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on Cognitive and Behavioural Economics |
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Issue of 2026–03–16
six papers chosen by Marco Novarese, Università degli Studi del Piemonte Orientale |
| By: | Bertermann, Alexander (Ifo Munich); Schildberg-Hörisch, Hannah (Heinrich Heine University Düsseldorf) |
| Abstract: | This paper provides the first evidence that children’s economic preferences vary systematically with parental mental health. Using experimentally elicited measures of economic preferences from more than 4, 500 children in Bangladesh, we document that children of parents with indications of mental illness are less prosocial but more patient than their peers with mentally healthy parents. Attitudes toward risk remain unchanged. We discuss potential pathways through which parental mental health may influence the formation of children’s preferences, documenting that children of parents with indication of mental illness assume greater responsibilities within the family, experience less parental involvement, and are exposed to a more adverse home environment. |
| Keywords: | mental health, social preferences, risk preferences, patience, origins of preferences, experiments with children, Bangladesh |
| JEL: | C91 D01 D10 I10 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18406 |
| By: | Dohmen, Thomas (University of Bonn); Meyer, Frauke (Eilert-Academy, Berlin, Germany); Walkowitz, Gari (Department of Business and Economics, Technical University Bergakademie Freiberg; Department of Management, Technical University of Munich) |
| Abstract: | This paper provides clear evidence that concerns for basic needs satisfaction (BNS) represent a distinct distributional motive. Using a unified theoretical and experimental framework across five dictator-game experiments in Germany and Georgia (N=446), we disentangle BNS from motives such as maximin, selfishness, efficiency, generosity, and envy. A substantial share of participants displayed BNS-driven choices and were willing to forgo income and efficiency to satisfy others’ basic needs. BNS remained robust across contexts, incentive schemes, and countries, and increased when needs satisfaction had strategic relevance. The results highlight the importance of BNS for understanding distributional preferences and policy design. |
| Keywords: | basic needs, redistribution, distributional motives, maximin, public policy, field experiment, laboratory experiment |
| JEL: | D31 D63 H23 C93 C91 D01 D91 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18409 |
| By: | Thomas Graeber; Shakked Noy; Christopher Roth |
| Abstract: | Information often spreads and influences beliefs regardless of its reliability.We show that this occurs in part because indicators of reliability are disproportionately lost in the process of word-of-mouth transmission. We conduct controlled experiments where participants listen to economic forecasts and pass them on through voice messages. Other participants listen either to original or transmitted audio recordings and report incentivized beliefs. Across various transmitter incentive schemes, a claim’s reliability is lost in transmission more than twice as much as the claim itself. Reliable and unreliable information, once filtered through transmission, impact listener beliefs similarly, substantially reducing the efficiency of downstream decisions. Mechanism experiments show that reliability is lost not because it is perceived as less relevant or harder to transmit, but because it is less likely to come to mind during transmission. Evidence from experiments, a large corpus of everyday conversations, and economic TV news demonstrate that reliability information is less likely to be cued during transmission and that attempts to retrieve it face greater interference in memory. |
| Keywords: | Information transmission, word-of-mouth, reliability, memory |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:zur:econwp:489 |
| By: | Thomas Graeber; Christopher Roth; Marco Sammon |
| Abstract: | Most news stories contain both granular quantitative information and coarse categorizations. For instance, company earnings are reported as a dollar figure alongside categorizations, such as whether earnings beat or missed market expectations. We formalize and study the hypothesis that when a decision is harder, people rely more on easier-to-integrate signals: people still discriminate between coarse categories but distinguish less granularly within them, creating higher sensitivity around category thresholds but lower sensitivity elsewhere. Using stock market reactions to earnings announcements, we document that hard-to-value stocks are associated with a more pronounced S-shaped response pattern around category thresholds. Experiments that exogenously manipulate the problem difficulty provide supporting causal evidence in individual investor behavior. We then exploit variation in investor familiarity with earnings surprises of different sizes to show that returns exhibit greater sensitivity in regions withmore historical density. Our findings speak to the ongoing debate about why economic agents display insufficient sensitivity in some instances and excessive sensitivity in others, even within the same empirical setting. |
| Keywords: | Categorical information, numerical information, earnings surprises, cognitive constraints, behavioral finance |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:zur:econwp:488 |
| By: | Benjamin Enke; Thomas Graeber; Ryan Oprea; Jeffrey Yang |
| Abstract: | We report the results of over 30 experiments to study the elasticity of economic decisions with respect to fundamentals. Our experiments cover a broad range of domains, from choice and valuation to belief formation, from strategic games to generic optimization problems, involving investment, savings, effort supply, product demand, taxes, externalities, fairness, beauty contests, search, policy evaluation, forecasting and inference. We identify two general patterns. First, behavioral attenuation: in 93% of our experiments, the elasticity of decisions to variation in fundamentals decreases in subjects’ cognitive uncertainty about their best decision. Second, diminishing sensitivity: the elasticity of decisions decreases in the distance of the fundamental from ‘simple points’ at which the best decision is transparent, and this decrease in elasticities is again mirrored by an increase in cognitive uncertainty. These results suggest that cognitive uncertainty systematically predicts an attenuation of economic elasticities, and that there is less (or no) uncertainty and attenuation when problems are cognitively easy. We argue that attenuation links several known decision anomalies, and study its limits. |
| Keywords: | Behavioral attenuation, diminishing sensitivity, cognitive uncertainty, experiments |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:zur:econwp:487 |
| By: | Hübsch, Theresa (University of Bonn); Mahlstedt, Robert (University of Copenhagen); Pinger, Pia (University of Cologne); Settele, Sonja (University of Cologne); Willadsen, Helene (National Research Centre for the Working Environment) |
| Abstract: | Using surveys with Danish students transitioning to secondary education, we study mental models of how gender and parental education shape academic performance. Students hold heterogeneous beliefs about performance gaps by gender and parental background, which appear to be shaped by within-family transmission and broader social environments. Open-text responses reveal that respondents link strong performance by girls and less socioeconomically privileged students to effort, while attributing privileged students' success to external advantages. Mental models matter: beliefs about performance gaps predict enrollment in upper secondary education by gender and parental education and causally affect students’ self-assessments, intended effort, and educational aspirations, as shown in an information experiment with girls. We highlight two mechanisms: updating about the returns to effort and about gender-specific effort costs in response to observed gender performance gaps. Our findings advance the understanding of education choices and shed light on the determinants and effects of mental models in a high-stakes setting. |
| Keywords: | mental models, academic performance gaps, educational aspirations, returns to effort, gender, socioeconomic background, information experiment, secondary education |
| JEL: | D83 D84 I24 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18433 |