Meritocracies aspire to reward effort and hard work but promise not to judge individuals by the circumstances they were born into. The choice to work hard is, however, often shaped by circumstances. This study investigates whether people’s merit judgments are sensitive to this endogeneity of choice. In a series of incentivized experiments with a large, representative US sample, study participants judge how much money two workers deserve for the effort they exerted. In the treatment condition, unequal circumstances strongly discourage one of the workers from working hard. Nonetheless, I find that individuals hold the disadvantaged worker fully responsible for his choice. They do so, even though they understand that choices are strongly influenced by circumstances. Additional experiments identify the cause of this neglect. In light of an uncertain counterfactual state – what would have happened on a level playing field – participants base their merit judgments on the only reliable evidence they possess - observed effort levels. I confirm these patterns in a structural model of merit views and a vignette study with real-world scenarios. |
| Keywords: | Meritocracy, attitudes toward inequality, redistribution, fairness, responsibility, social preferences, inference, uncertain counterfactual |
| JEL: | C91 D63 D91 H23 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2021_318&r= |
| By: | D’Acunto, Francesco; Hoang, Daniel; Paloviita, Maritta; Weber, Michael |
| Abstract: | Many consumers below the top of the distribution of a representative population by cognitive abilities barely react to monetary and fiscal policies that aim to stimulate consumption and borrowing, even when they are financially unconstrained and despite substantial debt capacity. Differences in income, formal education levels, economic expectations, and a large set of registry-based demographics do not explain these facts. Heterogeneous cognitive abilities thus act as human frictions in the transmission of economic policies that operate through the household sector and might imply redistribution from low- to high-cognitive ability agents. We conclude by discussing how our findings inform the microfoundation of behavioral macroeconomic theory. |
| JEL: | D12 D84 D91 E21 E31 E32 E52 E65 |
| Date: | 2021–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2021_012&r= |
| By: | Daniele Girardi (Department of Economics, University of Massachusetts Amherst (USA)); Sai Madhurika Mamunuru (Department of Economics, Whitman College (USA)); Simon D Halliday (School of Economics, University of Bristol (UK)); Samuel Bowles (Santa Fe Institute (USA)) |
| Abstract: | It is widely held that studying economics makes you more selfish and politically conservative. We use a difference-in-differences strategy to disentangle the causal impact of economics education from selection effects. We estimate the effect of four different intermediate microeconomics courses on students’ experimentally elicited social preferences and beliefs about others, and policy opinions. We find no discernible effect of studying economics (whatever the course content) on self-interest or beliefs about others’ self-interest. Results on policy preferences also point to little effect, except that economics may make students somewhat less opposed to highly restrictive immigration policies. |
| Keywords: | endogenous preferences, economics education, social preferences, self-interest, generosity, altruism, reciprocity, microeconomics, teaching |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2021-07&r= |
| By: | Steve J. Bickley; Ho Fai Chan; Benno Torgler |
| Abstract: | The history of AI in economics is long and winding, much the same as the evolving field of AI itself. Economists have engaged with AI since its beginnings, albeit in varying degrees and with changing focus across time and places. In this study, we have explored the diffusion of AI and different AI methods (e.g., machine learning, deep learning, neur al networks, expert systems, knowledge- based systems) through and within economic subfields, taking a scientometrics approach. In particular, we centre our accompanying discussion of AI in economics around the problems of economic calculation and social planning as proposed by Hayek. To map the history of AI within and between economic sub- fields, we construct two datasets containing bibliometrics information of economics papers based on search query results from the Scopus database and the EconPapers (and IDEAs/RePEc) repository. We present descriptive results that map the use and discussion of AI in economics over time, place, and subfield. In doing so, we also characterise the authors and affiliations of those engaging with AI in economics. Additionally, we find positive correlations between quality of institutional affiliation and engagement with or focus on AI in economics and negative correlations between the Human Development Index and share of learning-based AI papers. |
| Keywords: | Artificial Intelligence; Machine Learning; Economics; Scientometrics; Science of Science; Bibliometrics |
| JEL: | B40 N01 A14 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2021-28&r= |
| By: | Oliver, Adam |
| Abstract: | In a previously published article, I reported some tests of prospect theory’s reflection effect over outcomes defined by money and life years gained from treatment. Those results suggested qualified support for the reflection effect over money outcomes and strong support over longevity outcomes. This article reruns those tests while accounting for the intensity of individual risk attitudes, and, overall, show consistency with the reflection effect. However, I argue that these results do not necessarily offer support for the explanatory power of prospect theory. Rather, the results may be driven by evolved responses to circumstances that provoke perceptions of scarcity and abundance. Therefore, from an ecological perspective, behavioural patterns such as those that are consistent with the reflection effect, which, by extension, tend to be considered as erroneous or biased by most behavioural economists because they conflict with the postulates of rational choice theory, may not be unreasonable. Recognising as such is important when considering how behavioural insights ought to inform public policy design and implementation. |
| Keywords: | expected utility theory; prospect theory; reflection effect; risk intensity; risk sensitivity theory |
| JEL: | J1 |
| Date: | 2021–09–13 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:111906&r= |
