New Economics Papers
on Neuroeconomics
Issue of 2010‒09‒11
seven papers chosen by

  1. Latent Process Heterogeneity in Discounting Behavior By Maribeth Coller; Glenn W. Harrison; E. Elisabet Rutström
  2. Intra-household Resource Allocation: Do Parents Reduce or Reinforce Child Cognitive Ability Gaps? By Frijters, Paul; Johnston, David W.; Shah, Manisha; Shields, Michael A.
  3. Overconfidence and the Attainment of Status in Groups By Anderson, Cameron; Brion, Sebastien
  4. New Evidence on the Role of Cognitive Skill in Economic Development By Eduardo de Carvalho Andrade; Márcio Laurini
  5. Strategic Ignorance and the Robustness of Social Preferences By Grossman, Zachary
  6. Theory, Experimental Design and Econometrics Are Complementary (And So Are Lab and Field Experiments) By Glenn W. Harrison; Morten Lau; E. Elisabet Rutström
  7. The Methodologies of Neuroeconomics By Glenn Harrison; Don Ross

  1. By: Maribeth Coller; Glenn W. Harrison; E. Elisabet Rutström
    Abstract: We show that observed choices in discounting experiments are consistent with roughly one-half of the subjects using exponential discounting and one-half using quasi-hyperbolic discounting. We characterize the latent data generating process using a mixture model which allows different subjects to behave consistently with each model. Our results have substantive implications for the assumptions made about discounting behavior, and also have significant methodological implications for the manner in which we evaluate alternative models when there may be complementary data generating processes.
    JEL: D91 C91
    Date: 2010–09
  2. By: Frijters, Paul (University of Queensland); Johnston, David W. (Queensland University of Technology); Shah, Manisha (University of California, Irvine); Shields, Michael A. (University of Melbourne)
    Abstract: Do parents invest more or less in their high ability children? We provide new evidence on this question by comparing observed ability differences and observed investment differences between siblings in the NLSY. To overcome endogeneity issues we use sibling differences in handedness as an instrument for cognitive ability differences, since handedness is a strong determinant of cognitive ability. We find that parents invest more in high ability children, with a one standard deviation increase in child cognitive ability increasing parental investments by approximately one-third of a standard deviation. Consequently, differences in child cognitive ability are enhanced by differential parental investments. This finding has important implications for education policy.
    Keywords: children, cognitive ability, parental investment, handedness
    JEL: D13 J1
    Date: 2010–08
  3. By: Anderson, Cameron; Brion, Sebastien
    Abstract: Individuals who occupy positions of high status and authority tend to engage in overconfidence more than others. While prior work suggests that this excessive overconfidence is partly a product of their elevated status, the current research tested whether overconfidence can also lead to status: Are individuals with overly positive self-perceptions of ability more likely to attain status in the first place? Three studies of task-focused dyads and groups involving laboratory and field settings found support for this hypothesis. Further, the relation between overconfidence and status was consistently mediated by peer-perceived competence: overconfident individuals attained status because others inaccurately perceived them as more competent. An experimental manipulation established the causal priority of overconfidence, and a longitudinal study found the effects of overconfidence endured over time. This research contributes to our understanding of status distribution systems in groups and organizations, the consequences of overconfidence, and the psychology of status.
    Date: 2010–04–14
  4. By: Eduardo de Carvalho Andrade (Insper Institute of Education and Research); Márcio Laurini (IBMEC Business School)
    Abstract: This paper presents new evidence on the role of cognitive skills in promoting economic growth rate. The novelties in this paper are that we use a within country dataset (Brazilian state and municipality levels data) and a new methodology, a nonparametric kernel regression estimation with mixed data. The main findings are the following: (i) there is strong evidence that the cognitive skill explains growth, but its relationship with growth appears to be non-linear, (ii) the quantity of schooling remains significant even after controlling for the quality of schooling, and (iii) there is support to the hypothesis that the effect of the cognitive skill on growth is important in an open environment.
    Keywords: Cognitive Skill, Nonparametric Kernel Regression
    Date: 2010–09–01
  5. By: Grossman, Zachary
    Abstract: How robust are social preferences to variations in the environment in which a decision is made? By varying the elicitation method and default choice in the `moral wiggle-room' game of Dana, Weber, and Kuang (2007), I examine the robustness and nature of the pattern of information avoidance in which many dictators in experiments-- if initially uncertain-- avoid learning whether their choice will help or hurt another person and choose selfishly. When ignorance is not the default choice, participants choose it much less frequently. However, when dictators express their outcome choice using the strategy method, most are willing to overcome the default choice and reveal the payoff state ex post. I conclude that people will employ strategic ignorance to avoid a morally-fraught decision if they can do so passively, but having to actively choose ignorance betrays its usefulness and leads to behavior largely consistent with models of preferences over outcomes. Thus while opportunities to create and exploit moral wiggle-room limit fair-minded behavior, environmental or psychological variables may reinforce the motivation that leads people to choose fair outcomes.
    Keywords: social preferences, strategic ignorance, moral wiggle-room, default effects, status quo bias, self- deception, self-signaling, dictator games
    Date: 2010–08–12
  6. By: Glenn W. Harrison; Morten Lau; E. Elisabet Rutström
    Abstract: Experiments are conducted with various purposes in mind including theory testing, mechanism design and measurement of individual characteristics. In each case a careful researcher is constrained in the experimental design by prior considerations imposed either by theory, common sense or past results. We argue that the integration of the design with these elements needs to be taken even further. We view all these elements that make up the body of research methodology in experimental economics as mutually dependant and therefore take a systematic approach to the design of our experimental research program. Rather than drawing inferences from individual experiments or theories as if they were independent constructs, and then using the findings from one to attack the other, we recognize the need to constrain the inferences from one by the inferences from the other. Any data generated by an experiment needs to be interpreted jointly with considerations from theory, common sense, complementary data, econometric methods and expected applications. We illustrate this systematic approach by reference to a research program centered on large artefactual field experiments we have conducted in Denmark. An important contribution that grew out of our work is the complementarity between lab and field experiments.
    Date: 2010–09
  7. By: Glenn Harrison; Don Ross
    Abstract: We critically review the methodological practices of two research programs which are jointly called 'neuroeconomics'. We defend the first of these, termed 'neurocellular economics' (NE) by Ross (2008), from an attack on its relevance by Gul and Pesendorfer (2008) (GP). This attack arbitrarily singles out some but not all processing variables as unimportant to economics, is insensitive to the realities of empirical theory testing, and ignores the central importance to economics of 'ecological rationality' (Smith 2007). GP ironically share this last attitude with advocates of 'behavioral economics in the scanner' (BES), the other, and better known, branch of neuroeconomics. We consider grounds for skepticism about the accomplishments of this research program to date, based on its methodological individualism, its ad hoc econometrics, its tolerance for invalid reverse inference, and its inattention to the difficulties involved in extracting temporally lagged data if people's anticipation of reward causes pre-emptive blood flow.
    JEL: A12 B41 C51 C81 C91 D87
    Date: 2010–09

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