nep-neu New Economics Papers
on Neuroeconomics
Issue of 2022‒04‒11
four papers chosen by
Daniel Houser
George Mason University

  1. Can Emotional Intelligence promote Individual Wellbeing and protect from perceptions' traps? By Antonino Callea; Dalila De Rosa; Giovanni Ferri; Francesca Lipari; Marco Costanzi
  2. The Impact of Social Influence and Risk Assessment Cues on User Conversion in Gam(bl)ified Digital Business Models By Röthke, Konstantin
  3. Econographics By Jonathan Chapman; Mark Dean; Pietro Ortoleva; Erik Snowberg; Colin Camerer
  4. Overconfidence, Alcohol and the Environment: Evidence from a Lab-in-the-Field Experiment By Long, Iain W; Matthews, Kent; Sivarajasingam, Vaseekaran

  1. By: Antonino Callea (LUMSA University); Dalila De Rosa (Ministero dell'Economia); Giovanni Ferri (LUMSA University); Francesca Lipari (Carlos III University of Madrid); Marco Costanzi (LUMSA University)
    Abstract: Rising income inequality has become a major worry in rich countries’ societies and a focus for remedial policy action to protect individual wellbeing. However, cognitive biases, misconceptions and emotions might detach inequality, as perceived by individuals, from the real measures of inequality. On a unique survey of 627 Italian respondents to a questionnaire tailor-made to embrace individuals’ Emotional Intelligence (EI), and perceptions about various socio-economic variables, we study the determinants of wellbeing. Specifically, we quantify wellbeing alternatively through Happiness – hedonic measure – or through Flourishing – eudemonic measure – and investigate its relationship with an individual’s perceived inequality (PI) and EI. Via an instrumental variable approach to tackle the intrinsic endogeneity of wellbeing with PI and EI, we reach two main results: i) Happiness responds (negatively) to PI, and positively to EI; ii) Flourishing is positively related to EI, but not to PI. Moreover, we find that PI depends negatively on individual’s trust, and income comparison. Finally, Happiness, Flourishing and PI are all related to real measures of income inequality such as the Gini index. Thus, reducing perceived inequality and promoting the capability to recognize other’s emotions are the true channels through which policies could promote society’s wellbeing while protecting it from perception traps.
    Keywords: Perceived Inequality; Emotional Intelligence; Individual Wellbeing; Analysis of Survey Data
    JEL: D91 D63 I31 C83
    Date: 2022–03
  2. By: Röthke, Konstantin
    Abstract: Information systems (IS) research that examines individual user-system interaction naturally relies on human cognition, judgment, and decision-making. Accordingly, this branch of IS research has employed psychological theories since its inception. However, only in recent years have IS researchers started to investigate how insights from cognitive psychology, social psychology, and behavioral economics can be leveraged within IS design. Especially the utilization of cognitive biases in combination with gamification currently attracts a lot of research attention. Both concepts aim at designing IS in a way that motivates users towards a target behavior. Despite calls for IS research on gamification to leverage insights from behavioral economics and social psychology in the context of gam(bl)ified IS (i.e., IS that use game/gambling design elements for non-entertainment purposes), there is only sparse research investigating how information cues can address cognitive biases to affect outcomes within gam(bl)ified IS. To advance the emergent research in these connected fields, this thesis investigates how information cues embedded in user-interface design elements can account for two important categories of cognitive biases regarding their influence on user behavior. More specifically, this thesis examines how information cues that address social influence biases and risk assessment biases impact user conversion (i.e., the process of turning visitors into active and/or paying users) within gam(bl)ified IS. Against this backdrop, five studies were conducted and published across four articles. The first study lays the foundation for the research context and setting. More specifically, a taxonomy of gamification elements is developed and extended to account for the novel gamification-related concept of gamblification. While gamification is often defined as the use of game design elements in a non-gaming context, gamblification can be viewed as the use of gambling design elements in non-gambling contexts. Gamblification is a unique concept that can be distinguished from gamification because it additionally relies on chance-based uncertainty and user-system resource transfer. Both gamification and gamblification provide a suitable setting for examining how cognitive biases can be accounted for in regard of their impact on user behavior. This is because gamification is often concerned with social interactions (e.g., competition or cooperation) and therefore frequently relies on social psychology as a theoretical foundation. Gamification is thus predestined to investigate the role of social influence biases (i.e., cognitive biases based on social influence theory) in motivating users towards a target behavior. Likewise, the emergent gamblification research setting is intriguing for investigating cognitive biases. Due to the inherent characteristics of gamblification (i.e., chance-based uncertainty and resource transfer) particularly risk assessment biases (i.e., cognitive biases that are induced by biased risk assessment) are highly relevant in this environment. The second article is situated in a gamified IS environment and investigates the role of social influence biases in fostering user conversion behavior (i.e., user registration) on an e-commerce