|
on Cognitive and Behavioural Economics |
|
Issue of 2024‒09‒02
six papers chosen by Marco Novarese, Università degli Studi del Piemonte Orientale |
| By: | Abdellaoui, Mohammed (HEC Paris); Bleichrodt, Han (Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Australian National University (ANU) - School of Economics); Gutierrez, Cédric (Bocconi University - Department of Management and Technology) |
| Abstract: | Overconfident behavior, the excessive willingness to bet on one’s performance, may be driven by optimistic beliefs and/or ambiguity attitudes. Separating these factors is key for understanding and correcting overconfident behavior, as they may call for different corrective actions. We present a method to do so, which we implement in two incentivized experiments. The first experiment shows the importance of ambiguity attitudes for overconfident behavior. Optimistic ambiguity attitudes (ambiguity seeking) counterbalanced the effect of pessimistic beliefs, leading to neither over- nor underconfident behavior. The second experiment applies our method in contexts where overconfident behavior is expected to vary: easy vs. hard tasks. Our results showed that task difficulty affected both beliefs and ambiguity attitudes. However, while beliefs were more optimistic for relative performance (rank) and more pessimistic for absolute performance (score) on easy tasks compared to hard tasks, ambiguity attitudes were always more optimistic on easy tasks for both absolute and relative performance. Our findings show the subtle interplay between beliefs and ambiguity attitudes: they can reinforce or offset each other, depending on the context, increasing or lowering overconfident behavior. |
| Keywords: | overconfidence; subjective expected utility; beliefs measurement; ambiguity attitudes; hard-easy effect. |
| JEL: | D81 D83 D91 |
| Date: | 2023–05–23 |
| URL: | https://d.repec.org/n?u=RePEc:ebg:heccah:1484 |
| By: | Dominique Desbois (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Daniel Kahneman, a researcher in cognitive psychology and professor at Princeton University, has highlighted cognitive biases in human behaviour, in particular aversion to the risk of loss, renewing our understanding of the psychological foundations of economics. |
| Keywords: | Behavioral Economics, Cogintive Psychology, United=States, Israel |
| Date: | 2024–06–21 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04620674 |
| By: | Costa-Font, Joan; Cowell, Frank |
| Abstract: | An individual’s inequality aversion (IA) is a central preference parameter that captures the welfare sacrifice from exposure to inequality. However, it is far from trivial how to best elicit IA estimates. Also, little is known about the behavioural determinants of IA and how they differ across domains such as income and health. Using representative surveys from England, this paper elicits comparable estimates of IA in the health and income domains using two alternative elicitation techniques: a direct trade-off and an indirect “imaginary-grandchild” approach that results from the choices between hypothetical lotteries. We make three distinct contributions to the literature. First, we show that IA systematically differs between income and health domains. Average estimates are around 0.8 for income IA and range from 0.8 to 1.5 for health IA. Second, we find that risk aversion and locus of control are central determinants of IA in both income and health domains. Finally, we present evidence suggesting that the distribution and comparison of IA vary depending on the elicitation method employed. |
| Keywords: | inequality and efficiency trade-offs; locus of control; inequality aversion; income inequality aversion; health inequality aversion; imaginary grandchild; risk attitudes |
| JEL: | H10 I18 |
| Date: | 2024–03–24 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:124423 |
| By: | J. Lucas Reddinger |
| Abstract: | Is an option especially tempting when it is both immediate and certain? I test the effect of risk on the present-bias factor given quasi-hyperbolic discounting. My experimental subjects allocate about thirty to fifty minutes of real-effort tasks between two weeks. I study dynamic consistency by comparing choices made two days in advance of the workday with choices made when work is imminent. My novel design permits estimation of present-bias using a decision with a consequence that is both immediate and certain. I find greater present-bias when the consequence is certain. I offer a methodological remedy for experimental economists. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.14955 |
| By: | Stephen L Cheung; Nathan Rogut |
| Abstract: | We experimentally test an intervention designed to reduce investors’ disposition effect by prompting them to identify their worst asset, from the standpoint of its impact on future portfolio performance. We find that this intervention is mildly effective, and significantly more so for participants who correctly identify their worst asset, and/or sell the asset they identify. We also find that participants who correctly understand diversification in a financial literacy questionnaire exhibit larger disposition effects in the experiment. The latter finding raises concerns over the external validity of standard experimental paradigms used to study the disposition effect. |
| Keywords: | behavioural finance, portfolio choice, disposition effect, diversification. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:syd:wpaper:2024-17 |
| By: | Mario Lackner |
| Abstract: | We analyse evaluation biases caused by physical attributes. Using data from German elite soccer, we find that referees are more inclined to sanction players when the difference in body size is sufficiently large. Moreover, we document an ‘inverse Napoleon effect’ in situations when the referee is confronted with smaller players, suggesting that sanctions are used as a substitute for authority gained by stature in the industry. Further analyses reveal that referees discriminate less against more talented players and teams with a higher concentration of these players. Finally, we find that the bias is reduced but still exists for the group of more experienced referees. |
| Keywords: | evaluation, discrimination, social dominance, referee bias, soccer |
| JEL: | J71 L83 Z20 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:jku:econwp:2024-06 |