nep-neu New Economics Papers
on Neuroeconomics
Issue of 2017‒11‒05
seven papers chosen by

  1. The Big Five personality traits and partisanship in England By Aidt, T.; Rauh, C.
  2. The Role of Cognitive Biases for Users' Decision-Making in IS Usage Contexts By Amirpur, Miglena
  3. Local Thinking and Skewness Preferences By Dertwinkel-Kalt, Markus; Köster, Mats
  4. Risk, time and social preferences : Evidence from large scale experiments By Perez Padilla, Mitzi
  5. Willpower and Compromise Effect By Masatlioglu, Yusufcan; Nakajima, Daisuke; Ozdenoren, Emre
  6. (Un-)Stable Preferences, Beliefs, and the Predictability of Behaviour By Wolff, Irenaeus
  7. Global Evidence on Economic Preferences By Armin Falk; Anke Becker; Thomas Dohmen; Benjamin Enke; David B. Huffman; Uwe Sunde

  1. By: Aidt, T.; Rauh, C.
    Abstract: We propose a new framework for the study of the psychological foundation of party identification. We draw a distinction between the part of an individual's party preference that is stable throughout adult life and the dynamic part responding to lifecycle events and macro shocks. We theorize that the Big Five personality traits exert a causal effect on the stable part of an individual's party preference and provide evidence from a large nationally representative English panel dataset in support of this theory. We find that supporters of the major parties (Labour, the Conservatives and the Liberal Democrats) have substantively different personality traits. Moreover, we show that those not identifying with any party, who are close to holding the majority, are similar to those identifying with the Conservatives. We show that these results are robust to controlling for cognitive skills and parental party preferences, and to estimation on a subsample of siblings. The relationship between personality traits and party identification is stable across birth cohorts.
    Keywords: Big Five personality traits, Party identification, Partisanship, England
    JEL: D72
    Date: 2017–10–23
  2. By: Amirpur, Miglena
    Abstract: Human cognition and decision-making related to information systems (IS) is a major area of interest in IS research. However, despite being explored since the mid-seventies in psychology, the phenomenon of cognitive biases has only recently gained attention among IS researchers. This fact is reflected inter alia in the lack of a comprehensive literature review of research on cognitive biases in IS, on which authors could build their work upon. Against this backdrop, this thesis presents a scientometric analysis of 12 top IS outlets covering the time period between 1992 and 2012, providing a comprehensive picture of the current state of research on cognitive biases in IS. Building on its results and considering the current trends in IS usage practice, this thesis further presents three articles in the IS usage contexts ‘personal productivity software’ and ‘e-commerce’. These articles investigate the influence of cognitive biases on IS users’ decision-making and the potential reasons thereof on the example of software updates and purchase pressure cues. The first two studies draw on expectation-confirmation theory and the IS continuance literature. Within the first study, a laboratory experiment reveals that feature updates have a positive effect on users’ continuance intention (CI) – the update-effect. According to this effect, software vendors can increase their users’ CI by delivering updates incrementally rather than providing the entire feature set right with the first release. However the results show that the update-effect only occurs if the number of updates does not exceed a tipping point in a given timeframe, disclosing update frequency as crucial boundary condition. Additionally, the study indicates that this effect operates through positive disconfirmation of expectations, resulting in increased user satisfaction. The second study expands the focus of the first study by considering feature as well as non-feature updates and elaborating on the explanatory role of satisfaction (SAT), perceived ease of use (PEOU) and perceived usefulness (PU). Besides update frequency, the findings demonstrate update type as another boundary condition to the repeatedly identified update-effect, that is, it occurs only with functional feature updates and not with technical non-feature updates. Moreover, by analyzing the practice of employing purchase pressure cues (PPCs) on commercial websites, the third study provides another example of the effect of cognitive biases on users’ decision making in the IS usage context ‘e-commerce’. The results show that while limited time (LT) pressure cues significantly increase deal choice, limited product availability (LPA) pressure cues have no distinct influence on it. Furthermore, perceived stress and perceived product value serve as two serial mediators explaining the theoretical mechanism of why LT pressure cues affect deal choice. Overall, the thesis highlights the role of human cognition and decision-making, and specifically of cognitive biases, for IS related users’ decisions. It further emphasizes the importance of an alterable and malleable IS for the occurrence of biased decision-making. Moreover, the findings shed light on the underlying explanatory mechanisms of how and why biased decision-making takes place, thus answering several calls for research and elaborating on existing theories from psychology and IS. Software vendors and online retailers may use the findings described in the