nep-neu New Economics Papers
on Neuroeconomics
Issue of 2011‒12‒13
five papers chosen by
Daniel Houser
George Mason University

  1. Gender Differences in Risk Aversion: Do Single-Sex Environments Affect their Development? By Booth, Alison L.; Cardona Sosa, Lina; Nolen, Patrick
  2. Family Background, Self-Confidence and Economic Outcomes By Filippin, Antonio; Paccagnella, Marco
  3. Investor Type, Cognitive Governance and Performance in Young Entrepreneurial Ventures: A Conceptual Framework By Christophe Bonnet; Peter Wirtz
  4. Conflicted Minds: Recalibrational Emotions Following Trust-based Interaction. By Eric Schniter; Roman M. Sheremeta; Timothy Shields
  5. Can Money Change Who We Are? Estimating the Effects of Unearned Income on Measures of Incentive-Enhancing Personality Traits By Powdthavee, Nattavudh; Boyce, Christopher J.; Wood, Alex M.

  1. By: Booth, Alison L.; Cardona Sosa, Lina; Nolen, Patrick
    Abstract: Single-sex classes within coeducational environments are likely to modify students' risk-taking attitudes in economically important ways. To test this, we designed a controlled experiment using first year college students who made choices over real-stakes lotteries at two distinct dates. Students were randomly assigned to classes of three types: all female, all male, and coeducational. They were not allowed to change group subsequently. We found that women are less likely to make risky choices than men at both dates. However, after eight weeks in a single-sex environment, women were significantly more likely to choose the lottery than their counterparts in coeducational groups. These results are robust to the inclusion of controls for IQ and for personality type, as well as to a number of sensitivity tests. Our findings suggest that observed gender differences in behaviour under uncertainty found in previous studies might partly reflect social learning rather than inherent gender traits.
    Keywords: cognitive ability; gender; risk preferences; single-sex groups
    JEL: C9 C91 C92 D01 D80 J16 J24
    Date: 2011–12
  2. By: Filippin, Antonio (University of Milan); Paccagnella, Marco (Bank of Italy)
    Abstract: In this paper we analyze the role played by self-confidence, modeled as beliefs about one's ability, in shaping task choices. We propose a model in which fully rational agents exploit all the available information to update their beliefs using Bayes' rule, eventually learning their true type. We show that when the learning process does not convergence quickly to the true ability level, even small differences in initial confidence can result in diverging patterns of human capital accumulation between otherwise identical individuals. As long as inital differences in the level of self-confidence are correlated with the socioeconomic background (as a large body of empirical evidence suggests), self-confidence turns out to be a channel through which education and earnings inequalities are transmitted across generations. Our theory suggests that cognitive tests should take place as early as possible, in order to avoid that systematic differences in self-confidence among equally talented people lead to the emergence of gaps in the accumulation of human capital.
    Keywords: self-confidence, family background
    JEL: D83 J24 J62
    Date: 2011–11
  3. By: Christophe Bonnet (GDF - Gestion, Droit et Finance - Grenoble Ecole de Management); Peter Wirtz (Finance Magellan - Équipe de Recherche en Finance - Université Jean Moulin - Lyon III - Centre de recherche Magellan de l'IAE)
    Abstract: This article contributes to a better understanding of the process of entrepreneurial finance from a behavioral perspective. We specifically examine the cognitive features and interaction of three key-actors in entrepreneurial finance: entrepreneurs, business angels and venture capitalists and derive implications for performance (value creation and growth) when a young venture raises external equity capital. Concepts of cognitive cost and value enhance theoretical insight into why BA and VC intervention is typically sequential. We also predict in what specific situations one should expect simultaneous coinvestment by BAs and VCs and how investors can use cognitive levers to influence the speed of growth.
    Keywords: Business Angel, Venture Capitalist, Cognitive Governance, Venture Growth
    Date: 2011
  4. By: Eric Schniter (Economic Science Institute, Chapman University); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University); Timothy Shields (Argyros School of Business and Economics, Chapman University)
    Abstract: Consistent with a modular view of the mind, both short-sighted and long-sighted programs may be simultaneously active in the mind and in conflict with one another when individuals face choice dilemmas in trust-based economic interactions. Recalibrational theory helps us identify the adaptive design features shared among subsets of superordinate emotion programs. According to this design logic and the computation of adaptive problem features produced by Trust games, we predict the activation of emotions after Trust games. While this study successfully predicts reports of twenty distinct emotional states, further studies are needed to demonstrate ultimate recalibrational functions of emotions.
    Keywords: emotions, recalibrational theory, modularity, Trust game, experiments
    Date: 2011
  5. By: Powdthavee, Nattavudh (Nanyang Technological University, Singapore); Boyce, Christopher J. (University of Manchester); Wood, Alex M. (University of Manchester)
    Abstract: The importance of noncognitive childhood skills in predicting higher wages is well documented in economics. This paper studies the reverse. Using surveys of lottery winners, we analyze the effects of unearned income on the Big Five personality traits. After correcting for potential endogeneity problems from prize sizes, we find that unearned income improves traits that predict pro-social and cooperative behaviors, preferences for social contact, empathy, and gregariousness, and reduces individuals' tendency toward negative emotional states: known in economics literature as incentive-enhancing personality traits. Our results support the possibility of scope for later interventions to improve the personality traits of adults.
    Keywords: noncognitive skills, personality traits, lottery winners, instrumental variables, unearned income
    JEL: D3 J24
    Date: 2011–11

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