New Economics Papers
on Neuroeconomics
Issue of 2010‒07‒10
three papers chosen by

  1. The causal effect of breastfeeding on children’s cognitive development: A quasi-experimental design By Kevin Denny; Orla Doyle
  2. Experiencing Simulated Outcomes By Robin Hogarth; Emre Soyer
  3. Envy and Loss Aversion in Tournaments By Gerald Eisenkopf; Sabrina Teyssier

  1. By: Kevin Denny (University College Dublin); Orla Doyle (University College Dublin)
    Abstract: Objective: To estimate the causal effect of breastfeeding on children’s cognitive skills as measured at ages 3, 5, 7 and 11. Design: An instrumental variable (IV) strategy which provides a correction method for dealing with selection bias. Standard linear regression models are compared to two-stage least squares models to test for the presence of endogeneity. The consistency of the results across multiple sources is also tested using data from two prospective longitudinal studies collected 40-years apart. Setting: The 1958 National Child Development Study (NCDS) and the 2000 UK Millennium Cohort Study (MCS). Participants: Data on 11,792 (age 3) and 9117 (age 5) children in MCS and 4923 (age 7 and 11) children in NCDS. Main outcome measures: Cognitive ability is measured by the Bracken School Readiness Assessment (age 3); Foundation Stage Profile (age 5); and tests of general ability including mathematics, comprehension, verbal and non-verbal skills (ages 7 and 11). Results: The duration of breastfeeding has a small, but significant, effect on children’s cognitive skills in the linear regression models at ages 3, 5, 7 and 11, but no effect in the IV models. However, in all cases, the hypothesis that breastfeeding is endogenous is rejected, indicating that the results of the linear regressions are valid. Conclusion: The relationship between breastfeeding and cognitive ability is not driven by selection bias once a rich set of confounders are included. IV methods can therefore be used to test for the presence of selection bias and are a useful alternative for identifying causal relationships when randomised control trials are not feasible. Showing that the size of the effect is similar for two cohorts born over 40 years apart, and using different measures of ability, are further indications that the relationship between breastfeeding and cognitive ability is not a statistical artefact.
    Keywords: parental investment, cognitive ability, endogeneity, breastfeeding
    Date: 2010–03–22
  2. By: Robin Hogarth; Emre Soyer
    Abstract: Whereas much literature has documented difficulties in making probabilistic inferences, it has also emphasized the importance of task characteristics in determining judgmental accuracy. Noting that people exhibit remarkable efficiency in encoding frequency information sequentially, we construct tasks that exploit this ability by requiring people to experience the outcomes of sequentially simulated data. We report two experiments. The first involved seven well-known probabilistic inference tasks. Participants differed in statistical sophistication and answered with and without experience obtained through sequentially simulated outcomes in a design that permitted both between- and within-subject analyses. The second experiment involved interpreting the outcomes of a regression analysis when making inferences for investment decisions. In both experiments, even the statistically naïve make accurate probabilistic inferences after experiencing sequentially simulated outcomes and many prefer this presentation format. We conclude by discussing theoretical and practical implications.
    Keywords: probabilistic reasoning; natural frequencies; experiential sampling; simulation.
    JEL: C00 C11 C15 C91
    Date: 2010–06
  3. By: Gerald Eisenkopf; Sabrina Teyssier
    Abstract: In tournaments, the large variance in effort provision is incompatible with standard economic theory. In our experiment we test theoretical predictions about the role of envy and loss aversion in tournaments. Our results confirm that envy implies higher effort while loss aversion increases the variance of effort. Moreover, we show that standard theory provides a good explanation for competitive behavior when envy and loss aversion do not play a role in the decision making process.
    Keywords: Tournament, Envy, Loss Aversion
    Date: 2010

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