nep-neu New Economics Papers
on Neuroeconomics
Issue of 2024‒04‒01
four papers chosen by

  1. Privacy regulation, cognitive ability, and stability of collusion By Rupayan Pal; Sumit Shrivastav
  2. Cognitive Abilities and Individual Earnings in Hybrid Continuous Double Auctions By Yan Peng; Jason Shachat; Lijia Wei; S. Sarah Zhang
  3. Family foster care or residential care: the impact of home environment on children raised in state care By Anna Bárdits; Gábor Kertesi
  4. The economic value of childhood socio-emotional skills By Del Bono, Emilia; Etheridge, Ben; Garcia, Paul

  1. By: Rupayan Pal (Indira Gandhi Institute of Development Research); Sumit Shrivastav (Indian Institute of Science Education and Research Bhopal)
    Abstract: This article analyzes implications of privacy regulation on stability of tacit collusion. It shows that privacy regulation is likely to hurt consumers' economic benefits, through its competition dampening effect. A more effective broad scope privacy regulation makes collusion more likely to be stable, regardless of the level of consumers' cognitive ability. Whereas, if the scope of privacy regulation is narrow, (a) its effectiveness positively (does not) affect collusion stability under limited (unlimited) cognitive ability of consumers and (b) the likelihood of collusion stability is decreasing in the level of consumers' cognitive ability. Our insights are relevant for designing privacy regulation.
    Keywords: Privacy regulation, Limited cognitive ability, Behavior-based price discrimination, Stability of collusion, Level-k Thinkin
    JEL: D43 L13 L88 L86
    Date: 2024–03
  2. By: Yan Peng (Xiamen University); Jason Shachat (Durham University Business School, Wuhan Unviversity, Chapman University); Lijia Wei (Wuhan University); S. Sarah Zhang (University of Manchester)
    Abstract: We study the influence of cognitive abilities, in particular reaction time, trader intuition (Theory of Mind), and cognitive reflection abilities, on human participants’ individual earnings when competing alongside algorithmic traders in continuous double auctions. In balanced markets, where each human trader has an algorithmic trader clone with the same valuations or costs, faster human reaction time significantly improves trading performance, while Theory of Mind can be detrimental to human trading performance, particularly for sellers. For unbalanced markets with humans and algorithmic traders on opposite sides of the market, the effects of cognitive abilities depend on trader role as well as agent presence and speed, highlighting the influence of market balance and agent presence and speed on trading success and earnings.
    Keywords: Trading agents, Cognitive abilities, Algorithmic trading, Laboratory experiment
    JEL: C78 C92 D40
    Date: 2024
  3. By: Anna Bárdits (HUN-REN Centre for Economic and Regional Studies); Gábor Kertesi (HUN-REN Centre for Economic and Regional Studies)
    Abstract: This paper investigates how the type of home environment – family foster care or residential care – affects the adult outcomes of individuals who were raised in state care during adolescence. While it is established in the literature that living in residential care is detrimental for babies, the effect of living in different types of care as an older child is underexplored. We use Hungarian individual-level administrative panel data and follow the children from age 13 until age 19. We show that the adult outcomes of adolescents who grew up in a foster family are substantially better even after controlling for a rich set of variables, including indicators of cognitive and non-cognitive skills, and mental problems observed at age 13. Young adults who grew up in family foster care are 8 percentage points more likely to complete secondary education, and 11 percentage points less likely to spend at least 6 months without either working or studying at age 19, than comparable peers raised in residential care. Using mental health medication is 5 percentage points less likely. For girls, the probability of teenage birth and abortion are smaller by 12 percentage points each. IV estimations using local foster mother capacity as an instrument reinforce the beneficial effect of family foster care..
    Keywords: Keywords: foster care, residential care, institutional care, state care
    JEL: J12 J13
    Date: 2024–03
  4. By: Del Bono, Emilia; Etheridge, Ben; Garcia, Paul
    Abstract: We investigate the relationship between child socio-emotional skills and labour market outcomes using longitudinal data from the 1970 British Cohort Study. We perform a novel factor analysis of child skills and capture four latent dimensions, representing ‘attention’, ‘conduct’, ‘emotional’, and ‘peers’ problems. Conditional on a range of confounding variables, we ï¬ nd that conduct problems, driven by aggression and impulsivity, are associated with positive outcomes in the labour market: higher wages, higher labour supply, sorting into ‘good’ jobs and higher productivity conditional on job tasks. Attention problems are instead negatively associated with labour market outcomes and this relationship is partially accounted for by schooling. We explore different mediating pathways, including through career interests, socialization and mental health - all measured in the adolescent period - but none of these is able to fully explain the association between child skills and later economic outcomes.
    Date: 2024–03–11

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