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on Cognitive and Behavioural Economics |
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Issue of 2020‒01‒13
seven papers chosen by Marco Novarese Università degli Studi del Piemonte Orientale |
| By: | James J. Heckman (The University of Chicago); Tomas Jagelka; Tim Kautz (Mathematica) |
| Abstract: | This paper synthesizes recent research in economics and psychology on the measurement and empirical importance of personality skills and preferences. They predict and cause important life outcomes such as wages, health, and longevity. Skills develop over the life cycle and can be enhanced by education, parenting, and environmental influences to different degrees at different ages. Economic analysis clarifies psychological studies by establishing that personality is measured by performance on tasks which depends on incentives and multiple skills. Identification of any single skill therefore requires isolation of confounding factors, accounting for measurement error using rich data and application of appropriate statistical techniques. Skills can be inferred not only by questionnaires and experiments but also from observed behavior. Economists advance the analysis of human differences by providing anchored measures of economic preferences and studying their links to personality and cognitive skills. Connecting the research from the two disciplines promotes understanding of the number and nature of skills and preferences required to characterize essential differences. |
| Keywords: | preferences, psychology, behavioral economics, human diversity |
| JEL: | C91 C93 D12 D91 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2019-069&r=all |
| By: | March, Christoph |
| Abstract: | Artificial intelligence (AI) is starting to pervade the economic and social life rendering strategic interactions with artificial agents more and more common. At the same time, experimental economic research has increasingly employed computer players to advance our understanding of strategic interaction in general. What can this strand of research teach us about an AI-shaped future? I review 90 experimental studies using computer players. I find that, in a nutshell, humans act more selfishly and more rational in the presence of computer players, and they are often able to exploit these players. Still, many open questions prevail. |
| Keywords: | Experiment,Robots,Computer players,Survey |
| JEL: | C90 C92 O33 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bamber:154&r=all |
| By: | Ulrich Gabriel Strunz (UCAM Universidad Católica San Antonio de Murcia); Christian Chlupsa (FOM University of Economics and Management) |
| Abstract: | Economic decision making is governed by complex problems. During complex problem solving, not all relevant information will be available to the decision-maker at first sight. Knowledge is derived from generally incomplete information and is accompanied by uncertainty. This can lead to falsely confirming one?s understanding of the true rules governing a complex problem. Bad choices can then lead to good outcomes, further strengthening a wrong mental model, eventually leading to inefficient strategies. The decision-maker can then either rely on old strategies or begin to gather new information, perform counterintuitive actions to override former rule knowledge and thus engage in non-routine problem solving. Curiosity might favor such behavior, as it is the recognition, pursuit and desire to explore uncertain and ambiguous events. To analyze the decision patterns of participants who are more successful in overcoming routine and to find possible correlations with curiosity, two hundred sixty-two US-American Mturks completed both a curiosity questionnaire and an experiment in the form of a cognitive puzzle game. High values in ?Joyous Exploration? were not associated with larger numbers of experimental decisions, while about 10 % of the participants who succeeded in obtaining true rule knowledge performed less experimental decisions, reported higher response times, but solved the experiment more efficiently. As shown, overcoming routine is an essential ?21st Century skill? in economic decision making that requires learning from unexpected feedback, benefits from reflection time and is shown to be a serious mental challenge. |
| Keywords: | complex problem solving, dynamic decision making, response time, decision bias, mental model, cognitive reflection, overcoming routine, non-routine task, curiosity, emotion |
| JEL: | D81 D83 D91 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:9712054&r=all |
| By: | Benjamin Enke; Thomas Graeber |
| Abstract: | This paper introduces a formal definition and an experimental measurement of the concept of cognitive uncertainty: people’s subjective uncertainty about what the optimal action is. This concept allows us to bring together and partially explain a set of behavioral anomalies identified across four distinct domains of decision-making: choice under risk, choice under ambiguity, belief updating, and survey expectations about economic variables. In each of these domains, behavior in experiments and surveys tends to be insensitive to variation in probabilities, as in the classical probability weighting function. Building on existing models of noisy Bayesian cognition, we formally propose that cognitive uncertainty generates these patterns by inducing people to compress probabilities towards a mental default of 50:50. We document experimentally that the responses of individuals with higher cognitive uncertainty indeed exhibit stronger compression of probabilities in choice under risk and ambiguity, belief updating, and survey expectations. Our framework makes predictions that we test using exogenous manipulations of both cognitive uncertainty and the location of the mental default. The results provide causal evidence for the role of cognitive uncertainty in belief formation and choice, which we quantify through structural estimations. |
| Keywords: | cognitive uncertainty, beliefs, bounded rationality |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7971&r=all |
| By: | Greiner, Ben; Stephanides, Marianne |
| Abstract: | Color research has a long tradition in psychology, consumer behavior, and marketing research. The literature suggests that exposure to colors influences mood and emotions of humans as well as their attitudes towards products. This paper makes two contributions. First, we review the existing literature in science and psychology on the effects of environmental colors (red and blue) on physiological functions, mood, and consumer/economic decision-making, insofar it may be potentially relevant to experimental and behavioral economists. Second, we conduct a laboratory experiment with a typical experimental economics subject pool testing the effects of environmental colors red and blue on decision-making in an incentivized Ultimatum Game experiment. We find no statistically significant effect. However, we also cannot replicate previous results of exposure to colors red and blue on mood as measured by established questionnaire instruments. Our results suggest that experimental economists do not need to worry about the potential confound of colors in economic decision-making. |
| Keywords: | experiment, colors, bargaining |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wus055:7388&r=all |
| By: | Zhixin Dai (China Financial Policy Research Center, School of Finance, Renmin University of China); Jiwei Zheng (School of Economics and Centre for Behavioural and Experimental Social Science, University of East Anglia); Daniel John Zizzo (School of Economics, University of Queensland) |
| Abstract: | We present a coordination game experiment testing the robustness of the predictive power of level-k reasoning and team reasoning in a sample of Chinese tax administrators. We show how the incidence of coordination game play is virtually identical between Chinese tax administrators and university students, which in turn is comparable with that found in research with a Western university student sample. However, relatively to non-students, students are comparatively more attracted by the focal point under team reasoning when this has equal payoffs and the other outcomes do not. |
| Keywords: | non-student subjects, focal points, team reasoning, level-k, coordination games |
| JEL: | C72 C78 C91 |
| Date: | 2019–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:612&r=all |
| By: | Giuseppe Danese; Luigi Mittone |
| Abstract: | The anthropological literature provides many instances of tokens donated in the form of a gift to woo potential trade partners, or to strengthen ties to existing partners. We study the role of gifts, as pledges of one’s trustworthiness, through an experiment modeled on the trust game. We vary whether the trustee can send a token before the trustor decides whether to transfer money; whether one of the tokens is socially positioned; and whether the participants interact repeatedly or are randomly re-matched in each round. Participants in a fixed matching achieve comparable levels of trust and trustworthiness in the studies with and without tokens. In the studies with a token, trustors send significantly more points when the trustee has sent a token. A token is used more sparingly after it is socially positioned. We conclude that for institutional design, the time horizon of the relationship might be at least as important as the ability to make pledges. |
| Keywords: | Pledges, Gifts, Marcel Mauss, Trust Game, Tokens |
| JEL: | Z13 B52 C92 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpce:2001&r=all |