nep-neu New Economics Papers
on Neuroeconomics
Issue of 2023‒02‒20
three papers chosen by

  1. Cognitive reflection and 2D:4D: Evidence from a large population sample By Neyse, Levent; Fossen, Frank M.; Johannesson, Magnus; Dreber, Anna
  2. Cognitive Ability and Perceived Disagreement in Learning By Piotr Evdokimov; Umberto Garfagnini
  3. Cognitive biases and historical turns. An empirical assessment of the intersections between minds and events in the investors’ decisions By Lorenzo Esposito; Letizia Malara

  1. By: Neyse, Levent; Fossen, Frank M.; Johannesson, Magnus; Dreber, Anna
    Abstract: Bosch-Domènech et al. (2014) reported a negative association between 2D:4D, a suggested marker of prenatal testosterone exposure, and the Cognitive Reflection Test (CRT) in a sample of 623 university students. In this pre-registered study, we test whether we can replicate their findings in a general population sample of over 2, 500 individuals from Germany. We find no statistically significant association between 2D:4D and the CRT in any of our primary hypothesis tests, or in any of our pre-registered exploratory analyses and robustness tests. The evidence is strong (based on the 99.5% confidence intervals in all three primary hypotheses tests) against effect sizes in the hypothesized direction larger than 0.075 CRT units (0.073 of the CRT standard deviation) for a one standard deviation change in 2D:4D.
    Keywords: Cognitive Reflection Test, 2D:4D, Replication, Prenatal Testosterone, Sex
    JEL: D87 D9
    Date: 2023
  2. By: Piotr Evdokimov (HU Berlin); Umberto Garfagnini (University of Surrey)
    Abstract: Do agents believe to be agreeing more with others in the long-run? This paper designs an experiment to study how cognitive abilities affect actual and perceived disagreement in a standard sequential belief updating task with public signals. We document a persistent gap in the perception of disagreement as a function of cognitive ability. Higher cognitive ability is associated with less perceived disagreement, although the average subject underestimates the extent of actual disagreement regardless of cognitive ability. Learning about the state of the world has little effect on the evolution of perceived disagreement when controlling for cognitive ability. Providing subjects with information about their partner’s cognitive ability affects perceived disagreement only when the partner is less cognitively able.
    Keywords: cognitive ability; disagreement; learning;
    JEL: C90 D83 D89
    Date: 2023–02–06
  3. By: Lorenzo Esposito (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore, Milano, Italy – Banca d'Italia, Milano, Italy); Letizia Malara (DISCE, Università Cattolica del Sacro Cuore, Milano, Italy)
    Abstract: Mainstream theory of finance is based on the assumptions that markets are efficient and economic agents are rational, in the sense that they use optimally the information they have in order to maximize their utility. At least since the “Allais paradox”, countless experiments have shown that this is not the case and investors’ decisions are often inconsistent. In particular, the researches by Kahneman and Tversky have highlighted that investor behaviors are not rational and sometimes are inconsistent with the logic of the traditional finance theory, due to numerous cognitive biases, which interfere with the choice process of investors. In this paper we investigate some of the most well-known cognitive biases: framing effect, loss aversion, endowment effect, decoy effect and disposition effect. In addition, the availability and representativeness heuristics and their associated biases (confirmation bias, accessibility bias, and conjunction fallacy) are examined. Our experimental methodology is based on a questionnaire consisting of 23 questions and organized into 6 sections, each referring to the various biases examined. The answers obtained differ somewhat from the huge literature on cognitive biases. We understand these differences as mainly connected to the unheard situation created by the Covid-19 pandemic, showing that personal experiences do have an effect on risk preferences.
    Keywords: cognitive biases, behavioral economics, prospect theory, pandemic
    JEL: G41
    Date: 2023–01

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