nep-neu New Economics Papers
on Neuroeconomics
Issue of 2018‒02‒19
five papers chosen by

  1. Naiveté About Temptation and Self-Control: Foundations for Naive Quasi-Hyperbolic Discounting By David S. Ahn; Ryota Iijima; Todd Sarver
  2. Biases in Beliefs: Experimental Evidence By Dominik Bauer; Irenaeus Wolff
  3. The Effect of Physical and Cognitive Decline at Older Ages on Work and Retirement: Evidence from Occupational Job Demands and Job Mismatch By Péter Hudomiet; Michael D. Hurd; Susann Rohwedder; Robert J. Willis
  4. What breaks the chain of unkindness: emotional closure or signaling? By Wendelin Schnedler; Nina Lucia Stephan
  5. An exploratory study of how sleep restriction impacts choice in two classic normal form games. By David L. Dickinson

  1. By: David S. Ahn (University of California, Berkeley); Ryota Iijima (Cowles Foundation, Yale University); Todd Sarver (Duke University)
    Abstract: We introduce and characterize a recursive model of dynamic choice that accommodates naivete about present bias. While recursive representations are important for tractable analysis of in nite-horizon problems, the commonly-used Strotz model of time inconsistency presents well-known technical difficulties in extensions to dynamic environments. Our model incorporates costly self-control in the sense of Gul and Pesendorfer (2001) to overcome these hurdles. The important novel condition is an axiom for naivete. We first introduce appropriate definitions of absolute and comparative naivete for a simple two-period model, and explore their implications for the costly self-control model. We then develop suitable extensions of these definitions to in nite-horizon environments. Incorporating the definition of absolute naivete as an axiom, we characterize a recursive representation of naive quasi-hyperbolic discounting with self-control for an individual who is jointly overoptimistic about her present-bias factor and her ability to resist instant gratification. We also study the implications of our proposed comparison of naivete for this recursive representation and uncover new restrictions on the present-bias and self-control parameters that characterize comparative naivete. Finally, we discuss the subtleties that preclude more general notions of naivete, and illuminate the impossibility of a definition that simultaneously accommodates both random choice and costly self-control.
    Keywords: Naive, Sophisticated, Self-control, Quasi-hyperbolic discounting
    JEL: D11 D91
    Date: 2017–08
  2. By: Dominik Bauer; Irenaeus Wolff
    Abstract: Many papers have reported behavioral biases in belief formation that come on top of standard game-theoretic reasoning. We show that the processes involved depend on the way participants reason about their beliefs. When they think about what everybody else or another ‘unspeci€fied’ individual is doing, they exhibit a consensus bias (believing that others are similar to themselves). In contrast, when they think about what their situation-speci€fic counterpart is doing, they show ex-post rationalization, under which the reported belief is €‹fitted to the action and not vice versa. Our €findings suggest that there may not be an ‘innocent’ belief-elicitation method that yields unbiased beliefs. However, if we ‘debias’ the reported beliefs using our estimates of the di‚fferent e‚ffects, we €find no more treatment e‚ffect of how we ask for the belief. ‘The ‘debiasing’ exercise shows that not accounting for the biases will typically bias estimates of game-theoretic thinking upwards.
    Keywords: Belief Elicitation, Belief Formation, Belief-Action Consistency, Framing E‚ffects, Projection, Consensus E‚ffect, Wishful ‘Thinking, Hindsight Bias, Ex-Post Rationalization
    Date: 2018
  3. By: Péter Hudomiet (RAND); Michael D. Hurd (RAND); Susann Rohwedder (RAND); Robert J. Willis (University of Michigan)
    Abstract: As workers age, their physical and cognitive abilities tend to decline. This could lead to a mismatch between workers’ resources and the demands of their jobs, restricting future work. We use longitudinal data from the Health and Retirement Study (HRS) linked to detailed occupational characteristics from the O*NET project to investigate how mismatches between job demands and workers’ resources in two physical and two cognitive domains affect retirement outcomes. We estimate how changes in physical and cognitive resources as well as their interactions with occupational job-demands affect changes in 1) subjective reports of work-limiting health problems; 2) mental health; and 3) subjective probabilities of working past age 65. We also estimate hazard models for transitions from full-time work to retirement. We found that declines in physical and cognitive resources are strong predictors of all outcomes: Fewer resources lead to greater reporting of work-limiting health problems; decline in mental health; smaller subjective probabilities of working full-time past age 65; and more transitions from work to retirement. The interaction of resources with job demands, however, is only statistically significant for workers with large-muscle limitations who are more likely to report changes in outcomes when they work in occupations that rely heavily on physical strength. In contrast, the effects of declines in fine motor skills and cognition do not show statistically significant differences by occupational job demands. It appears cognitive and fine motor skills, at least as measured in the HRS, are universally important determinants of working, not specific to certain occupations.
    Date: 2017–10
  4. By: Wendelin Schnedler (University of Paderborn); Nina Lucia Stephan (University of Paderborn)
    Abstract: Previous experimental studies show that subjects who receive little in a dictator game, pass on less to a third person when they are dictators themselves (they reciprocate negatively to a third party). However, when they can write a letter to their dictator, subjects are less likely to pass on the unkindness. There are two potential explanations for this phenomenon: First, writing the letter may help to emotionally ‘close the case’ (closure explanation). Second, the opportunity to write a letter is a sign that it is not ‘ok’ to imitate the previous dictator (signal explanation). The present study examines with an experiment which explanation is more suitable.\\ The novelty in our design is a domain shift, making imitation impossible: The first subject does not decide on how to split a pot of money but can instead treat the second subject unkindly by assigning her to an annoying instead of a funny task. We find that letter writing nevertheless increases the average amount passed on in the subsequent dictator game. Thus, the closure explanation is perhaps more suitable. There is, however, one caveat: while writing the letter may make people emotionally ‘close the case’, this is not reflected in how happy people rate themselves.
    Keywords: experimental economics, chain of unkindness, imitation, emotional closure, cooling down
    JEL: D91 C91 D03
    Date: 2018–01
  5. By: David L. Dickinson
    Abstract: We experimentally manipulate sleep levels to examine the impact of sleepiness on strategic oneshot interactions. Where multiple Nash equilibria exist (the Battle-of-the-Sexes game), sleepy subjects play closer to the mixed strategy prediction than do well-rested subjects. When there is a unique equilibrium in mixed strategies (the Penalty Kick game), strategy play of sleepy subject shows indications of reinforcement play. Sleepiness may, at least in some games, promote use of simple heuristics that focus on previous outcomes even when interactions are one-shot. Key Words: Sleep deprivation, game theory, heuristics, experiments
    JEL: C92 D91 C72
    Date: 2018

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