INFORMATION ACQUISITION UNDER RISKY CONDITIONS ACROSS REAL AND HYPOTHETICAL SETTINGS

I collect data on how subjects acquire information about risky choices in both real and hypothetical settings using process‐tracing software called Mouselab. On average, there are no significant differences across settings in the amount of time subjects take to make a choice or the completeness of the information they acquire. Subjects also acquire information in sequences consistent with an integration model of decision‐making, such as expected utility theory or prospect theory. I do not find significant differences in risk preferences across settings, on average, but I do find that subjects' risk preferences are related to the completeness of the information that they acquire and where they start their information acquisition. (JEL C91, D80, D83)     

Hanging Out With the Right Crowd: Peer Influence on Risk‐Taking Behavior in Adolescence

Peer influence plays a key role in the increase of risk‐taking behavior during adolescence. However, its underlying processes are not fully understood. This study examined the effects of social norms, conveyed through peer advice, on risk‐taking behavior in 15‐ to 17‐year‐old adolescents (N = 76). Participants played a card‐guessing task alone and with online peer advice. Results showed that risk‐taking increased in the presence of peers. The results further showed that adolescents took into account the uncertainty associated with gambles, as well as the social norms conveyed by peers. Our findings suggest that peers are most influential in uncertain situations and demonstrate the value of a social norms approach in examining the processes underlying peer effects.     

TESTING COMMITMENT COST THEORY IN CHOICE EXPERIMENTS

In choice experiments, it is commonly assumed that individuals make choices in static and certainty decision‐making conditions. Real‐world choices, however, are usually made in a dynamic setting. Committing a purchase decision under conditions of uncertainty might have a “Commitment Cost” (CC). In this study, we test CC theory using a nonhypothetical choice experiment. Specifically, we test whether choice behavior and willingness to pay estimates differ when individuals have the option to gain present or delayed information or reverse the transaction. Our results suggest that the construction of a dynamic decision context can be relevant in the design of choice experiments. (JEL C90, C93, Q18)     

Ethics Anxiety

This case report, drawn from an American hospital, explores a phenomenon best described as ethics anxiety, a feeling of uncertainty as to what is ethically required or permitted, leading to clinical delay and confused decisions. In the specific clinical situation presented, the clinicians find themselves confronting, under severe time constraints, a complex, multidimensional problem with ethical and legal implications. The situation deteriorates as the clinicians find themselves unable to find what they perceive as the expert advice, either clinical or ethical, that would enable them to resolve the problem presented. In the discussion section of the case report, some attention is given to the role that the bioethics movement itself has had in creating these situations and undermining clinical decision‐making.     

Worum geht es, wenn es um nichts geht?

Rational choice theories appear to have difficulties when it comes to explain behaviour in so called ‘low cost, low benefit’ situations. As a consequence, low cost situations are sometimes regarded as a serious problem of the rational choice paradigm as a whole. We demonstrate that, quite to the contrary, theories of rational action are perfectly well suited to understand the logic of low cost situations. The costs of information and decision making on the part of the actor and the clarity of incentive or cost structures on the part of the situation prove to be the central variables. Since there is a close link between low cost situations and certain collective good problems, the role of these variables is discussed with regard to the production of collective goods. In adapting an established model of routine based decision making, we show how the threshold of a low cost situation can be determined analytically.     

INFORMATION RIGIDITIES,INFLATION PERCEPTIONS,AND THE MEDIA: LESSONS FROM THE EURO CASH CHANGEOVER

The objective of theoretical models of information rigidities is to capture the fact that people are constrained in their ability to acquire and process all available information. Given that most people obtain their information about the economy from the media, press coverage of the economy may exert an influence on peoples' attitudes. This paper tests for this influence by examining consumers' inflation perceptions in the aftermath of the euro cash changeover, which serves as a natural experiment. Using a new data set, that quantifies the intensity and tone of media reports, we document that media reporting has had a statistically significant and economically meaningful impact on inflation perceptions and contributed to their sharp rise in the aftermath of the euro cash changeover and to the divergence between inflation perceptions and actual inflation rates. (JEL E53, D83)     

A critique of the normative and descriptive foundations of subjective probability—with reference to agriculture

Subjective probability is currently accepted as an adequate analytical framework for research into choice under uncertainty. This study tries to challenge this on a number of grounds. We suggest that Savage's inferred probabilities do not take account of differences in uncertainty which may rationally determine behaviour. Secondly, utility functions used in economic theory may vary depending on the information content. Thirdly, it may provide an inefficient method of analysing observed economic behaviour. Fourthly, changes in utility functions may constitute part of what we think of as uncertainty, and fifthly, we mention problems with elicited subjective probabilities. Finally, some avenues for further research are suggested.     

