Cognitive Resource Depletion, Choice Consistency, and Risk Preferences
AbstractWe investigate the consistency and stability of individual risk preferences by slightly manipulating the cognitive resources of subjects through sleepiness. Participants are recruited and randomly assigned to an experiment session at a preferred time of day relative to their diurnal preference (circadian matched) or at a non-preferred time of day (circadian mismatched). For the decision task, subjects and are asked to choose how much to allocate between two state-dependent assets (using the Choi et al., 2007, design). We have two main findings. First, the consistency of behavior for circadian matched and mismatched subjects is statistically the same. This is true whether it is (nonparametrically) defined as consistency with GARP, payoff dominance, expected utility, disappointment aversion or cumulative prospect theory. Second, while our cognitive resource manipulation yields no difference in consistency of behavior, it results in an increased tendency to take risk. Our experiment confirms theoretical predictions that preferences are consistent yet state-dependent. Key Words:
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Bibliographic InfoPaper provided by Department of Economics, Appalachian State University in its series Working Papers with number 12-04.
Date of creation: 2012
Date of revision:
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Postal: Thelma C. Raley Hall, Boone, North Carolina 28608
Web page: http://www.business.appstate.edu/departments/economics/
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Other versions of this item:
- Marco Castillo & David Dickinson & Ragan Petrie, 2012. "Cognitive Resource Depletion, Choice Consistency, and Risk Preferences," Working Papers 1036, George Mason University, Interdisciplinary Center for Economic Science, revised Nov 2012.
- NEP-ALL-2012-11-17 (All new papers)
- NEP-CBE-2012-11-17 (Cognitive & Behavioural Economics)
- NEP-EVO-2012-11-17 (Evolutionary Economics)
- NEP-EXP-2012-11-17 (Experimental Economics)
- NEP-NEU-2012-11-17 (Neuroeconomics)
- NEP-UPT-2012-11-17 (Utility Models & Prospect Theory)
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