nep-neu New Economics Papers
on Neuroeconomics
Issue of 2021‒09‒27
four papers chosen by

  1. Cognitive skills, strategic sophistication, and life outcomes By Eduardo Fe; David Gill; Victoria Prowse
  2. Overinference from Weak Signals, Underinference from Strong Signals, and the Psychophysics of Interpreting Information By Michael Thaler
  3. Inequality in Early Care Experienced by U.S. Children By Sarah Flood; Joel F.S. McMurry; Aaron Sojourner; Matthew J. Wiswall
  4. Salience By Pedro Bordalo; Nicola Gennaioli; Andrei Shleifer

  1. By: Eduardo Fe; David Gill; Victoria Prowse
    Abstract: Classification-
    Date: 2021–09
  2. By: Michael Thaler
    Abstract: Numerous experiments have found that when people receive signals that would lead a Bayesian to substantially revise beliefs, they underinfer. This paper experimentally considers inference from a wider range of signal strengths and finds that subjects overinfer when signals are sufficiently weak. A model of cognitive imprecision adapted to study misperceptions about signal strength explains the data well. As the theory predicts, subjects with more experience, greater cognitive sophistication, and lower variance in answers, infer less from weak signals and infer more from strong signals. The results also relate misperceptions to demand for information and inference from multiple signals.
    Date: 2021–09
  3. By: Sarah Flood; Joel F.S. McMurry; Aaron Sojourner; Matthew J. Wiswall
    Abstract: Using every major nationally-representative dataset on parental and non-parental care provided to children up to age 6, we quantify differences in American children’s care experiences by socioeconomic status (SES), proxied primarily with maternal education. Increasingly, higher-SES children spend less time with their parents and more time in the care of others. Non-parental care for high-SES children is more likely to be in childcare centers, where average quality is higher, and less likely to be provided by relatives where average quality is lower. Even within types of childcare, higher-SES children tend to receive care of higher measured quality and higher cost. Inequality is evident at home as well: measures of parental enrichment at home, from both self-reports and outside observers, are on average higher for higher-SES children. We also find that parental and non-parental quality is reinforcing: children who receive higher quality non-parental care also tend to receive higher quality parental care. Head Start, one of the largest government care subsidy programs for low-income households, reduces inequality in care provided, but it is mainly limited to older children and to the lowest income households. Our evidence is from the pre-COVID-19 period, and the latest year we examine is 2019.
    JEL: I24 J13
    Date: 2021–09
  4. By: Pedro Bordalo; Nicola Gennaioli; Andrei Shleifer
    Abstract: We review the fast-growing work on salience and economic behavior. Psychological research shows that salient stimuli attract human attention “bottom up” due to their high contrast with surroundings, their surprising nature relative to recalled experiences, or their prominence. The Bordalo, Gennaioli and Shleifer (2012, 2013, 2020) models of salience show how bottom up attention can distort economic choice by distracting decision makers from their immediate goals or from certain choice attributes. We show that this approach explains many puzzles: separately treated departures from “rationality” such as probability weighting, menu effects, reference point effects, and framing, emerge as distinct manifestations of the same principle of bottom up attention to salient stimuli. We highlight new predictions and discuss open conceptual questions, as well as potential applications in finance, industrial organization, advertising, and politics.
    JEL: D0 D03 D81 D90
    Date: 2021–09

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.