REFERENCE‐DEPENDENT PREFERENCES,LOSS AVERSION,AND LIVE GAME ATTENDANCE

We develop a consumer choice model of live attendance at a sporting event with reference‐dependent preferences. The predictions of the model motivate the “uncertainty of outcome hypothesis” (UOH) as well as fans' desire to see upsets and to simply see the home team win games, depending on the importance of the reference‐dependent preferences and loss aversion. A critical review of previous empirical tests of the UOH reveals significant support for models with reference‐dependent preferences, but less support for the UOH. New empirical evidence from Major League Baseball supports the loss aversion version of the model. (JEL L83, D12)     

Rationality,external norms,and the epistemic value of menus

Ever since Sen’s criticism of internal consistency properties of choice, there exists a perception that the standard rational choice approach has difficulties in coping with the existence of external norms, or the information a menu of choice might convey to a decision maker. This article provides a brief survey of possible responses to these criticisms of traditional rational choice theory. We review approaches to the internalization of external norms as well as ways to formulate norm-conditional rationalizability. Furthermore, we illustrate how the epistemic value of an opportunity set can be incorporated into rational choice theory.     

COLLEGE CHOICE AS A COLLECTIVE DECISION

Although the choice between colleges can be thought of as being made collectively by a family, models of educational choice almost universally portray the decision as made by the student alone. Using a novel experimental method for identifying collective decision functions, I find that students have more influence than parents over the decision, but not exclusive control. Students care more than parents about classroom experience and future earnings. Ignoring the dual‐agent nature of the decision can weaken predictions and lead to poorly targeted policy designs. (JEL I21, J24, D13)     

Investment, resolution of risk, and the role of affect

This experimental study is concerned with the impact of the timing of the resolution of risk on investment behavior, with a special focus on the role of affect. In a between-subjects design, we observe the impact of a substantial delay of risk resolution (2 days) on investment choices. Besides the resolution timing all other factors, including the timing of payout, are held constant across treatments. In addition, state-of-the-art experimental techniques from experimental economics and psychology are used for eliciting preferences and to explicitly measure emotions and personality traits. Participants put their own money at stake. Our main finding is that the timing of the resolution of risk matters for investment, modulated by the probability of investment success. Emotions are found to play a significant role in this respect and explain our main finding. Our results support recent models of decision making under risk trying to incorporate anticipatory emotions but also uncover some important shortcomings related to the dynamics of emotions.     

DECISION TIME,CONSIDERATION TIME,AND STATUS QUO BIAS

Economists increasingly appreciate the value of studying the time taken to make decisions in order to provide insights into decision makers' choices. This article shows that studying how time is allocated among individual options is also valuable in helping researchers to understand the impact default options have on decision makers' attention allocation, as approximated by how the time is allocated. The study of this impact generates new insights into the well‐known choice phenomenon of status quo bias, which typically refers to decision makers' tendency to stick to a default option. By designing a series of novel experiments, I find that this bias arises even when the choice is among prizes of fixed monetary value expressed in arithmetic form. I also find asymmetric attention (i.e., more time devoted to default options) and strikingly asymmetric choice errors; specifically, decision makers fail to select an alternative better than the default 28% of the time, while they incorrectly select an alternative worse than the default only 11% of the time; and provide evidence supporting a causal relationship between asymmetric attention and asymmetric errors. (JEL D03, D12, D83)     

AN EXPERIMENTAL TEST OF THE PERSISTENCE OF GENDER‐BASED STEREOTYPES

This paper experimentally investigates the role of gender‐based stereotypes in the forecasting of risk attitudes. Subjects predict the gamble choice of target subjects in one of three treatments: (1) Visual—the predictor can only observe the target; (2) Information—the predictor has individuating information about the targets' response to two statements from a risk‐preference survey; and (3) Combined—the predictor both observes the targets and has the targets' two responses to the risk‐preference survey. Our results suggest that stereotypes play a considerable role in forming predictions about others' risk attitudes and that these stereotypes persist even when individuating information is available. (JEL C91, D8, J16)     

ENDOWMENTS,PERCEIVED SIMILARITY,AND DICTATOR GIVING

A common assumption of money is that it is fungible. An implication of this assumption is that the source of money does not affect economic decision making. We find evidence contradicting this fungibility assumption. Specifically, we explore how the perception of an endowment source influences amounts sent in a dictator game. We find perceived similarity to the endowment provider to be negatively correlated with dictator offers. Dictators who consider themselves relatively more similar to their endowment provider send significantly smaller amounts to their partners. Our results demonstrate that economic decision making can be influenced by the provider of income shocks. (JEL C78, C91, C99, D31, D64, D74)     

