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on Cognitive and Behavioural Economics |
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Issue of 2023‒09‒18
eight papers chosen by Marco Novarese, Università degli Studi del Piemonte Orientale |
| By: | Georgia E. Buckle (University of Portsmouth); Wolfgang J. Luhan (University of Portsmouth) |
| Abstract: | We study whether money managers impose their risk preferences onto investments for clients paternalistically and whether they impose them more, the more their client’s risk preference differs from their own. We conduct an online experiment, where participants make an investment decision for themselves and on behalf of another participant (as money managers). When investing for another (the client), we use the strategy method to elicit decisions for every possible investment the other participant could have made for their own payoff, such that money managers have complete information of their client’s risk preference. With this, we systematically manipulate the difference in risk preference between the manager and client within subjects. Overall, we find that money managers do project their risk preferences onto clients’ investments due to paternalism. The manager’s risk preference significantly influenced their investment for others, despite knowing their client’s risk preference, and them having no stake in the decision. Investments were also significantly predicted by the client’s known risk preference, but this was a substantially worse predictor than the managers’ preference. We also find, as predicted, that managers do deviate further from their client’s risk preference, the more that preference differs from their own. |
| Keywords: | decision making for others, paternalism, risk preferences, experiment |
| JEL: | C91 D81 G11 G40 |
| Date: | 2023–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:pbs:ecofin:2023-07&r=cbe |
| By: | Armenak Antinyan; Tigran Aydinyan; Anna Ressi; Lilia Wasserka-Zhurakhovska |
| Abstract: | While the existence of the in-group bias is a well-researched phenomenon in Economics, the established findings are of limited value for understanding its dynamics in the context of challenging societal and economic times. The aim of this paper is to shed more light on whether intergroup discrimination manifests itself differently in a loss compared to a gain domain (corresponding to periods of economic upturns and downturns). We run an online experiment with natural identities, in which participants allocate money between three recipients who vary in the social distance to the decision-maker. We find that, on average, the in-group favoritism documented in the gain domain vanishes in the loss domain. While this result seems to imply that participants become egalitarian in the loss domain, it is actually driven by out-group favoring allocation types becoming more extreme in their decisions. Overall, the loss domain leads to a stronger polarization regarding the question of how different social groups in the society should be treated. |
| Keywords: | in-group bias, favoritism, discrimination, gain and loss domain, polarization |
| JEL: | C99 D30 D63 D91 J10 J15 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10606&r=cbe |
| By: | Groß, Mona (Department of Health Care Management, University of Cologne, Germany); Hennig-Schmidt, Heike (Department of Economics, University of Bonn, Germany Departement of Health Economics and Health Management, University of Oslo, Norway); Wiesen, Daniel (Department of Health Care Management, University of Cologne, Germany) |
| Abstract: | We study how the heterogeneity in responses to performance pay can be explained by personality traits. We utilize data from behavioral experiments and surveys on personality traits with physicians, medical students, and non-medical students. Performance pay is introduced at a within-subject level and complements either fee-for-service or capitation. We find that the payment system matters regarding the behavioral impact of personality traits. More conscientious and more agreeable individuals provide higher quality of care under capitation. Although performance pay further improves the quality, more conscientious and agreeable individuals respond less to capitation-based performance pay. Other personality traits are not behaviorally relevant. Under fee-for-service-based schemes, personality traits do not significantly related to individuals’ behavior. Our findings inform the incentive design for physicians and the potential sorting into incentive schemes based on personality traits. |
| Keywords: | Fee-for-service; capitation; blended pay for performance; personality traits; quality of care; heterogeneity |
| JEL: | C91 I11 |
| Date: | 2023–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oslohe:2023_005&r=cbe |
| By: | Kaiser, Tim (University of Kaiserslautern); Menkhoff, Lukas (DIW Berlin); Oberrauch, Luis (University of Kaiserslautern) |
| Abstract: | We study the age-dependent malleability of patience via educational interventions designed to foster financial decision-making capabilities and to induce a more future-oriented mindset. We conduct a field experiment covering both youths and adults in Uganda and aggregate evidence from earlier experiments to study the generalizability of effects. In our field experiment, we find heterogenous effects by age: adults' patience and discount factors are unaffected by the intervention after 15 months follow-up, but we observe large effects on patience and estimated discount factors and field saving behavior for youth. In the meta-analysis, we find that the results are generalizable across contexts. |
| Keywords: | patience, time preferences, malleability, field experiment, educational intervention |
| JEL: | C93 D15 I21 G53 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16399&r=cbe |
| By: | Bokern, Paul (RS: GSBE UM-BIC, Microeconomics & Public Economics, RS: GSBE other - not theme-related research); Linde, Jona (RS: GSBE UM-BIC, Microeconomics & Public Economics); Riedl, Arno (RS: GSBE UM-BIC, Microeconomics & Public Economics); Werner, Peter (RS: GSBE UM-BIC, Microeconomics & Public Economics) |
| Abstract: | We investigate how preferences have been affected by exposure to the COVID-19 crisis. Our main contributions are: first, our participant pool consists of a large general population sample; second, we elicited a wide range of preferences (risk, time, ambiguity, and social preferences) using different incentivized experimental tasks; third, we elicited preferences before the onset of the crises and in three additional waves during the crises over a time period of more than a year, allowing us to investigate both short-term and medium-term preference responses; fourth, besides the measurement of causal effects of the crisis, we also analyze within each wave during the crisis, how differential exposure to the crisis in the health and financial domain affects preferences. We find that preferences remain remarkably stable during the crisis. Comparing them before the start and during the crisis, we do not observe robust differences in any of the elicited preferences. Moreover, individual differences in the exposure to the crisis at best show only weak effects in the financial domain. |
