Do bidders require a monetary premium for cognitive effort in an auction?
AbstractResearch on the influence of cognitive effort on decision making has grown in recent years. We argue that when cognitive effort is required, a decision maker requests a monetary premium for his effort. In our experiment, the participants were asked to bid a price for lotteries of differing complexity that required varying amounts of cognitive effort. Furthermore, some participants were given a simple calculator. We show that the increase in cognitive efforts increases the monetary premium they request, and leads to better pricing of similar lotteries.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).
Volume (Year): 42 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/620175
Cognitive effort; Premium; Lottery; Demand effect;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
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