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Effects of Stress on Economic Decision-Making: Evidence from Laboratory Experiments

Author

Listed:
  • Delaney, Liam

    () (University of Stirling)

  • Fink, Günther

    () (Harvard School of Public Health)

  • Harmon, Colm P.

    () (University of Sydney)

Abstract

The ways in which preferences respond to the varying stress of economic environments is a key question for behavioral economics and public policy. We conducted a laboratory experiment to investigate the effects of stress on financial decision making among individuals aged 50 and older. Using the cold pressor task as a physiological stressor, and a series of intelligence tests as cognitive stressors, we find that stress increases subjective discounting rates, has no effect on the degree of risk-aversion, and substantially lowers the effort individuals make to learn about financial decisions.

Suggested Citation

  • Delaney, Liam & Fink, Günther & Harmon, Colm P., 2014. "Effects of Stress on Economic Decision-Making: Evidence from Laboratory Experiments," IZA Discussion Papers 8060, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp8060
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    References listed on IDEAS

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    1. Krueger, Alan B. & Mueller, Andreas, 2010. "Job search and unemployment insurance: New evidence from time use data," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 298-307, April.
    2. David Laibson & Andrea Repetto & Jeremy Tobacman, 2005. "Estimating Discount Functions with Consumption Choices over the Lifecycle," Levine's Bibliography 784828000000000643, UCLA Department of Economics.
    3. Alan B. Krueger & Andreas I. Mueller, 2012. "Time Use, Emotional Well-Being, and Unemployment: Evidence from Longitudinal Data," American Economic Review, American Economic Association, vol. 102(3), pages 594-599, May.
    4. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    5. Paul A. Samuelson, 1937. "A Note on Measurement of Utility," Review of Economic Studies, Oxford University Press, vol. 4(2), pages 155-161.
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    Cited by:

    1. Bondy, Malvina & Roth, Sefi & Sager, Lutz, 2018. "Crime is in the Air: The Contemporaneous Relationship between Air Pollution and Crime," IZA Discussion Papers 11492, Institute for the Study of Labor (IZA).
    2. Thomas Buser & Anna Dreber & Johanna Mollerstrom, 2015. "Stress Reactions cannot explain the Gender Gap in Willingness to compete," Tinbergen Institute Discussion Papers 15-059/I, Tinbergen Institute.
    3. repec:kap:expeco:v:20:y:2017:i:2:d:10.1007_s10683-016-9496-x is not listed on IDEAS

    More about this item

    Keywords

    risk aversion; discounting; financial decisions; stress; learning;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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