nep-neu New Economics Papers
on Neuroeconomics
Issue of 2014‒12‒08
two papers chosen by

  1. Error prone inference from respons time: The case of intuitive generosity By Recalde M.P.; Riedl A.M.; Vesterlund L.
  2. Does the Choice of Well-Being Measure Matter Empirically? An Illustration with German Data By Decancq, Koen; Neumann, Dirk

  1. By: Recalde M.P.; Riedl A.M.; Vesterlund L. (GSBE)
    Abstract: Response time is increasingly used to shed light on the process by which individualsmake decisions. As mistakes may be correlated with response time it could, however, bemisleading to use this measure to draw inference on preferences. To demonstrate we build on arecent literature, which uses response time to determine whether individuals intuitively aregenerous or selfish. Examining public good games researchers have shown that fast decisionmakers appear more generous than slow decision makers and this has been interpreted asevidence that generosity is intuitive and impulsive while selfishness is a calculated responseRand et al. 2012; Nielsen, et al. 2014. Modifying the public good game to have an interiordominant strategy equilibrium we ask if the negative correlation between response time andgiving is sensitive to the location of the equilibrium and whether it may result from mistakes.When the equilibrium is located below the midpoint of the strategy space we replicate earlierfindings. However, when the equilibrium is located above the midpoint of the strategy space weget instead a positive correlation between response time and giving. While contributiondistributions vary significantly by treatment for slow decision makers, these differences are notsignificant for fast decision makers. Fast decision makers are in both treatments more likely tomake contributions that simultaneously lower individual and group earnings. We argue that thenegative correlation between response time and giving rather than reflecting spontaneousgiving, results from confused participants quickly selecting contributions that lie, on average, inthe middle of the strategy space. Our results demonstrate that inference on preferences fromresponse time requires that we take into account how mistakes are correlated with response time.
    Date: 2014
  2. By: Decancq, Koen (University of Antwerp); Neumann, Dirk (Université catholique de Louvain)
    Abstract: We discuss and compare five measures of individual well-being, namely income, an objective composite well-being index, a measure of subjective well-being, equivalent income, and a well-being measure based on the von Neumann-Morgenstern utilities of the individuals. After examining the information requirements of these measures, we illustrate their implementation using data from the German Socio-Economic Panel (SOEP) for 2010. We find sizeable differences in the characteristics of the individuals identified as worst off according to the different well-being measures. Less than 1% of the individuals belong to the bottom decile according to all five measures. Moreover, the measures lead to considerably different well-being rankings of the individuals. These findings highlight the importance of the choice of well-being measure for policy making.
    Keywords: von Neumann-Morgenstern utility function, equivalent income, life satisfaction, composite well-being index, income, worst off, Germany
    JEL: D31 D63 I30
    Date: 2014–10

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