| JEL: | C90 D01 |
| Date: | 2023–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2023012&r=cbe |
| By: | Christian König-Kersting; Stefan T. Trautmann |
| Abstract: | We study the association of the perseverance-of-effort (PoE) and the consistency-of-interests (CoI) components of the psychological measure of grit, with economic measures of impatience and decreasing impatience (time inconsistency), respectively, in the general population. We find that impatience is associated with grit through the PoE component. No association of time inconsistency with grit is found. Predicting participants’ financial and health outcomes and behaviors, we find that both impatience and grit are predictive for both outcomes, but this is not the case for time inconsistency. Our findings suggest that it can be beneficial for empirical studies of intertemporal decisions to include both economic impatience and psychological grit measures. |
| Keywords: | Time preferences, time inconsistency, decreasing impatience, Grit, household finance, health. |
| JEL: | D15 G51 I10 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2023-12&r=cbe |
| By: | Ardislamov Vladlen (Ардисламов, Владлен) (The Russian Presidential Academy of National Economy and Public Administration) |
| Abstract: | Subject: the study is dedicated to a retrospective assessment of time intervals. Relevance: The theory of contextual change states that both attention and long-term memory are involved in estimating the length of past time intervals. However, the same manipulations on the test subjects under experimental conditions can lead to opposite effects. The probe task can either consume the resource of attention or create more short memorable events. The former should lead to a decrease in the interval estimate, and the latter to an increase. Scientific novelty: The predictions of this model have not been confirmed in the meta-analysis by its author, as well as in several studies with long (9-58 min) intervals. Methods: We conducted an experiment (N = 92) trying to establish the role of the resource of attention and long-term memory in the assessment of long time intervals. The results of the study show the assessment of time has no relationship with the cognitive load, or with the number of events remembered. However, a posteriori analysis of the data was carried out, inspired by the theory of metacognitive evaluation of the passage of time, first published in 2022. The results of a posteriori analysis showed the existence of a relationship between the estimated time and the discrepancy between the remembered events and the number of events perceived by the subjects (metacognitive component). Conclusions: based on this data, a metacognitive time estimation model is put forward and further studies are proposed to verify it. |
| Keywords: | contextual change model, hindsight, long-term memory, attention, metacognition |
| JEL: | D91 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:rnp:wpaper:w20220100&r=cbe |
| By: | Feng, Mengli |
| Abstract: | Predictive coding (PC) is a theory in cognitive/computational neuroscience which explains cortical functions with a hierarchical process of minimising prediction errors. It provides a neuronal scheme for implementing Bayesian inference in the brain to recover the hidden state of the world from sensory input (passive inference) and to select actions to reach the goals the agent has (active inference). Since its discovery, predictive coding has been found to be a unifying theory explaining more and more cognitive functions, including perception, attention, and action planning. In this literature thesis, I review and discuss how PC can be used also as a powerful tool to understand working memory (WM), an essential function for executive control. % Giving a brief introduction to working memory and current PC frameworks, I start with an overview of how WM might fit within predictive coding frameworks. Specifically, I try to explore how PC frameworks help with explaining the following questions: 1. how is WM maintained and updated? 2. What is the relationship between attention and WM and how do they interact? 3. why does WM have limited capacity? and 4. why is WM hierarchical? By treating WM coding as part of the state inference process, we can explain WM maintenance as the stage where the state variables remain the same when there is no new evidence. WM updates, on the other hand, correspond to belief updating when new evidence arises. Since there is a trade-off between prediction complexity and accuracy during state inference, the limited capacity of WM may be an emergent property to ensure a certain level of accuracy. In a process of active inference, attention helps the agent to select actions that reduce uncertainties about the world where selected actions give rise to observations that are used to update WM. This delineates the roles of WM and attention and clarifies the mechanism of their interactions. Finally, hierarchical PC can account for the hierarchical representation of working memory in the brain where each level of WM corresponds to each level of inferred states. Based on the reviewed literature, I summarised three important ingredients for modelling WM which are temporal depth, goals and hierarchy. Future work on modelling would be to clarify whether WM is a separable component in PC, which variable WM is actually represented in PC and where in the hierarchy WM is generated and maintained. In summary, through the lens of variational Bayesian inference, WM can be assessed in the process of evidence accumulation simulated in a deep hierarchical predictive coding model. With action selection incorporated, this naturally explains WM as an emergent property of goal-directed behaviour, manifested by hierarchical inference of the brain through the minimization of expected free energy. Modelling WM in PC frameworks provides alternative explanations to some long-standing questions about WM and may help with resolving the conflicts between WM theories, for example, the ones that propose either persistent or sparse neuronal activity during WM. It may also help with developing computational tools to improve treatments for brain disorders such as schizophrenia and facilitate artificial intelligence in coping with a world full of uncertainties. |
| Date: | 2023–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:osf:thesis:sqfr9&r=cbe |