nep-neu New Economics Papers
on Neuroeconomics
Issue of 2019‒04‒15
four papers chosen by

  1. Risk Preferences of Children and Adolescents in Relation to Gender, Cognitive Skills, Soft Skills, and Executive Functions By James Andreoni; Amalia Di Girolamo; John A. List; Claire Mackevicius; Anya Samek
  2. Judgments of length in the economics laboratory: Are there brains in choice? By Duffy, Sean; Gussman, Steven; Smith, John
  3. Cognitive stress and learning Economic Order Quantity (EOQ) inventory management: An experimental investigation By Pan, Jinrui; Shachat, Jason; Wei, Sijia
  4. Beliefs and Endogenous Cognitive Levels: An Experimental Study By Marina Agranov; Elizabeth Potamites; Andrew Schotter; Chloe Tergiman

  1. By: James Andreoni; Amalia Di Girolamo; John A. List; Claire Mackevicius; Anya Samek
    Abstract: We conduct experiments eliciting risk preferences with over 1,400 children and adolescents aged 3-15 years old. We complement our data with an assessment of cognitive and executive function skills. First, we find that adolescent girls display significantly greater risk aversion than adolescent boys. This pattern is not observed among young children, suggesting that the gender gap in risk preferences emerges in early adolescence. Second, we find that at all ages in our study, cognitive skills (specifically math ability) are positively associated with risk taking. Executive functions among children, and soft skills among adolescents, are negatively associated with risk taking. Third, we find that greater risk-tolerance is associated with higher likelihood of disciplinary referrals, which provides evidence that our task is equipped to measure a relevant behavioral outcome. For academics, our research provides a deeper understanding of the developmental origins of risk preferences and highlights the important role of cognitive and executive function skills to better understand the association between risk preferences and cognitive abilities over the studied age range.
    JEL: C72 C91 C93
    Date: 2019–04
  2. By: Duffy, Sean; Gussman, Steven; Smith, John
    Abstract: We design a choice experiment where the objects are valued according to only a single attribute with a continuous measure and we can observe the true preferences of subjects. However, subjects have an imperfect perception of their own preferences. Subjects are given a choice set involving several lines of various lengths and are told to select one of them. They strive to select the longest line because they are paid an amount that is increasing in the length of their selection. Subjects also make their choices while they are required to remember either a 6-digit number (high cognitive load) or a 1-digit number (low cognitive load). We find that subjects in the high load treatment make inferior line selections and perform worse searches. When we restrict attention to the set of viewed lines, we find evidence that subjects in the high load treatment make worse choices than subjects in the low load treatment. Therefore the low quality searches do not fully explain the low quality choices. Our results suggest that cognition affects choice, even in our idealized choice setting. We also find evidence of choice overload even when the choice set is small and the objects are simple. Further, our experimental design permits a multinomial discrete choice analysis on choice among single-attribute objects with an objective value. The results of our analysis suggest that the errors in our data are better described as having a Gumbel distribution rather than a normal distribution. Finally, we observe the effects of limited cognition, consistent with memory decay and attention.
    Keywords: cognitive load, choice, choice overload, judgment, memory, search
    JEL: C91
    Date: 2019–04–06
  3. By: Pan, Jinrui; Shachat, Jason; Wei, Sijia
    Abstract: We use laboratory experiments to evaluate the effects of cognitive stress on inventory management decisions in a finite horizon Economic Order Quantity (EOQ) model. We manipulate two sources of cognitive stress. First, we vary participants' ability to order inventory from any decision period to only when inventory is depleted. This reduces cognitive stress by restricting the policy choice set. Second we vary participants' participation in a competing pin memorization. This increases cognitive load. Participants complete a sequence of five ``annual'' inventory management tasks, with monthly ordering decisions. Both sources of cognitive stress negatively impact earnings, with the bulk of these impacts occurring in the first year. Participants' choices in all treatments exhibit trends to near optimal policy adoption. But only in the most favorable treatment do the majority of choices reach the optimal policy. We estimate the learning dynamics of monthly order decisions using a Markov switching model. Estimates suggest increased cognitive load reduces the probability of switching to more profitable policies, and that more complex policy choice sets leads to a greater policy lock-in. Our results suggests that inexperienced individuals will perform more poorly when called upon to make inventory management situations in cognitively stressfully environments, and that the benefits of providing support and task simplicity is greatest when the task is first assigned.
    Keywords: Economic Order Quantity, Cognitive load, Choice set complexity, Learning
    JEL: C92 D83 M11
    Date: 2018–04–15
  4. By: Marina Agranov; Elizabeth Potamites; Andrew Schotter; Chloe Tergiman
    Abstract: Uses a laboratory setting to manipulate our subjectsʼ beliefs about the cognitive levels of the players they are playing against. We show that in the context of the 2/3 guessing game, individual choices crucially depend on their beliefs about the level of others.
    Keywords: Guessing game , Beliefs , Level-k theory
    JEL: I

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.