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on Cognitive and Behavioural Economics |
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Issue of 2026–05–04
five papers chosen by Marco Novarese, Università degli Studi del Piemonte Orientale |
| By: | Gorodnichenko, Yuriy (University of California, Berkeley); Kudlyak, Marianna (Federal Reserve Bank of San Francisco, Hoover Institution, CEPR, IZA); Lobozynska, Sophia (Ivan Franko National University of Lviv); Skomorovych, Iryna (Ivan Franko National University of Lviv); Vladychyn, Ulyana (Ivan Franko National University of Lviv); Kovalyuk, Andriy (Ivan Franko National University of Lviv); Snovydovych, Iryna (Ivan Franko National University of Lviv) |
| Abstract: | We elicit reservation wage premia for relocating to two Ukrainian cities, using a household survey conducted in mid-April to mid-July 2024 during the Russian invasion of Ukraine: high-risk Kharkiv (near the frontline) and moderate-risk Kyiv. Risk tolerance is a strong predictor of willingness to move to Kharkiv - the most risk-averse have roughly half the odds of the most risk-tolerant - but matters much less for Kyiv. This asymmetry is difficult to reconcile with the hypothesis that risk tolerance merely proxies for general mobility preferences. Separately estimating the elasticity of intertemporal substitution (EIS~0.04), we find that including it renders risk tolerance insignificant for Kyiv but not for Kharkiv - a pattern illuminated by the Epstein-Zin separation of risk aversion and the EIS: risk aversion adds predictive power only when danger is high, while the EIS operates equally for both cities as a common relocation-cost channel. The very low EIS implies that relocation incentives structured as future benefits may be ineffective; frontloaded subsidies are more likely to influence behavior. |
| Keywords: | risk preferences, elasticity of intertemporal substitution, migration, compensating differentials, Ukraine, war |
| JEL: | D15 D81 J61 R23 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18557 |
| By: | Astruc--Le Souder, Mael (Bordeaux University); Bargain, Olivier (University of Bordeaux); Knecht, Niclas (Bordeaux University) |
| Abstract: | Trust in others is essential for the well-functioning of societies. While economists often study its longer-term determinants, short-term fluctuation may be equally critical, particularly during pivotal moments (e.g, elections) or periods requiring social cohesion (e.g., pandemics). Hope plays a similarly vital role in shaping individual well-being, behavior, and societal stability. We investigate the short-run plasticity of trust and hope by reactivating threat exposure similar to that encountered in media coverage. In an online experiment, individuals are randomly exposed to short videos depicting terrorism, natural disasters, or war. Both social trust and hope are significantly malleable, declining by 12%-28% of a standard deviation (across models) in response to these brief interventions. We observe strong heterogeneity in these effects, particularly along lines of political orientation and social media usage, and explore their co-movements with basic emotions. Our findings suggest that routine exposure to threatening content can destabilize the emotional underpinnings of trust and hope, with potential implications for key individual and collective behaviors. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18554 |
| By: | Solomon Polachek; Kenneth Romano; Ozlem Tonguc |
| Abstract: | This study examines how large language models (LLMs) respond to varying stake sizes in the Dictator and Ultimatum games using the high-stakes design introduced by Andersen et al. (2011). We test ten leading LLMs chosen for their accessibility, prominence, and differences in reasoning capabilities. Results reveal substantial variation across models: Only 5 of 10 models exhibit strategic behavior by offering more in the Ultimatum Game (UG) than in the Dictator Game (DG). Relative to humans, 4 models are consistently more generous, 2 consistently less, and 4 vary with stake size. Only 1 model shows a monotonic decline in UG offers as stakes increase; the remaining 9 are non-monotonic or stable. Unlike humans, most models reduce UG offers when endowed with wealth. Prompting for "human-like" decisions generally increases generosity in the UG. These findings are important for evaluating whether LLMs can serve as realistic proxies for human subjects in behavioral experiments and highlight key limitations and future directions for model development. |
| Keywords: | Ultimatum Game, Dictator Game, fairness, payoff stakes, artificial intelligence |
| JEL: | D01 C72 C90 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26110 |
| By: | Odermatt, Reto; Sisso, Itay; Brun, Fanny; Scheibehenne, Benjamin |
| Abstract: | A fundamental assumption in consumer behavior is that opportunity cost is only relevant in the decision-making process and does not matter for utility once the decision is made. In this study, we question this assumption and consider the possibility that opportunity cost negatively impacts the satisfaction derived from a chosen option. In a series of hypothetical and real choice experiments, we provide evidence that opportunity cost significantly decreases consumers’ happiness after the choice. |
| JEL: | D01 D12 I31 |
| Date: | 2026–04–07 |
| URL: | https://d.repec.org/n?u=RePEc:bsl:wpaper:2026/01 |
| By: | Bargain, Olivier (University of Bordeaux); Herault, Nicolas (University of Bordeaux); Nettle, Daniel (Institut Jean Nicod, CNRS UMR 8129, ENS-PSL, EHESS) |
| Abstract: | Job loss is known to adversely affect mental health, but the time course of recovery and the role of anticipation remain unclear. Using 22 annual waves (2001-2022) of the Household, Income and Labour Dynamics in Australia (HILDA) survey, we estimate fixed-effects models to examine the relationship between redundancy and mental health (SF-36), incorporating subjective probability of job loss to refine anticipation measures. The final sample consists of 14, 195 individuals and 4, 251 redundancy events. Three key findings emerge. First, we document a generalized decline in mental health prior to job loss that is not confined to individuals who anticipate redundancy, suggesting psychological costs of impending job loss due to factors other than anticipation. Second, we document complete recovery among those who are re-employed, revealing that psychological restoration can occur relatively quickly upon securing new employment. Third, perceived anticipation of job loss does not appear to meaningfully alter these post-redundancy recovery trajectories. These findings call for greater emphasis on employment trajectories in both research and policy aimed at understanding and mitigating the mental health impacts of job loss. |
| Keywords: | job loss, mental health, anticipation, unemployment, panel data |
| JEL: | J63 J64 I31 I12 C23 D91 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18549 |