Intelligence predicts choice in decision-making strategies
Marco Furtner and
Stefan E. Huber
Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2020, vol. 84, issue C
We analyze how cognitive sophistication shapes the individual balance between two economic decision strategies: model-based, which utilizes a mental map of the environment to calculate the possible outcomes, and model-free, which habitually learns outcomes through trial and error. To address this question, we investigate how individual differences in cognitive ability, proxied by intelligence and working memory, shape the balance of strategies. We provide first evidence that these constructs are directly related to an individual's tendency to model task structures when facing economic choice scenarios. However, structural equation modeling shows intelligence to be the sole predictor of model-based behavior, without any effect of working memory. These findings offer new insights into what factors shape variance from person to person when faced with economic decisions, and inform classical economic models of human behavior.
Keywords: Decision-making; Psychology; Economics; Cognitive ability; Intelligence (search for similar items in EconPapers)
JEL-codes: A12 D01 D81 D91 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:84:y:2020:i:c:s2214804319302666
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