For me, economics is a collection of ideas and conventions which economists accept and use to reason with. Namely, it is a culture. Behavioral economics represents a transformation of that culture. Nonetheless, as pointed out by Camerer and Loewenstein (2003), its methods are pretty much the same as those introduced by the Game Theory revolution. At the core of most models in Behavioral Economics there are still agents who maximize a preference relation over some space of consequences and the solution (...) in most cases still involves standard equilibrium concepts. However, the behavioral economists are not committed to what is usually referred to as rational motivations. An economic fable (or a model as we would call it) that has at its core fairness, envy, present-bias and the like is by now not only permitted but even preferred. (shrink)

In this study, we analyze choice in the presence of some conflict that affects the decision time, a subject that has been documented in the literature. We axiomatize a multiattribute decision time representation, which is a dynamic extension of the classic multiattribute expected utility theory that allows potentially incomplete preferences. Under this framework, one alternative is preferred to another in a certain period if and only if the weighted sum of the attribute-dependent expected utility induced by the former alternative is (...) larger than that induced by the latter for all attribute weights in a closed and convex set. MDT uniquely determines the decision time as the earliest period at which the ranking between alternatives becomes decisive. The comparative statics result indicates that the decision time provides useful information to locate indifference curves in a specific setting. MDT also explains various empirical findings in economics and other relevant fields. (shrink)

Understanding more about how the brain functionsshouldhelp us understand economic behaviour. But some would have us believe that it has done this already, and that insights from neuroscience have already provided insights in economics that we would not otherwise have. Much of this is just academic marketing hype, and to get down to substantive issues we need to identify that fluff for what it is. After we clear away the distractions, what is left? The answer is that a lot is (...) left, but it is still all potential. That is not a bad thing, or a reason to stop the effort, but it does point to the need for a serious reconsideration of what neuroeconomics is and what passes for explanation in this literature. I argue that neuroeconomics can be a valuable field, but not the way it is being developed and “sold” now. The same is true more generally of behavioural economics, which shares many of the methodological flaws of neuroeconomics. (shrink)

We present a formal analysis of Douglas Hofstadter’s concept of superrationality. We start by defining superrationally justifiable actions, and study them in symmetric games. We then model the beliefs of the players, in a way that leads them to different choices than the usual assumption of rationality by restricting the range of conceivable choices. These beliefs are captured in the formal notion of type drawn from epistemic game theory. The theory of coalgebras is used to frame type spaces and to (...) account for the existence of some of them. We find conditions that guarantee superrational outcomes. (shrink)

Using a large sample of retail investors as well as experimental data we find that risk and ambiguity aversion are positively correlated. We provide evidence that a common link is decision mode: intuitive thinkers tolerate more risk and ambiguity than effortful reasoners. One interpretation is that intuitive thinking confers an advantage in risky or ambiguous situations. We present supporting lab and field evidence that intuitive thinkers outperform others in uncertain environments. Finally, we find that risk and ambiguity aversion vary with (...) individual characteristics and wealth. The wealthy are less risk averse but more ambiguity averse, which has implications for financial puzzles. (shrink)

Both economists and psychologists are interested in understanding decision making under uncertainty. Yet, they rely on different concepts to analyse human behaviour: economists use economic preference parameters rooted in utility theory, while psychologists use personality traits to describe responses to uncertain situations. Using a large sample of university students, this study examines and contrasts five economic preference parameters and six psychological personality traits that are commonly used to study individuals’ attitudes towards uncertainty. A novelty of this paper is including both (...) the economic concept of ambiguity aversion as well as the personality trait of ambiguity intolerance. We find that standard economic preference measures based on incentivized choice tasks seem to capture rather different characteristics than psychological personality traits. In contrast, economic preference measures obtained from self-assessment questions appear more related to personality traits, especially ambiguity intolerance. (shrink)

Cappelen et al. (2015) open their paper, “Fairness is intuitive,” with the observation, “A key question in the social sciences is whether it is intuitive to behave in a fair manner or whether fair behavior requires active self-control” (p. 2). They purport to offer “evidence showing that fair behavior is intuitive to most people” (p. 1). Their premise is that deciding by intuition is faster than deciding by deliberation. While this premise in and on itself is rather uncontroversial—the conclusion that (...) they draw from it is not: “Since a decision that relies on intuition is typically made faster than a decision that relies on deliberation, the response time of a fair decision relative to a selfish decision provides an important indication of the intuitiveness of fair behavior” (p. 2). This reasoning, in fact, amounts to a reverse inference fallacy. ‘Intuitive’ may mean ‘fast’, but this would not imply that ‘fast’ means ‘intuitive’. However, we may ask, under which empirical conditions might we be allowed to draw the inference of ‘intuitive’ from ‘fast’? Naturally, these conditions would require that ‘fast’ rule out ‘deliberative’. To achieve this, we would need information beyond relative response speed alone—such as absolute decision times. And this begs the question, which range of decision times would rule out ‘deliberative’—or at the very least, render it improbable? Although the precise cut-off for deliberative decisions may be difficult to establish (see e.g., Schnei... (shrink)

Kaushik Basu presenta el dilema del viajero como un desafío a la teoría de juegos. El desafío ha sido investigado experimentalmente. Al enfrentarse a la versión de Basu del DV o similares, los participantes se comportan como sugiere Basu. Sin embargo, un pequeño cambio en el juego tiene como consecuencia revertir las tendencias de elección. La cuestión es, entonces, si es posible brindar una explicación de los principales hallazgos empíricos como consecuencias de decisiones racionales. Hay varias propuestas en la literatura (...) pero ninguna provee una explicación satisfactoria de por qué expertos en teoría de juegos jugando entre sí usualmente rechazan la única estrategia no dominada del DV. El objetivo de este artículo es sugerir una propuesta alternativa que solucione este problema. (shrink)

Colonel Blotto “secret files” are opened and Information about the way that people play the game is revealed. The files rely on web-based experiments, which involve a tournament version of the Colonel Blotto Game. A total of 6,500 subjects from two diverse populations participated in the tournaments. The results are analyzed in light of a novel procedure of multi-dimensional iterative reasoning. According to the procedure, a player decides separately about different features of his strategy using iterative reasoning. Measuring the response (...) time of the subjects assists in interpreting the reasoning procedure behind the choices. Common properties of the successful strategies in the tournament are exposed. Keywords: Colonel Blotto, Multi-dimensional iterative reasoning, Response Time.. (shrink)

For too long, a majority of economic stories speak of perfectly informed, fully rational optimisation within a purely materialistic world – leaving a lack of evidence and explanation regarding human decision makers and entrepreneurs revolutionising the decision space. Strands like game theory and institutional economics have already adopted a more practical view. Evolutionary and behavioural economics were finally able to establish the necessary links to other disciplines – like psychology and informational science. This paper recaps selected parts of the literature (...) that favour a conceptional view of computational agents. Firstly, we invite economic modellers to question the microfoundation of their assumptions with regard to the individual or to an aggregate level of human behaviour that they truly refer to. Secondly, we illustrate the potential, as well as the limitations, that computational agents exhibit – with regard to the incorporation of creativity as the main source of innovative behaviour. Thirdly, this rather superficial collection of ideas serves as a position paper for future approaches. (shrink)