thesis to better understand how and why cognitive biases can be applied in a targeted way to achieve positive revenue effects. Specifically, software vendors are advised to distribute software functionality over time via updates, because feature updates can induce a positive state of surprise, which, in turn, increases users’ CI. However, while the thesis’ results disclose the update-effect as a useful measure for software vendors to achieve customers’ satisfaction regarding a software product, it is also necessary to consider its boundary conditions in order to achieve the desired outcomes. Finally, online retailers are advised to carefully select the PPCs on their websites. While the thesis’ results show that some of them are cost-effective solutions to stimulate positive value perceptions, which in turn impact online purchases, they also reveal that others have no effect on users’ purchase decisions and can even be perceived as an attempt at deception.
    Date: 2017
  3. By: Dertwinkel-Kalt, Markus; Köster, Mats
    Abstract: We show that models of stimulus-driven attention can account for skewness preferences. As unlikely, but outstanding payoffs attract attention, an agent exhibits a preference for right-skewed and an aversion toward left-skewed risks. We show that extreme predictions on skewness preferences by prospect theory can be ruled out for models of stimulus-driven attention.
    JEL: D81
    Date: 2017
  4. By: Perez Padilla, Mitzi (Tilburg University, School of Economics and Management)
    Abstract: This dissertation contains four chapters studying individual preferences and economic decision-making. The first three chapters study preferences for risk taking and intertemporal choice. First, it asks the question whether economic preferences are related to psychological measures of personality and whether they have similar prediction power on financial decisions. Our main finding is that the channels through which personality affect economic behavior is different than those measured by economic preferences. The next two papers ask the following questions: How are financial choices within a household being made? If a household is composed of more than one individual, which family members decide and what influences their decisions? Are individual preferences considered stable over time? These questions are approached by using experimental data and information on actual financial choices such as household portfolio composition and financial wealth. Findings suggest that bargaining power with respect to risky and intertemporal choices is not equally divided within couples. The third essay finds a positive correlation between preferences over time, and no strong evidence for cross-couple effects of economic or health shocks. The last chapter discusses the relationship between social preferences, specifically, trust and trustworthiness and socio-economic status.
    Date: 2017
  5. By: Masatlioglu, Yusufcan; Nakajima, Daisuke; Ozdenoren, Emre
    Abstract: This paper provides a behavioral foundation for the willpower as limited cognitive resource model which bridges the standard utility maximization and the Strotz models. Using the agent's ex ante preferences and ex post choices, we derive a representation that captures key behavioral traits of willpower constrained decision making. We use the model to study the pricing problem of a profit maximizing monopolist who faces consumers with limited willpower. We show that the optimal contract often consists of three alternatives and the consumer's choices reflect a form of the "compromise effect" which is induced endogenously.
    Date: 2017–10
  6. By: Wolff, Irenaeus
    Abstract: I show that whether participants generally believe in others’ preference stability is a crucial determinant of behaviour. Whether a participant’s behaviour can be predicted by her best-response or a Nash-equilibrium in a context where she can observe others' elicited preferences depends heavily both on the participant having stable preferences and on her generally believing in others’ preference stability. The latter is true because such a belief is associated with less dispersed beliefs.
    JEL: C72
    Date: 2017
  7. By: Armin Falk; Anke Becker; Thomas Dohmen; Benjamin Enke; David B. Huffman; Uwe Sunde
    Abstract: This paper studies the global variation in economic preferences. For this purpose, we present the Global Preference Survey (GPS), an experimentally validated survey dataset of time preference, risk preference, positive and negative reciprocity, altruism, and trust from 80,000 individuals in 76 countries. The data reveal substantial heterogeneity in preferences across countries, but even larger within-country heterogeneity. Across individuals, preferences vary with age, gender, and cognitive ability, yet these relationships appear partly country specific. At the country level, the data reveal correlations between preferences and bio-geographic and cultural variables such as agricultural suitability, language structure, and religion. Variation in preferences is also correlated with economic outcomes and behaviors. Within countries and subnational regions, preferences are linked to individual savings decisions, labor market choices, and prosocial behaviors. Across countries, preferences vary with aggregate outcomes ranging from per capita income, to entrepreneurial activities, to the frequency of armed conflicts.
    JEL: D0 D03 D9
    Date: 2017–10

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