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on Cognitive and Behavioural Economics |
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Issue of 2024–12–02
four papers chosen by Marco Novarese, Università degli Studi del Piemonte Orientale |
| By: | Anna Esslinger; Katharina Pfeil; Lars P. Feld |
| Abstract: | Are the effects of tax aversion on labor supply symmetric? In a real-effort online experiment, participants are exposed to manipulated wages and taxes after first experiencing the same reference wage. More participants change their labor supply when encountering a tax increase than when experiencing an equivalent wage decrease. However, there is no significant difference in labor supply change between the groups that received tax decreases and wage increases. Tax averse behavior existing only in the presence of net wage decreases implies asymmetric labor supply responses to taxation. |
| Keywords: | tax aversion, loss aversion, labor supply asymmetry, online experiment |
| JEL: | H20 H30 D91 J22 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11317 |
| By: | Xavier Gabaix; Thomas Graeber |
| Abstract: | We propose a theory of the complexity of economic decisions. Leveraging a macroeconomic framework of production functions, we conceptualize the mind as a cognitive economy, where a task's complexity is determined by its composition of cognitive operations. Complexity emerges as the inverse of the total factor productivity of thinking about a task. It increases in the number of importance-weighted components and decreases in the degree to which the effect of one or few components on the optimal action dominates. Higher complexity generates larger decision errors and behavioral attenuation to variation in problem parameters. The model applies both to continuous and discrete choice. We develop a theory-guided experimental methodology for measuring subjective perceptions of complexity that is simple and portable. A series of experiments test and confirm the central predictions of our model for perceptions of complexity, behavioral attenuation, and decision errors. We provide a template for applying the framework to core economic decision domains, and then develop several applications including the complexity of static consumption choice with one or several interacting goods, consumption over time, the tax system, forecasting, and discrete choice between goods. |
| JEL: | C91 D03 D11 D14 D90 E03 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33109 |
| By: | Jana Freundt; Holger Herz |
| Abstract: | We study how individuals’ willingness to delegate choice is affected by heterogeneity in identity between the delegee and the delegate. While it is straightforward that such heterogeneity can affect delegation for instrumental reasons, we show experimentally that divergent identity also causes delegation aversion through purely intrinsic channels. More specifically, we demonstrate that Republicans (Democrats) are intrinsically less averse to delegate decisions over their own outcomes when the delegate also identifies as a Republican (Democrat), compared to when the delegate identifies as a Democrat (Republican). By design, beliefs about the actions of the delegate cannot explain the observed treatment effect. Our finding suggests that contrasting identities impede the creation — or the continuation — of shared institutions that rely on centralization of control beyond what can be explained by purely instrumental reasons. |
| Keywords: | identity, autonomy, experiments |
| JEL: | D02 D91 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11304 |
| By: | Brian Jabarian; Elia Sartori |
| Abstract: | We argue that storytelling contexts – the way information is communicated through varying credibility sources, visual designs, writing styles, and content delivery – impact the effectiveness of surveys and elections in eliciting preferences formed through critical thinking (reasoned preferences). Through an artefactual field experiment with a US sample (N = 725), incentivized by an (LLM), we find that intermediate storytelling contexts prompt critical thinking more effectively than basic or sophisticated ones. Sensitivity to these contexts is linked to individual cognitive traits, and participants with a high need for cognition are particularly responsive to intermediate contexts. In a conceptual framework, we explore how critical thinkers impact the efficiency of elections and polls in aggregating reasoned preferences. Storytelling contexts that effectively prompt critical thinking improve election efficiency. However, the in-decisiveness of critical thinkers can have ambiguous effects on election bias, potentially posing challenges for principals who are required to act on these election outcomes. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11282 |