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Consistent and inconsistent choices under uncertainty: The role of cognitive abilities

Luis Amador (), Pablo Brañas-Garza, Antonio Espín (), Teresa Garcia and Ana Hernández

MPRA Paper from University Library of Munich, Germany

Abstract: There is an intense debate whether decision making under uncertainty is partially driven by cognitive abilities. The critical issue is whether choices arising from subjects with lower cognitive abilities are more likely driven by errors or lack of understanding than pure preferences for risk. The latter implies that the often argued link between risk preferences and cognitive abilities might be a spurious correlation. This experiment reports evidence from a sample of 556 participants who made choices in risk-related tasks about winning and losing money and completed three cognitive tasks, all with real monetary incentives: number-additions under time pressure (including incentive-compatible expected number of correct additions), the Cognitive Refection Test (to measure analytical/reflective thinking) and the Remote Associates Test (for convergent thinking). Results are unambiguous: none of our cognition measures plays any systematic role on risky decision making. Our data indeed suggest that cognitive abilities are negatively associated with noisy, inconsistent choices, which might have led to spurious correlations with risk preferences in previous studies.

Keywords: decision making under uncertainty; cognitive abilities; online experiment (search for similar items in EconPapers)
JEL-codes: C91 D81 (search for similar items in EconPapers)
Date: 2019-07-17
New Economics Papers: this item is included in nep-exp, nep-hrm and nep-neu
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https://mpra.ub.uni-muenchen.de/95178/1/MPRA_paper_95178.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/106081/1/MPRA_paper_95178.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/106081/5/MPRA_paper_106081.pdf revised version (application/pdf)

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