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on Neuroeconomics |
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Issue of 2017‒10‒01
five papers chosen by |
| By: | Lee, Ji Yong; Nayga, Rodolfo; Deck, Cary; Drichoutis, Andreas C. |
| Abstract: | Behavioral biases are more pronounced for individuals with lower cognitive abilities. This paper examines what connection if any there is between cognitive ability and bidding strategy in second price auctions. Despite truthful revelation being a weakly dominant strategy, previous experiments have consistently observed overbidding, which makes use of such auctions for inferring homegrown value problematic. Examining the effect of cognitive ability is important as it may help identify when one can reliably recover values from bids. The results indicate that more cognitively able subjects behave in closer accordance with theory, and that cognitive ability partially explains heterogeneity in bidding behavior. |
| Keywords: | Cognitive ability; Second price auction; Bid deviation; Overbidding; Laboratory experiment |
| JEL: | C91 C92 |
| Date: | 2017–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:81495&r=neu |
| By: | Bütikofer, Aline (Dept. of Economics, Norwegian School of Economics and Business Administration); Peri, Giovanni (UC Davis) |
| Abstract: | There is growing evidence that cognitive and noncognitive skills affect the economic and social outcomes of individuals. In this paper, we analyze how they affect the migration decisions of individuals during their lifetimes. We use data that combine military enlistment and administrative records for the male population born in 1932 and 1933 in Norway. Records of interviews with a psychologist at age 18 allow us to construct an index of `sociability' and `adaptability' for each individual, as well as an index of cognitive ability, the intelligence quotient. We find that adaptability and cognitive ability have significant and positive impacts on the probability of an individual migrating out of his area, whether this involves rural{urban, long distance, or international migration. Adaptability has a particularly strong impact on migration for individuals with low cognitive skills, implying a strong positive selection of less educated migrants with respect to the (previously unobserved) adaptability skill. We also show that cognitive skills have a strong positive effect on the pre- and post-migration wage differential, whereas adaptability has no significant effect. Moreover, individuals with high cognitive ability migrate to areas with large wage returns to cognitive abilities, whereas this is not true for individuals with high adaptability. This evidence suggests that adaptability reduces the psychological cost of migrating, whereas cognitive skills increase the monetary returns associated with migration. |
| Keywords: | Noncognitive Skills; Mobility Costs; Returns to Migration |
| JEL: | J24 J61 R23 |
| Date: | 2017–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2017_017&r=neu |
| By: | Brice Corgnet (EMLYON Business school - EMLYON Business School, GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Etienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Antonio M. Espin (Middlesex University Business School - Middlesex University Business School); Roberto Hernán-Gonzalez (Nottingham University Business School - UON - University of Nottingham, UK) |
| Abstract: | Organizations crucially need the creative talent of millennials but are reluctant to hire them because of their supposed lack of diligence. Recent studies have shown that hiring diligent millennials requires selecting those who score high on the Cognitive Reflection Test (CRT) and thus rely on effortful thinking rather than intuition. A central question is to assess whether the push for recruiting diligent millennials using criteria such as cognitive reflection can ultimately hamper the recruitment of creative workers. To answer this question, we study the relationship between millennials' creativity and their performance on fluid intelligence (Raven) and cognitive reflection (CRT) tests. The good news for recruiters is that we report, in line with previous research, evidence of a positive relationship of fluid intelligence, and to a lesser extent cognitive reflection, with convergent creative thinking. In addition, we observe a positive effect of fluid intelligence on originality and elaboration measures of divergent creative thinking. The bad news for recruiters is the inverted U-shape relationship between cognitive reflection and fluency and flexibility measures of divergent creative thinking. This suggests that thinking too much may hinder important dimensions of creative thinking. Diligent and creative workers may thus be a rare find. |
| Keywords: | Millennials,Creativity, Cognitive Skils |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01439169&r=neu |
| By: | Dickinson, David L. (Appalachian State University); McElroy, Todd (Florida Gulf Coast University) |
| Abstract: | This paper examines the impact of a commonly experienced adverse cognitive state on decision making under uncertainty. Specifically, we administer an at-home sleep restriction protocol combined with random assignment to the time-of-day for decision making. Thus, we induce sleepiness in our subjects via sleep restriction as well as suboptimal time-of-day prior to administration of a Bayesian choice task. The specific task used discriminates between Bayesian choices that coincide with more simple reinforcement heuristic choices (in "Easy" trials) versus those that do not (in "Hard" trials), which is ideal given our underlying hypothesis that sleepy subjects are more likely to use simple heuristics. We first show that both circadian mismatch and sleep restriction significantly increase subjective sleepiness – this documents protocol validity. Our key behavioral results are that sleepy subjects are more likely to make a Bayesian inaccurate decision and more likely to make decisions consistent with a simple reinforcement heuristic, particularly in more cognitively difficult "Hard" trials. Secondary results show that stimulation of subject affect increased used of the simple decision heuristic but, when combined with sleep restriction, increased affect may increase task motivation and improve choice accuracy. These results offer new insights into the likely impact of sleepiness on decision making under uncertainty and highlight the potential negative impact on such cognitive states may have on accurate formation of probability assessments. |
| Keywords: | sleep restriction, sleep deprivation, reinforcement heuristic, Bayesian choice, experiments |
| JEL: | C91 D81 D91 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10985&r=neu |
| By: | Dickinson, David L. (Appalachian State University); Chaudhuri, Ananish (University of Auckland); Greenaway-McGrevy, Ryan (University of Auckland) |
| Abstract: | Traders in global markets operate at different local times-of-day. Suboptimal times-of-day may produce sleepiness due to daily variations in sleep/wake patterns and possibly also increased accumulation of hours awake. Global asset markets imply significantly increased heterogeneity in circadian timing, and likely sleepiness, of trader decisions compared to localized markets. We examine these factors by administering single-location and global sessions of an online asset market experiment that regularly produces valuation bubble and crash events. Global sessions involved real time trades between subjects in two locations 16 time zones apart (i.e., "global" markets) and at varied local times of day across sessions. We find asset market bubbles occur in all sessions, but global markets had significantly more extreme and longer duration valuation bubbles. Additionally, subjects at the most suboptimal times-of-day held significantly more asset shares in their portfolios in late trading rounds compared to other subjects – a risky strategy with overvalued shares. Overall, our results highlight a unique but underappreciated factor present across traders in global market environments. They also point to the importance of a relatively common cognitive state (i.e., suboptimal time-of-day) in attempting to understand trader behavior and, ultimately, market outcomes. |
| Keywords: | asset markets, experiments, bubbles, sleep, circadian rhythm |
| JEL: | C92 G12 G15 D84 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp10984&r=neu |