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on Cognitive and Behavioural Economics |
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Issue of 2024‒03‒18
four papers chosen by |
| By: | Thomas Graeber; Shakked Noy; Christopher Roth; Thomas W. Graeber |
| Abstract: | For many decisions, people rely on information received from others by word of mouth. How does the process of verbal transmission distort economic information? In our experiments, participants listen to audio recordings containing economic forecasts and are paid to accurately transmit the information via voice messages. Other participants listen either to an original recording or a transmitted version and then state incentivized beliefs. Our main finding is that, across a variety of transmitter incentive schemes, information about the reliability of a forecast is lost in transmission more than twice as much as information about the forecast’s level. This differential information loss predictably distorts listeners’ belief updates: following transmission, reliable and unreliable messages converge in influence and average belief updates from new information are weakened. Mechanism experiments show that the differential loss is not driven by transmitters deliberately trading off the costs and benefits of transmitting different kinds of information. Instead, it results from memory constraints during transmission, which can be overcome through targeted reminders. |
| Keywords: | information transmission, word-of-mouth, narratives, reliability |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10903&r=cbe |
| By: | Laura Breitkopf (Max Planck Institute for Research on Collective Goods, Bonn); Shyamal Chowdhury (University of Sydney); Shambhavi Priyam (World Bank, Washington DC, US); Hannah Schildberg-Hörisch (Max Planck Institute for Research on Collective Goods, Bonn, Heinrich Heine University Düsseldorf (DICE), IZA Institute of Labor Economics, Bonn); Matthias Sutter (Max Planck Institute for Research on Collective Goods, Bonn, University of Cologne, Germany, University of Innsbruck, Austria, IZA Bonn, Germany, and CESifo Munich) |
| Abstract: | We use novel data on nearly 6, 000 children and adolescents aged 6 to 16 that combine incentivized measures of social, time, and risk preferences with rich information on child behavior and family environment to study whether children’s economic preferences predict their behavior. Results from standard regression specifications demonstrate the predictive power of children’s preferences for their prosociality, educational achievement, risky behaviors, emotional health, and behavioral problems. In a second step, we add information on a family’s socio-economic status, family structure, religion, parental preferences and IQ, and parenting style to capture household environment. As a result, the predictive power of preferences for behavior attenuates. We discuss implications of our findings for research on the formation of children’s preferences and behavior. |
| Keywords: | social preferences, time preferences, risk preferences, experiments with children, origins of preferences, human capital, behavior |
| JEL: | C91 D01 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2024_09&r=cbe |
| By: | Guy Aridor; Rava Azeredo da Silveira; Michael Woodford |
| Abstract: | We analyze a coordination game with information-constrained players. The players’ actions are based on a noisy compressed representation of the game’s payoffs in a particular case, where the compressed representation is a latent state learned by a variational autoencoder (VAE). Our generalized VAE is optimized to trade off the average payoff obtained over a distribution of possible games against a measure of the congruence between the agent’s internal model and the statistics of its environment. We apply our model to the coordination game in the experiment of Frydman and Nunnari (2023), and show that it offers an explanation for two salient features of the experimental evidence: both the relatively continuous variation in the players’ action probabilities with changes in the game payoffs, and the dependence of the degree of stochasticity of players’ choices on the range of game payoffs encountered on different trials. Our approach also provides an account of the way in which play should gradually adjust to a change in the distribution of game payoffs that are encountered, offering an explanation for the history-dependent play documented by Arifovic et al. (2013). |
| Keywords: | global games, experiments, autoencoder, cognitive noise |
| JEL: | C45 C63 C73 C92 D91 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10935&r=cbe |
| By: | Paul Heidhues (Heinrich Heine University Dusseldorf); Botond Koszegi (Central European University (CEU)); Philipp Strack (Yale University) |
| Abstract: | We model an agent who stubbornly underestimates how much his behavior is driven by undesirable motives, and, attributing his behavior to other considerations, updates his views about those considerations. We study general properties of the model, and then apply the framework to identify novel implications of partially naive present bias. In many stable situations, the agent appears realistic in that he eventually predicts his behavior well. His unrealistic self- view does, however, manifest itself in several other ways. First, in basic settings he always comes to act in a more present-biased manner than a sophisticated agent. Second, he systematically mispredicts how he will react when circumstances change, such as when incentives for forward-looking behavior increase or he is placed in a new, ex-ante identical environment. Third, even for physically non-addictive products, he follows empirically realistic addiction-like consumption dynamics that he does not anticipate. Fourth, he holds beliefs that Ñ when compared to those of other agents Ñ display puzzling correlations between logically unrelated issues. Our model implies that existing empirical tests of sophistication in intertemporal choice can reach incorrect conclusions. Indeed, we argue that some previous findings are more consistent with our model than with a model of correctly specified learning. |
| Date: | 2023–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2378&r=cbe |