New Economics Papers
on Neuroeconomics
Issue of 2012‒05‒02
three papers chosen by
  1. Cognitive ability and learning to play equilibrium: A level-k analysis By Gill, David; Prowse, Victoria
  2. Income Comparisons and Non-Cognitive Skills By Santi Budria; Ada Ferrer-i-Carbonell
  3. Consumer attention to advertising. By Pieters, R.; Wedel, M.
  1. By: Gill, David; Prowse, Victoria
    Abstract: In this paper we investigate how cognitive ability influences behavior, success and the evolution of play towards Nash equilibrium in repeated strategic interactions. We study behavior in a p-beauty contest experiment and find striking differences according to cognitive ability: more cognitively able subjects choose numbers closer to equilibrium, converge more frequently to equilibrium play and earn more even as behavior approaches the equilibrium prediction. To understand better how subjects with different cognitive abilities learn differently, we estimate a structural model of learning based on level-k reasoning. We find a systematic positive relationship between cognitive ability and levels; furthermore, the average level of more cognitively able subjects responds positively to the cognitive ability of their opponents, while the average level of less cognitively able subjects does not respond at all. Our results suggest that, in strategic environments, higher cognitive ability translates into better analytic reasoning and a better ‘theory of mind’
    Keywords: Cognitive ability; Bounded rationality; Learning; Convergence; Level-k; Nonequilibrium behavior; Beauty contest; Repeated games; Structural modeling; Theory of mind; Intelligence; Raven test
    JEL: D83 C73 C91
    Date: 2012–04–23
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:38317&r=neu
  2. By: Santi Budria; Ada Ferrer-i-Carbonell
    Abstract: People gain utility from occupying a higher ranked position in the income distribution of the reference group. This paper investigates whether these gains depend on an individual's set of non-cognitive skills. Using the 2000-2008 waves of the German Socioeconomic Panel dataset (SOEP), a subjective question on Life Satisfaction, and three different sets of non-cognitive skills indicators, we find significant and robust differences across skills groups. People who are more neurotic, extravert and have low external locus of control and low negative reciprocity are more sensitive to their individual position in the economic ladder. By contrast, the Life Satisfaction reaction to changes in economic status is significantly lower among individuals who score high (low) in negative (positive) reciprocity, and are at the bottom of the distribution of neuroticism, extraversion. The heterogeneity on the importance of income comparisons needs to be taken into account when, for example, introducing them into economic models, predicting individuals' behaviour, or making welfare judgments.
    Keywords: Life satisfaction, income comparisons, personality traits
    JEL: D62 I31
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp441&r=neu
  3. By: Pieters, R. (Tilburg University); Wedel, M.
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:ner:tilbur:urn:nbn:nl:ui:12-5258450&r=neu
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