nep-neu New Economics Papers
on Neuroeconomics
Issue of 2018‒09‒03
five papers chosen by

  1. Too Little or Too Much? Actionable Advice in an Early-Childhood Text Messaging Experiment By Cortes, Kalena E.; Fricke, Hans; Loeb, Susanna; Song, David S.
  2. “This one is 400 Libyan dinars, this one is 500”: Insights from Cognitive Human Capital and Slave Trade By Asongu, Simplice; Kodila-Tedika, Oasis
  3. Effects of Poverty On Impatience By Bartos, Vojtech; Bauer, Michal; Chytilova, Julie; Levely, Ian
  4. Are Reference Points Merely Lagged Beliefs Over Probabilities? By Ori Heffetz
  5. Psychology-based Models of Asset Prices and Trading Volume By Nicholas C. Barberis

  1. By: Cortes, Kalena E. (Texas A&M University); Fricke, Hans (Stanford University); Loeb, Susanna (Stanford University); Song, David S. (Stanford University)
    Abstract: Text-message based parenting programs have proven successful in improving parental engagement and preschoolers' literacy development. The tested programs have provided a combination of (a) general information about important literacy skills, (b) actionable advice (i.e., specific examples of such activities), and (c) encouragement. The regularity of the texts – each week throughout the school year – also provided nudges to focus parents' attention on their children. This study seeks to identify mechanisms of the overall effect of such programs. It investigates whether the actionable advice alone drives previous study's results and whether additional texts of actionable advice improve program effectiveness. The findings provide evidence that text messaging programs can supply too little or too much information. A single text per week is not as effective at improving parenting practices as a set of three texts that also include information and encouragement, but a set of five texts with additional actionable advice is also not as effective as the three-text approach. The results on children's literacy development depend strongly on the child's pre-intervention literacy skills. For children in the lowest quarter of the pretreatment literacy assessments, only providing one example of an activity decreases literacy scores by 0.15 standard deviations relative to the original intervention. Literacy scores of children in higher quarters are marginally higher with only one tip per week. We find no positive effects of increasing to five texts per week.
    Keywords: text messaging, parental engagement, literacy and reading skills, and parent-child activities
    JEL: I21 I24 J18
    Date: 2018–07
  2. By: Asongu, Simplice; Kodila-Tedika, Oasis
    Abstract: One of the most disturbing contemporary episodes in human history that has been decried globally is the recent Libyan experience of slave trade, where migrants captured end-up being sold as slaves. We contribute to the understanding of this phenomenon by investigating the role of cognitive human capital in slave trade. To this end, we use the historic intelligence and slave trade variables respectively, as the independent and outcome variables of interest. Our findings show a negative relationship between slave trade and cognitive human capital. Hence, slave trade is more apparent when cognitive human capital is low. The Ordinary Least Squares findings are robust to the control for outliers, uncertainty about the model and Tobit regressions. We substantiate why from the perspective of massive sensitisation and education, the non-contemporary relationship between cognitive ability and slave trade established in this study has contemporary practical policy relevance in efforts to stem the tide of clandestine travel to Europe through countries in which clandestine migrants are captured and sold as slaves.
    Keywords: Intelligence; Human Capital; Slavery
    JEL: I20 I29 N30
    Date: 2018–01
  3. By: Bartos, Vojtech (LMU Munich); Bauer, Michal (CERGE-EI and Institute of Economic Studies); Chytilova, Julie (Institute of Economic Studies); Levely, Ian (Wageningen University)
    Abstract: We study two psychological channels how poverty may increase impatient behavior -- an effect on time preference and reduced attention. We measured discount rates among Ugandan farmers who made decisions about when to enjoy entertainment instead of working. We find that experimentally induced thoughts about poverty-related problems increase the preference to consume entertainment early and delay work. The effect is equivalent to a 27 p.p. increase in the intertemporal rate of substitution. Using monitoring tools similar to eye tracking, a novel feature for this subject pool, we show this effect is not due to a lower ability to sustain attention.
    Keywords: poverty; scarcity; time discounting; preferences; inattention; decision-making process;
    Date: 2018–07–30
  4. By: Ori Heffetz
    Abstract: What explains the mixed evidence from laboratory tests of Kőszegi and Rabin’s (2006 and later) model of expectations-based reference-dependent preferences? We investigate one hypothesis: to become (behavior-affecting) reference points, probability beliefs have to sink in—being merely lagged, as the theory requires, is not sufficient. Past experiments with conflicting findings exogenously endowed subjects with beliefs that were equally lagged, but possibly unequally sunk-in. In four experiments, whose designs replicate past KR-nonsupporting experiments, we add new sink-in manipulations that endow individuals with additional, visual/physical probability impressions. Our findings are more KR-supporting in an endowment-effect setting but not in an effort-provision setting.
    JEL: D12 D84 D91 J22
    Date: 2018–06
  5. By: Nicholas C. Barberis
    Abstract: Behavioral finance tries to make sense of financial data using models that are based on psychologically accurate assumptions about people's beliefs, preferences, and cognitive limits. I review behavioral finance approaches to understanding asset prices and trading volume, with particular emphasis on three types of models: extrapolation-based models, models of overconfident beliefs, and models of gain-loss utility inspired by prospect theory. The research to date shows that a few simple assumptions about investor psychology capture a wide range of facts about prices and volume and lead to concrete new predictions. I end by speculating about the form that a unified psychology-based model of investor behavior might take.
    JEL: G11 G12
    Date: 2018–06

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