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Habits as adaptations: an experimental study


Matysková, Ludmila; Rogers, Brian; Steiner, Jakub; Sun, Keh-Kuan (2020). Habits as adaptations: an experimental study. Games and Economic Behavior, 122:391-406.

Abstract

When observable cues correlate with optimal choices, habit-driven behavior can alleviate cognition costs. We experimentally study the degree of sophistication in habit formation and cue selection. To this end, we compare lab treatments that differ in the information provided to subjects, holding fixed the serial correlation of optimal actions. We find that a particular cue – own past action – affects behavior only in treatments in which this habit is useful. The result suggests that caution is warranted when modeling habits via a fixed non-separable utility. Despite this sophistication, lab behavior also reveals myopia in information acquisition.

Abstract

When observable cues correlate with optimal choices, habit-driven behavior can alleviate cognition costs. We experimentally study the degree of sophistication in habit formation and cue selection. To this end, we compare lab treatments that differ in the information provided to subjects, holding fixed the serial correlation of optimal actions. We find that a particular cue – own past action – affects behavior only in treatments in which this habit is useful. The result suggests that caution is warranted when modeling habits via a fixed non-separable utility. Despite this sophistication, lab behavior also reveals myopia in information acquisition.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Finance
Social Sciences & Humanities > Economics and Econometrics
Uncontrolled Keywords:Economics and econometrics, finance, habit formation, rational inattention
Language:English
Date:July 2020
Deposited On:17 Sep 2020 14:22
Last Modified:18 Sep 2020 20:00
Publisher:Elsevier
ISSN:0899-8256
OA Status:Hybrid
Publisher DOI:https://doi.org/10.1016/j.geb.2020.04.013
Project Information:
  • : FunderH2020
  • : Grant ID770652
  • : Project TitleBEHAVFRICTIONS - Behavioral Implications of Information-Processing Frictions

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