platform. Drawing on social influence theory, two social influence cues (i.e., information cues that account for social influence biases), namely reciprocity cues and social proof cues, are embedded in the gamification design element ‘user onboarding’ and investigated in an e-commerce setting. The article’s findings indicate that both, reciprocity and social proof, have positive direct effects on user registration. However, depending on how reciprocity is implemented, the interactive effect of reciprocity and social proof attenuates or amplifies the positive direct effect. The third article examines risk assessment cues (i.e., information cues that aim to account for risk assessment biases) positioned within the gamblification element of a ‘loot box menu’. By illuminating how these risk assessment cues can address a group of risk assessment biases, namely probability evaluation biases (i.e., cognitive biases that result from a skewed evaluation of probabilities during risk assessment) their role in affecting product selection in a digital gaming context is investigated. More specifically, drawing on prospect theory, information cues are designed to account for two different probability evaluation biases, the certainty effect and the availability bias. The study’s results demonstrate that offering users loot box menus with two different probabilities of winning a reward (i.e., the choice between two different uncertain rewards vs. the choice between a certain and an uncertain reward) may trigger the certainty effect which influences user conversion behavior (i.e., product selection). Moreover, combining these different loot box menu designs with a previous loss experience causes users to be subject to the availability bias and amplifies the certainty effect. In contrast, when users are subject to the optimism bias, the certainty effect is attenuated. The fourth and last article investigates how risk assessment cues embedded in differently designed product offerings (i.e., gamblified vs. transaction-based) in the context of a digital gaming service can address a different group of risk assessment biases (i.e., stability biases) and thereby influence user conversion behavior (i.e., user purchase behavior). More specifically, drawing on literature on decision-making under risk, information cues are designed to address two stability biases, namely the risk avoidance effect and the endowment effect. Moreover, the effect of a general personal trait that is relevant for risk assessment (i.e., risk aversion) is examined. The results reveal that a gamblified product offering (i.e., a loot box with an uncertain reward) vs. a transaction-based product offering (i.e., a loot box with a certain reward) triggers the risk avoidance effect that influences user conversion. This effect is amplified when users are either subject to the endowment effect (i.e., when they experience a previous endowment with a loot box) or when they are risk-averse. Taken together, this thesis highlights the importance of considering the role of social influence and risk assessment biases and how information cues can be designed within gam(bl)ified IS to address these cognitive biases to motivate users towards a target behavior. Moreover, the results contribute to IS research by exploring the impact of manifold information cues that account for social influence and risk assessment biases as well as context-dependent interacting variables in various gam(bl)ified IS environments. Alongside these contributions to research, this thesis provides several interesting and actionable recommendations on how to implement information cues that take cognitive biases into account. This is primarily aimed at practitioners tasked with designing gam(bl)ified IS with the goal of optimizing user conversion behavior.
    Date: 2022
  3. By: Jonathan Chapman (NYUAD); Mark Dean (Columbia University); Pietro Ortoleva (Princeton University); Erik Snowberg (Caltech); Colin Camerer (Caltech)
    Abstract: We study the pattern of correlations across a large number of behavioral regularities, with the goal of creating an empirical basis for more comprehensive theories of decision- making. We elicit 21 behaviors using an incentivized survey on a representative sample (n = 1,000) of the U.S. population. Our data show a clear and relatively simple structure underlying the correlations between these measures. Using principal components analysis, we reduce the 21 variables to six components corresponding to clear clusters of high correlations. We examine the relationship between these components, cognitive ability, and demographics. Common extant theories explain some of the patterns in our data, but each theory we examine is also inconsistent with some patterns.
    Keywords: Econographics, Reciprocity, Altruism, Trust, Costly Third-Party Punishment, Inequality Aversion, Risk Aversion, Common-Ratio Effect, Endowment Effect, WTA, WTP, Ambiguity Aversion
    JEL: C90 D64 D81 D90 D91
    Date: 2020–11
  4. By: Long, Iain W (Cardiff Business School); Matthews, Kent (Cardiff Business School); Sivarajasingam, Vaseekaran (Cardiff University,School of Dentistry)
    Abstract: Alcohol has long been known as the demon drink; an epithet owed to numerous social ills associated with it. Our lab-in-the-field experiment assesses the extent to which intoxication leads to changes in overconfidence or cognitive ability that are often linked to problematic behaviours. Results suggest that it is the joint effect of being intoxicated in a bar that matters. Subjects systematically underestimated their magnitude, suggesting that they cannot be held fully accountable for their actions.
    Keywords: Alcohol intoxication, overconfidence
    JEL: C93 D91 I18
    Date: 2022–03

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