nep-neu New Economics Papers
on Neuroeconomics
Issue of 2015‒02‒16
eight papers chosen by

  1. Cognitive Bubbles By Ciril Bosch-Rosa; Thomas Meissner; Antoni Bosch-Domènech;
  2. Smart or Selfish - When Smart Guys Finish Nice By Lohse, Johannes
  3. Fetal Origins of Personality: Effects of early life circumstances on adult personality traits By Sonya Krutikova; Helene Bie Lilleør
  4. How Does Aging Affect Financial Decision Making? By Keith Jacks Gamble; Patricia A. Boyle; Lei Yu; David A. Bennett
  5. Knowing What Not To Do: Financial Literacy and Consumer Credit Choices By Jaroszek, Lena; Dick, Christian D.
  6. The Effect of Belief Elicitation Game Play By Hoffmann, Timo
  7. Predictably angry: Facial cues provide a credible signal of destructive behavior By Noussair, Charles N.; Offerman, Theo; Suetens, Sigrid; Van de Ven, Jeroen; Van Leeuwen, Boris; Van Veelen, Matthijs
  8. The effects of language on children s intertemporal choices By Lergetporer, Philipp; Sutter, Matthias; Angerer, Silvia; Glätzle-Rützler, Daniela

  1. By: Ciril Bosch-Rosa; Thomas Meissner; Antoni Bosch-Domènech;
    Abstract: Smith et al. (1988) reported large bubbles and crashes in experimental asset markets, a result that has been replicated by a large literature. Here we test whether the occurrence of bubbles depends on the experimental subjects' cognitive sophistication. In a two-part experiment, we rst run a battery of tests to assess the subjects' cognitive sophistication and classify them into low or high levels of cognitive sophistication. We then invite them separately to two asset market experiments populated only by subjects with either low or high cognitive sophistication. We observe classic bubble- crash patterns in the sessions populated by subjects with low levels of cognitive sophistication. Yet, no bubbles or crashes are observed with our sophisticated subjects. This result lends strong support to the view that the usual bubbles and crashes in experimental asset markets are caused by subjects' confusion and, therefore, raises some doubts about the external validity of this type of experiments.
    Keywords: Asset Market Experiment, Bubbles, Cognitive Sophistication
    JEL: C91 D12 D84 G11
    Date: 2015–02
  2. By: Lohse, Johannes
    Abstract: In three different variants of an one-shot public good game I analyze the relationship between cooperation and cognitive abilities, assessed through the cognitive reflection test (CRT). In a between-subjects design, the baseline case is contrasted with two treatment conditions that allow to control for two potentially moderating factors: By employing a test for the presence of confusion, the first condition scrutinizes whether higher cognitive abilities are correlated with cooperation proper or simply grant a better understanding of the incentive structure. The second condition explores the proposition that the link between cognitive abilities and cooperation could depend on the complexity of the decision situation. To exogenously create a cognitively more demanding choice setting, subjects had to decide under time pressure. I find a strong and positive relationship between CRT-scores and cooperation, that is not driven by confusion. Time pressure has a strongly moderating effect on this relationship.
    Keywords: Cooperation; Cognitive Abilities; Confusion; Public Goods; Dual Process Theories.
    Date: 2014–12–02
  3. By: Sonya Krutikova; Helene Bie Lilleør
    Abstract: Personality traits are highly predictive of life outcomes and successes. However, little is known about their formation and what can hamper their development. There is ample evidence that conditions in early-life can have persistent influence on health and cognitive skills. In this paper, we ask whether this is also the case for the formation and development of personality traits. We find strong and robust evidence of persistent impacts among siblings of early-life rainfall fluctuations on measures of a latent personality trait, known as core self-evaluation, in adulthood. The results are driven by females, irrespective of the gender composition of siblings within the household. There is heterogeneity across households likely to have different levels of credit access, suggesting a household wealth mechanism; effects are strongest for households with lowest durable asset holdings. Effects on other outcomes in adulthood suggest that early life rainfall may impact adult core self-evaluation through health, schooling and wealth, although we cannot rule out reverse causality.
    Date: 2015
  4. By: Keith Jacks Gamble; Patricia A. Boyle; Lei Yu; David A. Bennett
