|
on Cognitive and Behavioural Economics |
|
Issue of 2025–08–25
six papers chosen by |
| By: | Margarita Leib; Nils K\"obis; Ivan Soraperra |
| Abstract: | People increasingly rely on AI-advice when making decisions. At times, such advice can promote selfish behavior. When individuals abide by selfishness-promoting AI advice, how are they perceived and punished? To study this question, we build on theories from social psychology and combine machine-behavior and behavioral economic approaches. In a pre-registered, financially-incentivized experiment, evaluators could punish real decision-makers who (i) received AI, human, or no advice. The advice (ii) encouraged selfish or prosocial behavior, and decision-makers (iii) behaved selfishly or, in a control condition, behaved prosocially. Evaluators further assigned responsibility to decision-makers and their advisors. Results revealed that (i) prosocial behavior was punished very little, whereas selfish behavior was punished much more. Focusing on selfish behavior, (ii) compared to receiving no advice, selfish behavior was penalized more harshly after prosocial advice and more leniently after selfish advice. Lastly, (iii) whereas selfish decision-makers were seen as more responsible when they followed AI compared to human advice, punishment between the two advice sources did not vary. Overall, behavior and advice content shape punishment, whereas the advice source does not. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.19487 |
| By: | Jonathan Benchimol (BoI - Bank of Israel); Lahcen Bounader (WBG = GBM - World Bank Group = Groupe Banque Mondiale); Mario Dotta (FGV - Fundacao Getulio Vargas [Rio de Janeiro]) |
| Abstract: | Bounded rationality and limited attention significantly influence expectation formation and macroeconomic dynamics, yet empirical quantification of these behavioral phenomena remains challenging. This paper provides the first cross-country estimation of both micro- and macro-level attention parameters using a structurally identified behavioral New Keynesian model. Employing Bayesian techniques on harmonized data from 22 OECD countries (1996--2019) and ensuring robust parameter identification, we document substantial heterogeneity in behavioral inattention across countries. Our cognitive discounting estimates range from 0.76 to 0.98, with higher values indicating greater attention. We establish three key empirical regularities: (1) attention parameters are positively associated with macroeconomic volatility, supporting rational inattention theory; (2) surprise movements in key macroeconomic variables and online information-seeking behavior significantly influence attention allocation; and (3) institutional quality, particularly government effectiveness, is correlated with attention levels. These findings reveal that attention is both a behavioral and a structural phenomenon, responding to institutional factors and economic conditions. Our results provide an empirical foundation for calibrating country-specific models and yield important implications for the design and transmission of monetary policy under bounded rationality, showing that policy effectiveness may systematically vary with the macroeconomic environment. |
| Keywords: | Cognitive discounting, Myopia, Attention, Bayesian estimation, Behavioral macroeconomics |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05170065 |
| By: | Michael Keinprecht (Department of Economics, WU Vienna University of Economics and Business) |
| Abstract: | The growing inequalities around the world are becoming increasingly alarming making redistribution more relevant than ever. One reason why people may oppose redistribution is third party loss aversion. In a pre-registered online experiment with a within-subjects design, I show that redistribution decisions by third parties are affected by loss aversion. Overall, spectators are 7%-points less likely to redistribute from a status quo to an alternative if the alternative entails a loss for one person, even if inequality aversion, maximin preferences and efficiency concerns favor the alternative. This effect is stronger the higher the loss is compared to the gain and the higher the individual loss aversion of the spectator. The key contribution of the paper is to disentangle third party loss aversion from pure status quo bias, rank reversal aversion and other distributional preferences in multiple loss scenarios and to link it to individual loss aversion. |
| Keywords: | Third party loss aversion, loss aversion, redistribution, spectators, fairness |
| JEL: | D91 D63 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp382 |
| By: | Alexander Egberts (Max Planck Institute for Research on Collective Goods, Bonn); Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn); Joshua Fairfield (Max Planck Institute for Research on Collective Goods, Bonn) |
| Abstract: | Many social ills can be modelled as a public bad. In such scenarios, private benefit is often immediate while the public damage takes some time to materialize. In this experiment, we investigate the behavioral effects caused by such delays in the realization of collective harm. By manipulating the weight with which the damages caused by group contributions are carried over to the next round, we alter the number of periods required for the social damage to fully unfold. We keep constant the economic consequences of contributions between treatments (by introducing a multiplier for the damage) and between periods (by deducting all unrealized harm at the end of the game) to avoid multiple equilibria. In a second treatment dimension, we isolate the cognitive challenges of this experiment by replacing human group-members with “computerized players†which perfectly copy each subject’s previous behavior. We find that participants’ behavior is less cooperative over time when harm is deferred into the future. Our results also suggest that the driving mechanism behind this effect is not insufficient anticipation, but the lack of having experienced the negative consequences of the public damage. |
| Keywords: | public bad; dynamically developing social harm; cognitive and motivational challenge; experiment |
| JEL: | C91 D62 D91 H41 K24 K32 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:mpg:wpaper:2024_16 |
| By: | Robin Musolff; Florian Zimmermann |
| Abstract: | Mental models help people navigate complex environments. This paper studies how people deal with model uncertainty. In an experiment, participants estimate a company’s value, facing uncertainty about which one of two models correctly determines its true value. Using a between-subjects design, we vary the degree of model complexity. Results show that in high-complexity conditions people fully neglect model uncertainty in their actions. However, their beliefs continue to reflect model uncertainty. This disconnect between beliefs and actions suggests that complexity leads to biased decision-making, while beliefs remain more nuanced. Furthermore, we show that complexity, via full uncertainty neglect, leads to higher confidence in the optimality of own actions. |
| Keywords: | mental models, geliefs, attention, confidence, representations |
| JEL: | D01 D83 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12041 |
| By: | Egil Diau |
| Abstract: | The origins of economic behavior remain unresolved-not only in the social sciences but also in AI, where dominant theories often rely on predefined incentives or institutional assumptions. Contrary to the longstanding myth of barter as the foundation of exchange, converging evidence from early human societies suggests that reciprocity-not barter-was the foundational economic logic, enabling communities to sustain exchange and social cohesion long before formal markets emerged. Yet despite its centrality, reciprocity lacks a simulateable and cognitively grounded account. Here, we introduce a minimal behavioral framework based on three empirically supported cognitive primitives-individual recognition, reciprocal credence, and cost--return sensitivity-that enable agents to participate in and sustain reciprocal exchange, laying the foundation for scalable economic behavior. These mechanisms scaffold the emergence of cooperation, proto-economic exchange, and institutional structure from the bottom up. By bridging insights from primatology, developmental psychology, and economic anthropology, this framework offers a unified substrate for modeling trust, coordination, and economic behavior in both human and artificial systems. For an interactive visualization of the framework, see: https://egil158.github.io/cogfoundations -econ/ |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.02945 |