Personality traits,preferences and educational choices: A focus on STEM

Around the developed world, the need for graduates from Science, Technology, Engineering and Mathematics (STEM) fields is growing. Research on educational and occupational choice has traditionally focused on the cognitive skills of prospective students, and on how these determine the expected costs and benefits of study programs. Little work exists that analyzes the role of personality traits on study choice. This study investigates how personality traits relate to preferences of students for STEM studies and occupations, and to specialization choice in high school. We use a rich data set that combines administrative and survey data of Dutch secondary education students. We find that personality traits are related to both the preference that students have for STEM as the actual decision to specialize in STEM studies, but to different degrees. We identify significant relations with preference indicators for all Big Five traits, especially for Openness to Experience (positive), Extraversion and Agreeableness (both negative). The size of these relations is often larger than those between cognitive skills and STEM preferences. Personality traits are comparatively less important with respect to the actual specialization choice, for which we identify a robust (and sizable) negative relation with Extraversion, and for girls find a positive relation with Openness to Experience. The results suggest that once students have to make actual study choice decisions, they rely more on cognitive skills rather than personality traits, in contrast to their expressed preferences.     

Risky journeys – Risk and decision-making among potential irregular migrants in Senegal and Guinea

In response to well-documented harms inflicted on irregular migrants attempting to travel from West Africa to Europe, various actors have scaled up information interventions to counter misinformation by smuggling networks and facilitate safe migration decisions. Many interventions include information on the potential dangers involved in migration. However, there is a striking lack of empirical evidence assessing a key assumption of campaign effectiveness, that is the relationship between risk perceptions and the decision to migrate irregularly. This study contributes an empirical account based on two independently collected surveys in Senegal and Guinea. Consistent with rational choice theories on migration decisions under uncertainty, the results suggest that higher risk perceptions are consistently and strongly associated with reduced intentions to migrate irregularly. Yet, the explanatory power of risk perceptions depends on context and is generally less important than structural and socio-economic factors.     

PERCEIVED GAME UNCERTAINTY,SUSPENSE AND THE DEMAND FOR SPORT

This study tries bridging between different behavioral economic explanations for the lack of support of the uncertainty of outcome hypothesis in spectator sports. We test a measure of perceived game uncertainty that is comparable to objective measures frequently tested in the literature. Econometric results suggest that fans do not perceive closeness of a game differently than how economists have tended to measure it. However, fans' perceptions of suspensefulness are distinct from their perceptions of game uncertainty. Moreover, the finding that fans' preferences for game uncertainty are dominated by loss aversion also emerges—independently of fanship status—in our stated‐preference setting. (JEL L83, D12, Z2)     

ENDOGENOUS DESTRUCTION IN CONFLICT: THEORY AND EXTENSIONS

This article develops a general equilibrium model of conflict to characterize the implications of endogenous destruction for bargaining and fighting. Specifically, we consider the scenario where two contending parties engage in bargaining to avoid fighting when there are direct costs (e.g., arms buildups) and indirect costs (e.g., destruction to consumable resources) of conflict. Without imposing specific functional form restrictions on conflict, production, and destruction technologies, we show their interactions in determining an optimal decision between fighting and bargaining. We find that, under the shadow of conflict, bargaining is costly as the contending parties always allocate more resources to arming for guarding settlement through bargaining than in the event of fighting. In contrast to conventional thinking that bargaining is Pareto superior over fighting, we show conditions under which fighting dominates bargaining as the Nash equilibrium choice. The positive analysis may help explain the general causes of fighting, without resorting to the assumption of incomplete information or misperceptions. (JEL D74, H56, C7)     

Explaining Career Decision‐Making Self‐Efficacy: Personality,Cognitions, and Cultural Mistrust

The authors explore the hypothesis that career decision‐making self‐efficacy could be affected by negative career thoughts, Big Five personality factors, and cultural mistrust in a sample of African American and Caucasian college students. Findings demonstrated that negative career thinking, openness, and conscientiousness explained a significant amount of variance in career decision‐making self‐efficacy in a general sample of college students, but no unique variance was explained by cultural mistrust in a sample of African American college students.     

Home Alone: Children as Caretakers in León,Nicaragua

This article seeks to explore and understand the life situations of sibling caretakers in poor areas in León, Nicaragua. The every day lives for caretakers were studied through observations and interviews with children, informants and parents. The children themselves were satisfied and proud to be trusted as caretakers and felt useful in contributing to their families’ livelihood. However, in a life course perspective the caretaking role implies a narrowing of life options. Early on they seem to acquire essential life skills but as they grow older many are at risk of falling behind due to their marginalised situation and lack of basic education.