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on Cognitive and Behavioural Economics |
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Issue of 2026–01–19
four papers chosen by Marco Novarese, Università degli Studi del Piemonte Orientale |
| By: | Feldman, Paul; Lee, Siun |
| Abstract: | Myopic loss aversion (MLA)—the tendency to "chase losses"—is a well-documented behavioral bias influencing investment decisions. However, whether groups amplify or mitigate this bias remains unclear. To investigate, we conducted an investment game where participants made decisions both individually and in groups under two conditions: "paper losses" (losses recorded prior to cash-out) and "realized losses" (Imas, 2016). Consistent with prior literature, we replicated the finding that individuals exhibit MLA. More importantly, our experimental evidence shows that group decision-making can intensify MLA rather than alleviate it. By analyzing group conversations with an LLMassisted approach, we identified key social mechanisms—rapid consensus formation, emotional contagion, and a shift toward risk-seeking behavior—that amplify these biases. These findings are significant because they reveal how group dynamics can undermine sound financial decision-making, emphasizing the need for financial literacy programs that address groupthink, shared biases, and emotional contagion and promote structured decision-making frameworks. |
| Keywords: | Labor and Human Capital |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361193 |
| By: | Lata Gangadharan (Department of Economics, Monash University); Philip J. Grossman (Department of Economics, Monash University); Nina Xue (Department of Economics, Vienna University of Economics and Business (WU)) |
| Abstract: | Many decisions are made by groups under uncertainty, with beliefs playing a critical role. However, less is known about how groups, often driven by self-serving motivations, aggregate these beliefs. In an experiment, we examine how groups form and update beliefs following communication and compare these to individual beliefs. We find that beliefs do not differ initially, however, group deliberation facilitates more motivated updating as groups become more pessimistic and less accurate than individuals over time. Text analyses reveal that groups with stronger self-serving motives send a larger volume of messages and are less likely to be anchored by initial proposals. |
| Keywords: | belief updating, group decision making, self-serving bias, communication, experiment |
| JEL: | C91 C92 D23 D83 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp388 |
| By: | Krasovskaia, Elena; David R. Just, David R. |
| Abstract: | This paper investigates how income influences consumer behavior in grocery shopping, focusing on food choices and price sensitivity. We introduce a behavioral framework grounded in a two-stage “putty-clay” decision-making process. In the flexible “putty” phase, consumers filter out items from the set of all alternatives based on price- and preference-related rationales; in the more rigid “clay” phase, choices are made from a constrained set that becomes habitual over time. We hypothesize that low-income consumers form smaller and more rigid sets due to budget constraints and perceived unaffordability, limiting their responsiveness to price changes. Using detailed purchase data from the NielsenIQ Consumer Panel, we find that choice set size increases with income and that price sensitivity is attenuated within the constrained sets. These findings challenge standard demand models by revealing that low-income consumers, while generally price-sensitive, may fail to adjust optimally due to behavioral and structural constraints. Our framework highlights how the two-stage choice process contributes to food and nutrition insecurity, offering implications for policy interventions aimed at expanding choice flexibility and improving food access for economically vulnerable populations. |
| Keywords: | Institutional and Behavioral Economics |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360712 |
| By: | Maxime Perodaud (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur); Michela Chessa (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur) |
| Abstract: | This study investigates how consumer confirmation bias affects expert decision-making in credence goods markets by combining theoretical modeling with experimental analysis. Using psychological game theory, we develop a dynamic two-player model in which an expert's utility is shaped by both financial incentives and the psychological disutility associated with not meeting consumer expectations. The model predicts that experts with higher psychological sensitivity are more likely to deviate from profit-maximizing strategies to align with consumer beliefs, potentially increasing market inefficiencies. Experimental results show that the extent to which confirmation bias influences expert behavior depends on both the expert's sensitivity and state of the world. Under conditions of high sensitivity and consumer bias, experts adjusted their recommendations to match consumer expectations, even when doing so led to suboptimal outcomes. These findings have policy implications and contribute to the literature on credence goods by highlighting the tension between expert judgment and consumer-driven expectations. |
| Keywords: | Psychological game theory, Experiments, Credence goods, Confirmation bias, Belief-dependent preferences |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05441370 |