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Cognitive sophistication and deliberation times


Alós-Ferrer, Carlos; Buckenmaier, Johannes (2019). Cognitive sophistication and deliberation times. Working paper series / Department of Economics 292, University of Zurich.

Abstract

Differences in cognitive sophistication and effort are at the root of behavioral heterogeneity in economics. To explain this heterogeneity, behavioral models assume that certain choices indicate higher cognitive effort. A fundamental problem with this approach is that observing a choice does not reveal how the choice is made, and hence choice data is insufficient to establish the link between cognitive effort and behavior. We show that deliberation times provide the missing link, in the form of an individually-measurable correlate of cognitive effort. We present a model of heterogeneous cognitive depth, incorporating stylized facts from the psychophysical literature, which makes predictions on the relation between choices, cognitive effort, incentives, and deliberation times. We confirm the predicted relations experimentally in different kinds of games. However, we also show that imputing cognitive depth from choices alone can lead to erroneous conclusions when the features leading to iterative thinking are not salient.

Abstract

Differences in cognitive sophistication and effort are at the root of behavioral heterogeneity in economics. To explain this heterogeneity, behavioral models assume that certain choices indicate higher cognitive effort. A fundamental problem with this approach is that observing a choice does not reveal how the choice is made, and hence choice data is insufficient to establish the link between cognitive effort and behavior. We show that deliberation times provide the missing link, in the form of an individually-measurable correlate of cognitive effort. We present a model of heterogeneous cognitive depth, incorporating stylized facts from the psychophysical literature, which makes predictions on the relation between choices, cognitive effort, incentives, and deliberation times. We confirm the predicted relations experimentally in different kinds of games. However, we also show that imputing cognitive depth from choices alone can lead to erroneous conclusions when the features leading to iterative thinking are not salient.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:C72, C91, D80, D91
Uncontrolled Keywords:Heterogeneity, iterative reasoning, cognitive sophistication, deliberation times, depth of reasoning, cognitive effort
Language:English
Date:April 2019
Deposited On:23 Jul 2018 15:22
Last Modified:13 May 2019 09:34
Series Name:Working paper series / Department of Economics
Number of Pages:41
ISSN:1664-7041
Additional Information:Revised version
OA Status:Green
Official URL:https://www.econ.uzh.ch/static/release/workingpapers.php?id=971

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