    Abstract: The brief’s key findings are: *With the shift from traditional pensions to 401(k) plans, the welfare of retirees depends increasingly on their ability to make sound financial decisions. *Using a dataset that follows a group of older individuals in the Chicago area, the analysis examines how aging affects financial decision making. *Participants who suffer cognitive decline experience a reduction in their financial literacy but no change in their confidence in managing their money. *Perhaps not surprisingly then, while they are more likely to get help with financial decisions, more than half retain primary responsibility for managing their money.
  5. By: Jaroszek, Lena; Dick, Christian D.
    Abstract: We analyze whether the frequent use of credit lines is rational or influenced by behavioral traits of households. We consider the special case of Germany where credit lines on current accounts are available to 80% of the population. We document that the excessive usage of costly credit lines is more likely for people who give intuitive but incorrect answers in the Cognitive Reflection Test. Our analysis of a rich sample of household data also provides evidence that a higher level of financial literacy can help to improve consumer credit choices.
    JEL: D12 D14 I20
    Date: 2014
  6. By: Hoffmann, Timo
    Abstract: The assumptions that subjects hold beliefs and that the chosen actions are not altered by a proper elicitation of these beliefs are widely used in economics. In this paper I experimentally test whether the second assumption is correct. Especially controlling for different game properties, I nd that in dominance solvable two-player normal-form games belief elicitation results in a signi cant increase of equilibrium play. Therefore the elicitation of beliefs can affect the choices made by subjects and lead to more equilibrium actions being chosen. Surprisingly one major reason for this effect is the decreased play of own dominated actions. The results indicate that belief elicitation induces subjects to think harder about the presented decision situation, which results in a better understanding of the given situation and consequently in a modi cation of their beliefs. Therefore, in certain decision situations, belief elicitation affects the decisions made by subjects.
    JEL: C72 C91 D83
    Date: 2014
  7. By: Noussair, Charles N.; Offerman, Theo; Suetens, Sigrid; Van de Ven, Jeroen; Van Leeuwen, Boris; Van Veelen, Matthijs
    Abstract: Evolutionary explanations of anger as a commitment device hinge on two key assumptions. The first is that it is observable ex-ante whether someone will get angry when feeling badly treated. The second is that anger is associated with destructive behavior. We test the validity of these assumptions by studying whether observers are able to detect who rejected a low offer in an ultimatum game. We collected photos and videos of responders in an ultimatum game before they were informed about the game that they would be playing. We showed pairs of photos or videos, consisting of one responder who rejected a low offer and one responder who accepted a low offer, to an independent group of observers. We find support for the two assumptions. Observers do better than chance at detecting who rejected the low offer, especially for rejecters who get angry at low offers.
    Keywords: anger, commitment, ultimatum game, laboratory experiment
    Date: 2014–11
  8. By: Lergetporer, Philipp; Sutter, Matthias; Angerer, Silvia; Glätzle-Rützler, Daniela
    Abstract: The ability of children to control the desire for immediate gratification is very important to achieve long-term beneficial goals (such as higher education or better health conditions). We show that the language children speak is significantly related to their ability to wait in a simple, incentivized experiment. We are thus providing controlled evidence for a recently developed linguistic-savings hypothesis, stating that languages which grammatically separate the future and the present (like English or Italian) induce less future-oriented behavior than languages in which speakers can refer to the future by using present tense (like German). In our unique experiment, we let practically all primary school children, aged 6 to 11 years, in a bilingual city in Northern Italy make intertemporal choices. We find that German-speaking children are about 46% more likely than Italian-speaking children to wait for a larger reward in the future. Controlling for several factors, including IQ or family background, the difference between German- and Italian-speaking children remains highly significant. Furthermore we provide survey evidence that this effect is unlikely to be driven by difference in cultural attitudes towards patience. Interestingly, language is not related to another important domain of economic decision making, risk taking, which is often associated with intertemporal preferences. Controlling for risk taking, the relation between language and patience persists.
    JEL: C91 D90 D03
    Date: 2014

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