Probability Weighting and Cognitive Ability

Published Online:https://doi.org/10.1287/mnsc.2021.4146

References

  • Abdellaoui M, Baillon A, Placido L, Wakker PP (2011) The rich domain of uncertainty: Source functions and their experimental implementation. Amer. Econom. Rev. 101(2):695–723.CrossrefGoogle Scholar
  • Agarwal S, Mazumder B (2013) Cognitive abilities and household financial decision making. Amer. Econom. J. Appl. Econom. 5(1):193–207.CrossrefGoogle Scholar
  • Andersson O, Holm HJ, Tyran J-R, Wengström E (2016) Risk aversion relates to cognitive ability: Preferences or noise? J. Eur. Econom. Assoc. 14(5):1129–1154.CrossrefGoogle Scholar
  • Arthur W Jr, Day DV (1994) Development of a short form for the Raven Advanced Progressive Matrices Test. Ed. Psych. Meas. 54(2):394–403.CrossrefGoogle Scholar
  • Baillon A, Huang Z, Selim A, Wakker PP (2018) Measuring ambiguity attitudes for all (natural) events. Econometrica 86(5):1839–1858.CrossrefGoogle Scholar
  • Barseghyan L, Molinari F, O’Donoghue T, Teitelbaum JC (2013) The nature of risk preferences: Evidence from insurance choices. Amer. Econom. Rev. 103(6):2499–2529.CrossrefGoogle Scholar
  • Binswanger J, Salm M (2017) Does everyone use probabilities? The role of cognitive skills. Eur. Econom. Rev. 98:73–85.CrossrefGoogle Scholar
  • Booij AS, van Praag BMS, van de Kuilen G (2010) A parametric analysis of prospect theory’s functionals for the general population. Theory Decision 68(1-2):115–148.CrossrefGoogle Scholar
  • Bors DA, Stokes TL (1998) Raven’s Advanced Progressive Matrices: Norms for first-year university students and the development of a short form. Ed. Psych. Meas. 58(3):382–398.CrossrefGoogle Scholar
  • Bruhin A, Fehr-Duda H, Epper T (2010) Risk and rationality: Uncovering heterogeneity in probability distortion. Econometrica 78(4):1375–1412.CrossrefGoogle Scholar
  • Burks SV, Carpenter JP, Goette L, Rustichini A (2009) Cognitive skills affect economic preferences, strategic behavior, and job attachment. Proc. Natl. Acad. Sci. USA 106(19):7745–7750.CrossrefGoogle Scholar
  • Carpenter PA, Just MA, Shell P (1990) What one intelligence test measures: a theoretical account of the processing in the Raven Progressive Matrices Test. Psych. Rev. 97(3):404.CrossrefGoogle Scholar
  • Cattell RB (1963) Theory of fluid and crystallized intelligence: A critical experiment. J. Ed. Psych. 54(1):1.CrossrefGoogle Scholar
  • Cattell RB (1987) Intelligence: Its Structure, Growth and Action (Elsevier, Amsterdam, the Netherlands).Google Scholar
  • Charness G, Rustichini A, Van de Ven J (2018) Self-confidence and strategic behavior. Exp. Econom. 21(1):72–98.CrossrefGoogle Scholar
  • Chen DL, Schonger M, Wickens C (2016) oTree—An open-source platform for laboratory, online, and field experiments. J. Behav. Exp. Finance 9:88–97.CrossrefGoogle Scholar
  • Choi S, Kim B-Y, Lee J, Lee S (2020) A tale of two Koreas: Property rights and fairness. J. Econom. Behav. Organ. 170:112–130.CrossrefGoogle Scholar
  • Choi S, Hahn KS, Kim B-Y, Lee E, Lee J (2021) Ideological Bias and Economic Behavior in a Market: Evidence from North Korean Refugees. Working paper, Seoul National University, South Korea.Google Scholar
  • Christelis D, Jappelli T, Padula M (2010) Cognitive abilities and portfolio choice. Eur. Econom. Rev. 54(1):18–38.CrossrefGoogle Scholar
  • Cohen A, Einav L (2007) Estimating risk preferences from deductible choice. Amer. Econom. Rev. 97(3):745–788.CrossrefGoogle Scholar
  • de Bruin WB, Fischhoff B, Millstein SG, Halpern-Felsher BL (2000) Verbal and numerical expressions of probability: “It’s a fifty–fifty chance. Organ. Behav. Human Decision Processes 81(1):115–131.CrossrefGoogle Scholar
  • Dohmen T, Falk A, Huffman D, Sunde U (2010) Are risk aversion and impatience related to cognitive ability? Amer. Econom. Rev. 100(3):1238–1260.CrossrefGoogle Scholar
  • Dohmen T, Falk A, Huffman D, Sunde U (2018) On the relationship between cognitive ability and risk preference. Working Paper, University of Bonn, Germany.Google Scholar
  • Fehr-Duda H, De Gennaro M, Schubert R (2006) Gender, financial risk, and probability weights. Theory Decision 60(2):283–313.CrossrefGoogle Scholar
  • Frederick S (2005) Cognitive reflection and decision making. J. Econom. Perspect. 19(4):25–42.CrossrefGoogle Scholar
  • Gill D, Prowse V (2016) Cognitive ability, character skills, and learning to play equilibrium: A level-k analysis. J. Political Econom. 124(6):1619–1676.CrossrefGoogle Scholar
