New Economics Papers
on Neuroeconomics
Issue of 2010‒09‒18
seven papers chosen by

  1. Timing and Self-Control By Drew Fudenberg; David K Levine
  2. Dopamine and Risk Preferences in Different Domains By Dreber, Anna; Rand, David G.; Garcia, Justin R.; Wernerfelt, Nils; Lum, J. Koji; Zeckhauser, Richard
  3. Thinking in Chinese vs. Thinking in English: Social Preference and Risk Attitudes of Multicultural Minds By Li King King
  4. The Origins of Savings Behavior By Cronqvist, Henrik; Siegel, Stephan
  5. Nature or Nurture: What Determines Investor Behavior? By Barnea, Amir; Cronqvist, Henrik; Siegel, Stephan
  6. Bias in the Relative Assessment of Happiness,Political Stance, Height and Weight By Proto, Eugenio; Sgroi, Daniel
  7. Human Nature, the Environment, and Behaviour: Explaining the scope and geographical scale of financial decision-making.. By Clark, Gordon L.

  1. By: Drew Fudenberg; David K Levine
    Date: 2010–09–06
  2. By: Dreber, Anna (Institute for Financial Research); Rand, David G. (Harvard University); Garcia, Justin R. (Binghamton University); Wernerfelt, Nils (Toulouse School of Economics); Lum, J. Koji (Binghamton University); Zeckhauser, Richard (Harvard University)
    Abstract: Individuals differ significantly in their willingness to take risks. Such differences may stem, at least in part, from individual biological (genetic) differences. We explore how risk-taking behavior correlates with different versions of the dopamine receptor D4 gene (DRD4), which has been implicated in previous studies of risk taking. We investigate risk taking in three contexts: economic risk taking as proxied by a financial gamble, self-reported general risk taking, and self-reported behavior in risk-related activities. Our participants are serious tournament bridge players with substantial experience in risk taking. Presumably, this sample is much less varied in its environment than a random sample of the population, making genetic based differences easier to detect. A prior study (Dreber et al. 2010) looked at risk taking by these individuals in their bridge decisions. Here we examine the riskiness of decisions they take in other contexts. We find evidence that individuals with a 7-repeat allele (7R+) of DRD4 take significantly more economic risk in an investment game than individuals without this allele (7R-). Interestingly, this positive relationship is driven by the men in our study, while the women show a negative but non-significant result. Even though the number of 7R+ women in our sample is low, our results may indicate a gender difference in how the 7R+ genotype affects behavior, a possibility that merits further study. Considering other risk measures, we find no difference between 7R+ and 7R- individuals in general risk taking or any of the risk-related activities. Overall, our results indicate that the dopamine system plays an important role in explaining individual differences in economic risk taking in men, but not necessarily in other activities involving risk.
    Keywords: Risk preferences; Dopamine; Risk taking; Risk perception; DRD4
    JEL: C91 C93 D81 D87 G00
    Date: 2010–05–15
  3. By: Li King King (Strategic Interaction Group, Max Planck Institute of Economics, Jena)
    Abstract: This paper investigates whether language priming activates different cultural identities and norms associated with the language communicated; bilingual subjects are given Chinese instructions in the Chinese treatment and English instructions in the English treatment. The main findings are: (1) in social preference games involving strategic interactions, e.g., the trust game, subjects in the Chinese treatment are more trusting and trustworthy than in the English treatment. However, (2) in individual choice games about social preference, such as the dictator game, while there is no treatment difference, subjects exhibit in-group favoritism only in the Chinese treatment. Further, (3) subjects in the Chinese treatment expect others to be more risk seeking, and prefer to pick Chinese lucky numbers in a lottery game. These findings support the hypothesis that languages are associated with cultural frames and that communicating in a particular language increases the cognitive accessibility of norms associated with that language.
    Keywords: Identity, cross-cultural differences, language, bilingual, biculture, social preference, risk attitudes
    JEL: C91 D81 Z10
    Date: 2010–09–13
  4. By: Cronqvist, Henrik (Claremont McKenna College); Siegel, Stephan (University of Washington)
    Abstract: What are the origins of individual savings behavior? Using data on identical and fraternal twins matched with data on their savings behavior, we find that an individual's savings propensity is governed by both genetic predispositions, social transmission from parents to their children, and gene-environment interplay where certain environments moderate genetic influences. Genetic variation explains about 35 percent of the variation in savings rates across individuals, and this genetic effect is stronger in less constraining, high socioeconomic status environments. Parent-child transmission influences savings for young individuals and those who grew up in a family environment with less competition for parental resources. Individual-specific life experiences is a very important explanation for behavior in the savings domain, and strongest in urban communities. In a world progressing rapidly towards individual retirement savings autonomy, understanding the origins of individuals' savings behavior are of key importance to economists as well as policy makers.
    Keywords: Savings; Consumption; Behavioral Genetics
    JEL: D10 D31 G11
    Date: 2010–09–15
  5. By: Barnea, Amir (Claremont McKenna College); Cronqvist, Henrik (Claremont McKenna College); Siegel, Stephan (University of Washington)
    Abstract: Using data on identical and fraternal twins' complete financial portfolios, we decompose the crosssectional variation in investor behavior. We find that a genetic factor explains about one third of the variance in stock market participation and asset allocation. Family environment has an effect on the behavior of young individuals, but this effect is not long-lasting and disappears as an individual gains experiences. Frequent contact among twins results in similar investment behavior beyond a genetic factor. Twins who grew up in different environments still display similar investment behavior. Our interpretation of a genetic component of the decision to invest in the stock market is that there are innate differences in factors affecting effective stock market participation costs. We attribute the genetic component of asset allocation - the relative amount invested in equities and the portfolio volatility - to genetic variation in risk preferences.
    Keywords: Portfolio choice; Investor heterogeneity; Behavioral genetics
    JEL: D10 G11
    Date: 2010–09–15
  6. By: Proto, Eugenio (Department of Economics, University of Warwick); Sgroi, Daniel (Department of Economics, University of Warwick)
    Abstract: Cognitive biases have been a recognised feature of research into human behaviour since at least Kahneman and Tversky’s ground-breaking work of the 1970s. We find that such biases extend into the realm of perceptions about relative happiness and we compare and contrast this phenomenon across three other characteristics : height, weight and political stance. Our findings indicate a powerful and consistent bias in the way individuals perceive their place in the population distribution. In particular, those at extremes perceive a population distribution that is incorrectly and heavily biased towards themselves,irrespective of whether the c haracteristic is objective and easily ob served or not. 
    Date: 2010
  7. By: Clark, Gordon L.
    Abstract: This paper explores two inter-related themes. One addresses fundamental questions of human nature, arguing that conventional theories of behaviour lack a credible appreciation of the interaction between cognition and context (or what is often termed as the 'environment'). The second considers decision-making under risk and uncertainty, focusing upon customary behaviour and the significance or otherwise of conscious deliberation. My argument is intended to be both critical and constructive, exploring the claims of the emerging school of behaviouralism associated with Kahneman and Tversky now sweeping the social sciences. Most importantly, it is argued that economic geography should take more seriously the nature and scope of behaviour recognising its attributes including related social and cultural aspirations. These ideas are illustrated by a set of recent studies dealing with financial decision-making and individuals' attitudes towards risk in personal and occupational pension plans. The importance of this project lies in the urgent need to understand the diversity of behaviour of men and women in, and through, the communities in which they live without being reduced to yet another version of environmental determinism. In conclusion, implications are drawn for understanding the global financial crisis.
    JEL: D81 J12 G11 D14
    Date: 2010

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