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on Cognitive and Behavioural Economics |
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Issue of 2024–12–30
three papers chosen by Marco Novarese, Università degli Studi del Piemonte Orientale |
| By: | Alexander Dzionara (Johannes-Gutenberg University, Germany); Niklas M. Witzig (Johannes-Gutenberg University, Germany) |
| Abstract: | In many economic contexts, people need to solve trade-offs between doing an activity (e.g., solving a task) faster and doing it better. While time choices in speed-accuracy trade-offs have been extensively studied in cognitive science for motor-response and perception tasks, little evidence is available for more deliberate economic decision-making, where people’s choices often fail to maximize payoffs. Conversely, the impact of behavioral biases – key explanans of said failure – on time choices has yet to be explored. We present a theoretical model linking time choices in speed-accuracy trade-offs to an agent’s abilities, subjective beliefs and uncertainty attitudes. We test the predictions of the model in an experiment for two distinct (but otherwise identical) environments: prospective time choices before solving a task and simultaneous time choices while solving a task. Correlational analyses indicate that overconfidence (in one’s ability) and uncertainty aversion affect time choices in the prospective but not in the simultaneous environment. Probabilistic structural estimations, aimed at capturing the optimization process on the individual level, support this conclusion. This suggests that long-known behavioral biases influence decisions beyond classical domains like risk and intertemporal choice, but may “play out“ differently in planned versus actual actions. |
| Keywords: | speed-accuracy trade-off, time allocation, beliefs, probability weighting |
| JEL: | C91 D01 D83 D90 D91 |
| Date: | 2024–11–29 |
| URL: | https://d.repec.org/n?u=RePEc:jgu:wpaper:2416 |
| By: | Christian Belzil (CREST, CNRS, Paris Polytechnic Institute, IZA, and CIRANO); Tomáš Jagelka (University of Bonn, Dartmouth College, CREST-Ensae, and IZA) |
| Abstract: | We develop a framework for accounting for individuals’ effort and cognitive noise which confound estimates of preferences based on observed behavior. Using a large-scale experimental dataset we estimate that failure to properly account for decision errors due to (rational) inattention on a more complex, but commonly used, task design biases estimates of risk aversion by 50% for the median individual. Effort propensities recovered from preference elicitation tasks generalize to other settings and predict performance on an OECD-sponsored achievement test used to make international comparisons. Furthermore, accounting for endogenous effort allows us to empirically reconcile competing models of discrete choice. |
| Date: | 2024–11–19 |
| URL: | https://d.repec.org/n?u=RePEc:crs:wpaper:2024-13 |
| By: | Elena Stepanova (European Commission, Joint Research Centre (JRC), Ispra, Italy); Marius Alt (European Commission, Joint Research Centre (JRC), Ispra, Italy); Astrid Hopfensitz (emlyon business school, CNRS, Université Lumière Lyon 2, Université Jean Monnet Saint-Etienne, GATE, 69007, Lyon, France) |
| Abstract: | Trust behavior and being trusted are influenced by a multitude of individual and situational factors. Loneliness is a factor that has recently been hypothesized to be related to trust. Societies and governments are increasingly concerned with the rise of loneliness, and a negative impact on trust might add an additional social cost of loneliness. To evaluate the economic risk of loneliness, we present results from a large, incentivized trust experiment conducted with more than 27000 respondents. Our study allows us to investigate (i) the relationship between self-reported loneliness and behavior in an incentivized trust situation and (ii) the impact of knowing about the loneliness status of others on behavior. Contrary to what the literature hypothesized, we observe no negative correlation between self-reported loneliness and trust in the trust game: lonely individuals are more trusting than individuals who are not lonely. Higher trust by lonely individuals cannot be attributed to more optimistic beliefs of returns but seems to reflect a larger willingness of the lonely to take the social risk associated with trusting in the trust game. We further observe that being informed that an interaction partner is lonely leads to a beneficial treatment of the lonely. Individuals known to be lonely are significantly more likely to be trusted, and they benefit from their partners acting more trustworthy. Behavior that cannot be attributed to strategic concerns. We conclude that loneliness should not be considered as a deteriorator of social capital but as an emotional state that organizations should acknowledge to enable individuals to reconnect to others. |
| Keywords: | loneliness, trust, experiment, trust game |
| JEL: | C90 D91 N34 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:gat:wpaper:2420 |