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Are Economists’ Preferences Psychologists’ Personality Traits? A Structural Approach

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  • Tomáš Jagelka

    (ECONtribute Cluster of Excellence, IZA, Institute for Applied Microeconomics at the University of Bonn, and CEHD at the University of Chicago.)

Abstract

This paper proposes a method for empirically mapping psychological personality traits to economic preferences. Careful modelling of random components of decision making is crucial to establishing the long supposed but empirically elusive link between economic and psychological systems for understanding differences in individuals’ behavior. I use factor analysis to extract information on individuals’ cognitive ability and personality and embed it within a Random Preference Model to estimate distributions of risk and time preferences, of their individual-level stability, and of people’s propensity to make mistakes. I explain up to 50% of the variation in both average risk and time preferences and in individuals’ capacity to make consistent rational choices using four factors related to cognitive ability and three of the Big Five personality traits. True differences in desired outcomes are related to differences in personality whereas actual mistakes in decisions are related to cognitive skill.

Suggested Citation

  • Tomáš Jagelka, 2020. "Are Economists’ Preferences Psychologists’ Personality Traits? A Structural Approach," ECONtribute Discussion Papers Series 014, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:014
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    3. Jose Apesteguia & Miguel Ángel Ballester, 2020. "Random utility models with ordered types and domains," Economics Working Papers 1719, Department of Economics and Business, Universitat Pompeu Fabra.
    4. Bhargava, Palaash & Chen, Daniel L. & Sutter, Matthias & Terrier, Camille, 2022. "Homophily and Transmission of Behavioral Traits in Social Networks," IZA Discussion Papers 15840, Institute of Labor Economics (IZA).
    5. Richard T. Carson & Derrick H. Sun & Yixiao Sun, 2024. "Random Utility Models with Skewed Random Components: the Smallest versus Largest Extreme Value Distribution," Papers 2405.08222, arXiv.org, revised May 2024.
    6. Belzil, Christian & Pernaudet, Julie & Poinas, François, 2021. "Estimating Coherency between Survey Data and Incentivized Experimental Data," IZA Discussion Papers 14594, Institute of Labor Economics (IZA).
    7. Andrea Fazio & Tomasso Reggiani & Fabio Sabatini, 2021. "The political cost of lockdown´s enforcement," MUNI ECON Working Papers 2021-04, Masaryk University, revised Feb 2023.
    8. Robert Finger & David Wüpper & Chloe McCallum, 2023. "The (in)stability of farmer risk preferences," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(1), pages 155-167, February.
    9. Piovesan, Marco & Willadsen, Helene, 2021. "Risk preferences and personality traits in children and adolescents," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 523-532.
    10. Рожкова К. В. & Рощин С. Ю., 2021. "Влияние Некогнитивных Характеристик На Выбор Траекторий В Высшем Образовании: Взгляд Экономистов," Вопросы образования // Educational Studies Moscow, National Research University Higher School of Economics, issue 3, pages 138-167.
    11. Amador-Hidalgo, Luis & Brañas-Garza, Pablo & Espín, Antonio M. & García-Muñoz, Teresa & Hernández-Román, Ana, 2021. "Cognitive abilities and risk-taking: Errors, not preferences," European Economic Review, Elsevier, vol. 134(C).
    12. Dietmar Fehr & Yannick Reichlin, 2021. "Status, Control Beliefs, and Risk-Taking," CESifo Working Paper Series 9253, CESifo.
    13. Ciril Bosch-Rosa & Brice Corgnet, 2022. "Cognitive finance," Chapters, in: Sascha Füllbrunn & Ernan Haruvy (ed.), Handbook of Experimental Finance, chapter 7, pages 73-88, Edward Elgar Publishing.
    14. Mequanint B. Melesse & Amos Nyangira Tirra & Yabibal M. Walle & Michael Hauser, 2023. "Understanding the Determinants of Aspirations in Rural Tanzania: Does Financial Literacy Matter?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(6), pages 1294-1321, December.
    15. Christian König-Kersting & Stefan T. Trautmann, 2023. "Grit, Discounting, & Time Inconsistency," Working Papers 2023-12, Faculty of Economics and Statistics, Universität Innsbruck.
    16. Ola Andersson & Håkan J. Holm & Jean-Robert Tyran & Erik Wengström, 2020. "Robust inference in risk elicitation tasks," Journal of Risk and Uncertainty, Springer, vol. 61(3), pages 195-209, December.
    17. Andrew Caplin & David J. Deming & Søren Leth-Petersen & Ben Weidmann, 2023. "Economic Decision-Making Skill Predicts Income in Two Countries," NBER Working Papers 31674, National Bureau of Economic Research, Inc.
    18. Ksenia Rozhkova & Sergey Roshchin, 2021. "The Impact of Non-Cognitive Characteristics on the Higher Education Choice-Making: An Economist Perspective," Voprosy obrazovaniya / Educational Studies Moscow, National Research University Higher School of Economics, issue 3, pages 138-167.
    19. Fang, Ximeng & Freyer, Timo & Ho, Chui-Yee & Chen, Zihua & Goette, Lorenz, 2022. "Prosociality predicts individual behavior and collective outcomes in the COVID-19 pandemic," Social Science & Medicine, Elsevier, vol. 308(C).

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    More about this item

    Keywords

    economic preferences; personality traits; decision error; measurement error; stochastic discrete choice;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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