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Aging and decision making: a comparison between neurologically healthy elderly and young individuals

  • Kovalchik, Stephanie
  • Camerer, Colin F.
  • Grether, David M.
  • Plott, Charles R.
  • Allman, John M.

We report the results of experiments on economic decisions with two populations, one of healthy elderly individuals (average age 82) and one of younger students (average age 20). We examine confidence, decisions under uncertainty, differences between willingness to pay and willingness to accept and the theory of mind (strategic thinking). Our findings indicate that the older adults' decision behavior is similar to that of young adults, contrary to the notion that economic decision making is impaired with age. Choices over lotteries do not reflect the age differences previously reported in the psychology and biology literature. Moreover, some of the demonstrated decision behaviors suggest that the elderly individuals are less biased than the younger individuals.(1)There is a greater prevalence of overconfident behavior in the younger population. (2) Our results show no significant support for a theory of an endowment effect in either population. (3) Both populations perform similarly on the beauty contest task, although there is a modest indication of a higher incidence of confused behavior by the older

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 58 (2005)
Issue (Month): 1 (September)
Pages: 79-94

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Handle: RePEc:eee:jeborg:v:58:y:2005:i:1:p:79-94
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  1. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-26, December.
  2. Antoni Bosch-Dom�nech & Jos� G. Montalvo & Rosemarie Nagel & Albert Satorra, 2002. "One, Two, (Three), Infinity, ...: Newspaper and Lab Beauty-Contest Experiments," American Economic Review, American Economic Association, vol. 92(5), pages 1687-1701, December.
  3. Powell, Melanie & Ansic, David, 1997. "Gender differences in risk behaviour in financial decision-making: An experimental analysis," Journal of Economic Psychology, Elsevier, vol. 18(6), pages 605-628, November.
  4. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-24, December.
  5. Soll, Jack B., 1996. "Determinants of Overconfidence and Miscalibration: The Roles of Random Error and Ecological Structure," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(2), pages 117-137, February.
  6. Giovanna Devetag & Massimo Warglien, 2002. "Games and Phone Numbers: Do Short Term Memory Bounds Affect Strategy Behavior?," ROCK Working Papers 018, Department of Computer and Management Sciences, University of Trento, Italy, revised 13 Jun 2008.
  7. Stahl, Dale O., 2001. "Population rule learning in symmetric normal-form games: theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 45(1), pages 19-35, May.
  8. John A. List, 2003. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," NBER Working Papers 9736, National Bureau of Economic Research, Inc.
  9. Juslin, Peter, 1994. "The Overconfidence Phenomenon as a Consequence of Informal Experimenter-Guided Selection of Almanac Items," Organizational Behavior and Human Decision Processes, Elsevier, vol. 57(2), pages 226-246, February.
  10. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
  11. Prince, Melvin, 1993. "Women, men and money styles," Journal of Economic Psychology, Elsevier, vol. 14(1), pages 175-182, March.
  12. Knetsch, Jack L, 1989. "The Endowment Effect and Evidence of Nonreversible Indifference Curves," American Economic Review, American Economic Association, vol. 79(5), pages 1277-84, December.
  13. Thaler, Richard, 1980. "Toward a positive theory of consumer choice," Journal of Economic Behavior & Organization, Elsevier, vol. 1(1), pages 39-60, March.
  14. repec:oup:qjecon:v:106:y:1991:i:4:p:1039-61 is not listed on IDEAS
  15. Dan Lovallo & Colin Camerer, 1999. "Overconfidence and Excess Entry: An Experimental Approach," American Economic Review, American Economic Association, vol. 89(1), pages 306-318, March.
  16. repec:oup:qjecon:v:99:y:1984:i:3:p:507-21 is not listed on IDEAS
  17. Jack L. Knetsch & J. A. Sinden, 1984. "Willingness to Pay and Compensation Demanded: Experimental Evidence of an Unexpected Disparity in Measures of Value," The Quarterly Journal of Economics, Oxford University Press, vol. 99(3), pages 507-521.
  18. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
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