nep-neu New Economics Papers
on Neuroeconomics
Issue of 2010‒04‒04
four papers chosen by
Daniel Houser
George Mason University

  1. The causal effect of breastfeeding on children's cognitive development: A quasi-experimental design By Orla Doyle; Kevin Denny
  2. Overconfidence is a Social Signaling Bias By Burks, Stephen V.; Carpenter, Jeffrey P.; Goette, Lorenz; Rustichini, Aldo
  3. Late-Life Decline in Well-Being across Adulthood in Germnay, the UK, and the US: Something is Seriously Wrong at the End of Life By Denis Gerstorf; Nilam Ram; Guy Mayraz; Mira Hidajat; Ulman Lindenberger; Gert G. Wagner; Jürgen Schupp
  4. In Vino Veritas: The Economics of Drinking By Jan Heufer

  1. By: Orla Doyle (School of Economics & Geary Institute, University College Dublin); Kevin Denny (School of Economics & Geary Institute, University College Dublin)
    Abstract: To estimate the causal effect of breastfeeding on children's cognitive skills as measured at ages 3, 5, 7 and 11.
    Date: 2010–03–03
  2. By: Burks, Stephen V. (University of Minnesota, Morris); Carpenter, Jeffrey P. (Middlebury College); Goette, Lorenz (University of Lausanne); Rustichini, Aldo (University of Minnesota)
    Abstract: Evidence from psychology and economics indicates that many individuals overestimate their ability, both absolutely and relatively. We test three different theories about observed relative overconfidence. The first theory notes that simple statistical comparisons (for example, whether the fraction of individuals rating own skill above the median value is larger than half) are compatible (Benoît and Dubra, 2007) with a Bayesian model of updating from a common prior and truthful statements. We show that such model imposes testable restrictions on relative ability judgments, and we test the restrictions. Data on 1,016 individuals' relative ability judgments about two cognitive tests rejects the Bayesian model. The second theory suggests that self-image concerns asymmetrically affect the choice to get new information about one’s abilities, and this asymmetry produces overconfidence (Kőszegi, 2006; Weinberg, 2006). We test an important specific prediction of these models: individuals with a higher belief will be less likely to search for further information about their skill, because this information might make this belief worse. Our data also reject this prediction. The third theory is that overconfidence is induced by the desire to send positive signals to others about one’s own skill; this suggests either a bias in judgment, strategic lying, or both. We provide evidence that personality traits strongly affect relative ability judgments in a pattern that is consistent with this third theory. Our results together suggest that overconfidence in statements is most likely to be induced by social concerns than by either of the other two factors.
    Keywords: IQ, field experiment, social signaling, self-image, Bayesian updating, overconfidence, numeracy, personality, MPQ
    JEL: D83 C93
    Date: 2010–03
  3. By: Denis Gerstorf; Nilam Ram; Guy Mayraz; Mira Hidajat; Ulman Lindenberger; Gert G. Wagner; Jürgen Schupp
    Abstract: Throughout adulthood and old age, levels of well-being appear to remain relatively stable. However, evidence is emerging that late in life well-being declines considerably. Using long-term longitudinal data of deceased participants in national samples from Germany, the UK, and the US, we examine how long this period lasts. In all three nations and across the adult age range, well-being was relatively stable over age, but declined rapidly with impending death. Articulating notions of terminal decline associated with impending death, we identified prototypical transition points in each study between three and five years prior to death, after which normative rates of decline steepened by a factor of three or more. The findings suggest that mortality-related mechanisms drive late-life changes in well-being and highlight the need for further refinement of psychological concepts about how and when late-life declines in psychosocial functioning prototypically begin.
    Keywords: Selective mortality, successful aging, differential aging, psychosocial factors, well-being, multiphase growth model
    Date: 2010
  4. By: Jan Heufer
    Abstract: It is argued that drug consumption, most commonly alcohol drinking, can be a technology to give up some control over one’s actions and words. It can be employed by trustworthy players to reveal their type. Similarly alcohol can function as a “social lubricant” and faciliate type revelation in conversations. It is shown that both separating and pooling equilibria can exist; as opposed to the classic results in the literature, a pooling equilibrium is still informative. Drugs which allow a gradual loss of control by appropriate doses and for which moderate consumption is not addictive are particularly suitable because the consumption can be easily observed and reciprocated and is unlikely to occur out of the social context. There is a tradeoff between the effi ciency gains due to the signaling eff ect and the loss of productivity associated with intoxication. Long run evolutionary equilibria of the type distribution are considered. If coordination on an exclusive technology is effi cient, social norms or laws can raise effi ciency by legalizing only one drug.
    Keywords: Asymmetric Information, Drinking, Drug Consumption, Signaling, Social Norms
    JEL: C72 D82
    Date: 2009–12

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