| By: | Emmanuel Kemel (GREGHEC, HEC Paris - Ecole des Hautes Etudes Commerciales, CNRS - Centre National de la Recherche Scientifique); Antoine Nebout (INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Bruno Ventelou (CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Risk is a key dimension of economic decisions, but whether risk attitudes can predict real economic behaviour is still subject to investigation. We measure general practitioners' (GPs) risk attitudes and check for a relationship with variations in prescribing practices. Individual-level risk attitudes are elicited from simple survey choices on a representative national panel of 939 French GPs, and are linked to their volume of lab-test prescriptions through administrative records. Specifically, we estimate individual components of a flexible decision model under risk (rank-dependent utility) using random-coefficient estimations, and then treat these components as predictors of observed lab-test prescribing. We find that (1) GPs exhibit the usual patterns of risk attitudes: risk aversion and inverse S-shaped probability weighting prevails (2) risk aversion captured by the utility function is positively correlated with lab-test prescribing. |
| Keywords: | General practitioners,risk attitudes,rank-dependent utility,lab-test prescribing,practice variation |
| Date: | 2021–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03330153&r= |
| By: | Peter Andre (University of Bonn) |
| Abstract: | Meritocracies aspire to reward effort and hard work but promise not to judge individuals by the circumstances they were born into. The choice to work hard is, however, often shaped by circumstances. This study investigates whether people's merit judgments are sensitive to this endogeneity of choice. In a series of incentivized experiments with a large, representative US sample, study participants judge how much money two workers deserve for the effort they exerted. In the treatment condition, unequal circumstances strongly discourage one of the workers from working hard. Nonetheless, I find that individuals hold the disadvantaged worker fully responsible for his choice. They do so, even though they understand that choices are strongly influenced by circumstances. Additional experiments identify the cause of this neglect. In light of an uncertain counterfactual state -- what would have happened on a level playing field -- participants base their merit judgments on the only reliable evidence they possess: observed effort levels. I confirm these patterns in a structural model of merit views and a vignette study with real-world scenarios. |
| Keywords: | Meritocracy, attitudes toward inequality, redistribution, fairness, responsibility, social preferences, inference, uncertain counterfactual |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:115&r= |
| By: | Emmanuel Kemel (GREGHEC, HEC Paris - Ecole des Hautes Etudes Commerciales, CNRS - Centre National de la Recherche Scientifique); Corina Paraschiv (LIRAES - EA 4470 - Laboratoire Interdisciplinaire de Recherche Appliquée en Economie de la Santé - UP - Université de Paris) |
| Abstract: | This paper presents an experiment that investigates differences of risk attitudes in decisions with immediate versus delayed consequences. Our experimental design allows to control for the effects of discounting and timing of risk resolution. We show that individuals are more risk tolerant in situations involving delayed consequences. Investigations based on rank-dependent utility show that this finding is mainly driven by probability weighting. More precisely, probability weighting is more elevated for delayed consequences, suggesting an overall increase in decision maker's optimism regarding the chances of success associated to risks for which consequences materialize in the future. |
| Keywords: | Risk Attitudes,Time,Rank Dependent Utility,Delay,Future Consequences D81,D90,C91 |
| Date: | 2021–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03330096&r= |
| By: | Thoma, Johanna |
| Abstract: | Behavioural economics has taught us that human agents don’t always display consistent, context-independent and stable preferences in their choice behaviour. Can we nevertheless do welfare economics in a way that lives up to the anti-paternalist ideal most economists subscribe to? I here discuss Sugden’s powerful critique of most previous attempts at doing so, which he dubs the ‘New Consensus’, as appealing to problematic notions of latent preference and inner rational agency. I elaborate on a fundamental rethinking of the normative foundations of anti-paternalist welfare measurement that often remains implicit in the behavioural welfare economics literature Sugden discusses, but which is required to make these accounts minimally plausible. I argue that, if we go along with this rethinking, Bernheim and Rangel’s (2007, 2009) choice-theoretic framework withstands Sugden’s criticism. Sugden’s own, more radical proposal is thus under-motivated by his critique of the ‘New Consensus’. |
| Keywords: | behavioural economics; welfare economics; anti-paternalism; preference purification; choice |
| JEL: | N0 |
| Date: | 2021–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:111789&r= |
| By: | Claire Rimbaud (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon); Alice Soldà (Heidelberg University) |
| Abstract: | Pro-social individuals face a trade-off between their monetary and moral motives. Hence, they may be tempted to exploit the uncertainty in their decision environment in order to reconcile this trade-off. In this paper, we investigate whether individuals with belief-dependent preferences avoid the monetary cost of behaving according to their moral standards by strategically acquiring information about others'expectations. We test the predictions of an information acquisition model in an online experiment. We use a modified trust-game in which we introduce uncertainty about the second movers' beliefs about first-movers' expectations. Our design enables to (i) identify participants with belief-based preferences and (ii) investigate their information acquisition strategy.Consistent with our predictions of subjective preferences, we find that most individuals classified as belief-dependent strategically select their source of information to avoid the cost of their conscience. |
| Keywords: | Belief-dependent preferences,illusory preferences,information acquisition,self-serving biases,experiment Belief-dependent preferences,experiment |
| Date: | 2021–08–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03325963&r= |