nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2023‒04‒03
three papers chosen by
Marco Novarese
Università degli Studi del Piemonte Orientale

  1. Behavioral Spillovers By Bonev, Petyo
  2. Measuring Preferences Over Intertemporal Profiles By Chen Sun
  3. The disposition effect: experimental evidence that exhibits rationality from professional commodities traders By Guenther, Benno; Lordan, Grace

  1. By: Bonev, Petyo
    Abstract: What is a behavioral spillover? How can a spillover be uncovered from the data? What is the precise link between the underlying psychological theory of a spillover and the econometric assumptions which are necessary to estimate it? This paper draws on recent advancements in causal inference, behavioral economics, psychology, and neuroscience to develop a framework for the causal evaluation and interpretation of behavioral spillovers. A novel research design is suggested. The paper challenges existing empirical strategies and reevaluates existing empirical results.
    Keywords: Behavioral spillovers, environmental policy evaluation, moral licensing, self-perception theory, cognitive dissonance theory, foot-in-the-door effect
    JEL: C21 C26 C9 D04 D9
    Date: 2023–03
  2. By: Chen Sun (HU Berlin)
    Abstract: Growing evidence indicates that utility over time is different from utility under risk. Hence, measuring intertemporal preferences (discounting and utility) exclusively from intertemporal choices is desirable. We develop a simple method for measuring intertemporal preferences. It is parameter-free in both discounting and utility, and allows a wider range of models to be measured than preceding methods. It is easy to implement, clear to subjects, incentive compatible, and does not require more measurements than existing methods if identical assumptions are imposed. In an experiment, we illustrate how the method can be used to test recent models with unconventional assumptions non-parametrically.
    Keywords: measuring time preferences; intertemporal profile; parameter-free;
    JEL: C91 D12 D91
    Date: 2023–02–13
  3. By: Guenther, Benno; Lordan, Grace
    Abstract: We conducted a within-subject experiment with 193 professional traders (151 professional commodities traders), to examine how the tendency towards the disposition effect varies across decision-making in mean reverting commodities and non-mean reverting equities contexts. In addition, we consider whether a simple informational intervention that makes the disposition effect salient can alter decision-making. Overall, we find that prior to the intervention the traders exhibit the disposition effect in the direction that aligns with profit maximisation goals suggesting that they are acting rational. For example, when being asked to make decisions on commodities the traders make choices in the direction of the disposition effect, which is rational given that these picks are mean reverting. We also find that the informational intervention is effective in changing the level of the disposition effect observed and also decision-making, regardless of whether traders are considering decisions over mean reverting or non-mean reverting securities. Further, we provide evidence that our simple informational intervention improves trader returns when making decisions on non-mean reverting securities only. In contrast, it has negative impacts when utilised for commodities. Our study highlights the power of simple interventions to make disproportionately large changes to decision-making regardless of whether they are in our best interests, and their beneficial role only when the context is right.
    Keywords: disposition effect; prospect theory; commodities; behavioural finance; trading decision-making; Frontiers deal
    JEL: G11
    Date: 2023–02–23

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