nep-neu New Economics Papers
on Neuroeconomics
Issue of 2022‒01‒03
five papers chosen by

  1. Cognitive Abilities in Children: The Relation between Intelligent Quotient and Cognitive Reflection Test By Marco Piovesan; Helene Willadsen; Sarah Zaccagni
  2. Beliefs in Repeated Games By Masaki Aoyagi; Guillaume Frechette; Sevgi Yuksel
  3. Understanding cognitive decline in older ages: The role of health shocks By Schiele, Valentin; Schmitz, Hendrik
  4. In and out of unemployment – labour market transitions and the role of testosterone By Eibich, Peter; Kanabar, Ricky; Plum, Alexander; Schmied, Julian
  5. Emotion may predict susceptibility to fake news but emotion regulation does not help By Bago, Bence; Rosenzweig, Leah; Berinsky, Adam; Rand, David

  1. By: Marco Piovesan (Dept. of Economics, University of Verona); Helene Willadsen (Dept. of Economics and Copenhagen Center for Social Data Science, University of Copenhagen); Sarah Zaccagni (Dept. of Economics and CEBI, University of Copenhagen)
    Abstract: The Cognitive Reflection Test (CRT) measures the tendency to override a prepotent response alternative that is incorrect and to engage in further reflection that leads to the correct response. As cognitive reflection is a form of cognitive ability, the CRT may be used in substitution of Intelligence Quotient (IQ) tests. We test this idea by asking 686 children enrolled in Danish schools to answer both a CRT and an IQ test. We compare the children's performances in these tests and find that CRT is highly correlated with IQ. In our analysis of the correlation, we control for gender and age. Our results confirm that a short CRT can substitute for the more extensive IQ test. In addition to the proof of the interchangeability between IQ and CRT, we show that both measures of cognitive abilities are a significant predictor of behavioral inconsistency when we measure children's time and risk preferences.
    Keywords: Intelligence Quotient, Cognitive Reflection, Cognitive Skills, Inconsistent behavior, Time preference, Risk preference, Field Experiment,
    JEL: C93 D91 J13 J24
    Date: 2021–12–19
  2. By: Masaki Aoyagi; Guillaume Frechette; Sevgi Yuksel
    Abstract: This paper uses a laboratory experiment to study beliefs and their relationship to action and strategy choices in finitely and indefinitely repeated prisoners' dilemma games. We find subjects' beliefs about the other player's action are accurate despite some systematic deviations corresponding to early pessimism in the indefinitely repeated game and late optimism in the finitely repeated game. The data reveals a close link between beliefs and actions that differs between the two games. In particular, the same history of play leads to different beliefs, and the same belief leads to different action choices in each game. Moreover, we find beliefs anticipate the evolution of behavior within a supergame, changing in response to the history of play (in both games) and the number of rounds played (in the finitely repeated game). We then use the subjects' beliefs over actions in each round to identify their beliefs over supergame strategies played by the other player. We find these beliefs correctly capture the different classes of strategies used in each game. Importantly, subjects using different strategies have different beliefs, and for the most part, strategies are subjectively rational given beliefs. The results also suggest subjects tend to overestimate the likelihood that others use the same strategy as them, while underestimating the likelihood that others use less cooperative strategies.
    Date: 2021–02
  3. By: Schiele, Valentin; Schmitz, Hendrik
    Abstract: Individual cognitive functioning declines over time. We seek to understand how adverse physical health shocks in older ages contribute to this development. By use of event-study methods and data from the USA, England and several countries in Continental Europe we find evidence that health shocks lead to an immediate and persistent decline in cognitive functioning. This robust finding holds in all regions representing different health insurance systems and seems to be independent of underlying individual demographic characteristics such as sex and age. We also ask whether variables that are susceptible to policy action can reduce the negative consequences of a health shock. Our results suggest that neither compulsory education nor retirement regulations moderate the effects, thus emphasizing the importance of maintaining good physical health in old age for cognitive functioning.
    Keywords: Cognitive decline,health shocks,retirement,education,event study
    JEL: J24 J14 I1 I12 J2
    Date: 2021
  4. By: Eibich, Peter; Kanabar, Ricky; Plum, Alexander; Schmied, Julian
    Abstract: Biological processes have provided new insights into diverging labour market trajectories. This paper uses population variation in testosterone levels to explain transition probabilities into and out of unemployment. We examine labour market transitions for 2,004 initially employed and 111 initially unemployed British men from the UK Household Longitudinal Study (“Understanding Society†) between 2009 and 2015. We address the endogeneity of testosterone levels by using genetic variation as instrumental variables (Mendelian Randomization). We find that for both initially unemployed men as well as initially employed men, higher testosterone levels reduce the risk of unemployment. Based on previous studies and descriptive evidence, we argue that these effects are likely driven by differences in cognitive and non-cognitive skills as well as job search behaviour of men with higher testosterone levels. Our findings suggest that latent biological processes can affect job search behaviour and labour market outcomes without necessarily relating to illness and disability.
    Date: 2021–12–17
  5. By: Bago, Bence; Rosenzweig, Leah; Berinsky, Adam; Rand, David
    Abstract: Misinformation is a serious concern for societies across the globe. To design effective interventions to combat the belief in and spread of misinformation, we must understand which psychological processes influence susceptibility to misinformation. This paper tests the widely assumed -- but largely untested -- claim that people are worse at identifying true versus false headlines when the headlines are emotionally provocative. Consistent with this proposal, we found correlational evidence that overall emotional response at the headline level is associated with diminished truth discernment, except for experienced anger which was associated with increased truth discernment. A second set of studies tested a popular emotion regulation intervention where people were asked to apply either emotional suppression or emotion reappraisal techniques when considering the veracity of several headlines. In contrast to the correlation results, we found no evidence that emotion regulation helped people distinguish false from true news headlines.
    Date: 2021–12–09

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