nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2022‒09‒05
four papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Simple models predict behavior at least as well as behavioral scientists By Dillon Bowen
  2. Looming Large or Seeming Small? Attitudes Towards Losses in a Representative Sample By Jonathan Chapman; Erik Snowberg; Stephanie W. Wang; Colin Camerer
  3. Better us later than me now: Regulatee-size and time-inconsistency as determinants of demand for environmental policies By Alt, Marius
  4. Choice That’s Rational By Chatterjee, Sidharta

  1. By: Dillon Bowen
    Abstract: How accurately can behavioral scientists predict behavior? To answer this question, we analyzed data from five studies in which 640 professional behavioral scientists predicted the results of one or more behavioral science experiments. We compared the behavioral scientists' predictions to random chance, linear models, and simple heuristics like "behavioral interventions have no effect" and "all published psychology research is false." We find that behavioral scientists are consistently no better than - and often worse than - these simple heuristics and models. Behavioral scientists' predictions are not only noisy but also biased. They systematically overestimate how well behavioral science "works": overestimating the effectiveness of behavioral interventions, the impact of psychological phenomena like time discounting, and the replicability of published psychology research.
    Date: 2022–08
  2. By: Jonathan Chapman; Erik Snowberg; Stephanie W. Wang; Colin Camerer
    Abstract: We measure individual-level loss aversion using three incentivized, representative surveys of the U.S. population (combined N=3,000). We find that around 50% of the U.S. population is loss tolerant, with many participants accepting negative-expected-value gambles. This is counter to earlier findings—which mostly come from lab/student samples—and expert predictions that 70-90% of participants are loss averse. Consistent with the difference between our study and the prior literature, loss aversion is more prevalent in people with high cognitive ability. Loss-tolerant individuals are more likely to report recent gambling and to have experienced financial shocks. These results support the general hypothesis that individuals value gains and losses differently, although the tendency in a large proportion of the population to emphasize gains over losses is an overlooked behavioral phenomenon.
    JEL: C81 C9 D03 D81 D9
    Date: 2022–07
  3. By: Alt, Marius
    Abstract: To adequately design and implement effective environmental policies, it is paramount for policymakers to understand preferences for regulatory instruments as well as their individual level determinants. In this study, I experimentally investigate the demand for three environmental policies, comprising nudges, monetary incentives, and punishments. I elicit the demand for these interventions through decisions in a pro-environmental real effort task. The experiment introduces exogenous variation along two dimensions to analyze, whether interventions are (1) demanded as commitment devices to commit to future pro-environmental behavior, and (2) how demand changes when regulation affects not only the self but also others. The results show that a large fraction of individuals demands regulation, which is, however, heterogeneously distributed across participants, being dependent on individual characteristics. Moreover, particularly participants who are sophisticated about their time-inconsistent prosocial preferences demand interventions to commit to pro-environmental behavior. When the intervention is also imposed on other participants, this leads to an increase in the demand, driven by conditionally cooperative individuals who are not averse to constraining others' behavior. Finally, I provide evidence that the experimentally elicited demand for interventions can serve as a predictor of preferences for actual environmental policies.
    Keywords: Pro-environmental behavior,Nudges,Economic incentives,Real effort
    JEL: Q58 D04 C91
    Date: 2022
  4. By: Chatterjee, Sidharta
    Abstract: In this paper, I discuss about the axiomatic basis of rational choice theory—the theory that is behind making rational choice and decisions. To make rational choices, we would require thinking rationally and understanding the reason and logic behind what makes a choice rational, and how we need to choose rationally. Decisions are made under various circumstances, i.e., under risk, and often under compulsion. In social choice theory, decisions are made by different types of decision making entities, i.e., committees, groups, individuals and collective judgments by various types of organizations, etc. This paper highlights these issues and addresses the fundamental tenets of making rational choices by examining and following the previous workings of experts on this field. As such, it introduces a novel concept and the idea of Social Choice Rationality in choosing what’s rational.
    Keywords: Choice, decision making, rational choice, social choice theory, Social Choice Rationality, Social welfare, welfare actions
    JEL: I3 Z1
    Date: 2022–07–25

This nep-cbe issue is ©2022 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.
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