  • Goldstein WM, Einhorn HJ (1987) Expression theory and the preference reversal phenomena. Psych. Rev. 94(2):236.CrossrefGoogle Scholar
  • Gonzalez R, Wu G (1999) On the shape of the probability weighting function. Cognitive Psych. 38(1):129–166.CrossrefGoogle Scholar
  • Harrison GW, Rutström EE (2008) Risk aversion in the laboratory. Harrison GW, Cox JC, eds. Risk Aversion in Experiments (Emerald Group Publishing Limited, Bingley, UK), 41–196.CrossrefGoogle Scholar
  • Harrison GW, Rutström EE (2009) Expected utility theory and prospect theory: One wedding and a decent funeral. Experiment. Econom. 12(2):133–158.CrossrefGoogle Scholar
  • Hey JD, Orme C (1994) Investigating generalizations of expected utility theory using experimental data. Econometrica 62(6):1291–1326.CrossrefGoogle Scholar
  • Jaeggi SM, Buschkuehl M, Jonides J, Perrig WJ (2008) Improving fluid intelligence with training on working memory. Proc. Natl. Acad. Sci. USA 105(19):6829–6833.CrossrefGoogle Scholar
  • Jensen AR (2006) Clocking the Mind: Mental Chronometry and Individual Differences (Elsevier, Amsterdam, the Netherlands).Google Scholar
  • Kahneman D, Frederick S (2005) A Model of Heuristic Judgment. Holyoak KJ, Morrison RG, eds. The Cambridge Handbook of Thinking and Reasoning (Cambridge University Press, New York), 267–293.Google Scholar
  • Kahneman D, Tversky A (1979) Prospect theory: An analysis of decision under risk. Econometrica 47(2):263–292.CrossrefGoogle Scholar
  • Kirchler M, Andersson D, Bonn C, Johannesson M, Sørensen EØ, Stefan M, Tinghög G, Västfjäll D (2017) The effect of fast and slow decisions on risk taking. J. Risk Uncertainty 54(1):37–59.CrossrefGoogle Scholar
  • Kocher MG, Pahlke J, Trautmann ST (2013) Tempus fugit: Time pressure in risky decisions. Management Sci. 59(10):2380–2391.LinkGoogle Scholar
  • Kocher MG, Schindler D, Trautmann ST, Xu Y (2019) Risk, time pressure, and selection effects. Experiment. Econom. 22(1):216–246.CrossrefGoogle Scholar
  • l’Haridon O, Vieider FM (2019) All over the map: A worldwide comparison of risk preferences. Quant. Econom. 10(1):185–215.CrossrefGoogle Scholar
  • Lattimore PK, Baker JR, Witte AD (1992) The influence of probability on risky choice: A parametric examination. J. Econom. Behav. Organ. 17(3):377–400.CrossrefGoogle Scholar
  • Lilleholt L (2019) Cognitive ability and risk aversion: A systematic review and meta analysis. Judgment Decision Making. 14(3):234–279.Google Scholar
  • Loomes G (2005) Modelling the stochastic component of behaviour in experiments: Some issues for the interpretation of data. Experiment. Econom. 8(4):301–323.CrossrefGoogle Scholar
  • Loomes G, Sugden R (1995) Incorporating a stochastic element into decision theories. Eur. Econom. Rev. 39(3-4):641–648.CrossrefGoogle Scholar
  • Luce RD (1986) Response Times: Their Role in Inferring Elementary Mental Organization (Oxford University Press on Demand).Google Scholar
  • Madan CR, Spetch ML, Ludvig EA (2015) Rapid makes risky: Time pressure increases risk seeking in decisions from experience. J. Cognitive Psych. 27(8):921–928.CrossrefGoogle Scholar
  • Mani A, Mullainathan S, Shafir E, Zhao J (2013) Poverty impedes cognitive function. Sci. 341(6149):976–980.CrossrefGoogle Scholar
  • Nisbett RE, Aronson J, Blair C, Dickens W, Flynn J, Halpern DF, Turkheimer E (2012) Intelligence: New findings and theoretical developments. Amer. Psych. 67(2):130.CrossrefGoogle Scholar
  • Peters E (2008) Numeracy and the perception and communication of risk. Ann. N. Y. Acad. Sci. 1128(1):1–7.CrossrefGoogle Scholar
  • Peters E, Levin IP (2008) Dissecting the risky-choice framing effect: Numeracy as an individual-difference factor in weighting risky and riskless options. Judgment Decision Making 3(6):435–448.Google Scholar
  • Prelec D (1998) The probability weighting function. Econometrica 66(3):497–527.CrossrefGoogle Scholar
  • Proto E, Rustichini A, Sofianos A (2019) Intelligence, personality, and gains from cooperation in repeated interactions. J. Political Econom. 127(3):1351–1390.Google Scholar
  • Raven JC (1938) Progressive Matrices: A Perceptual Test of Intelligence (HK Lewis, London).Google Scholar
  • Recalde MP, Riedl A, Vesterlund L (2018) Error-prone inference from response time: The case of intuitive generosity in public-good games. J. Public Econom. 160:132–147.CrossrefGoogle Scholar
  • Rubinstein A (2007) Instinctive and cognitive reasoning: A study of response times. Econom. J. (London) 117(523):1243–1259.Google Scholar
  • Saqib NU, Chan EY (2015) Time pressure reverses risk preferences. Organ. Behav. Human Decision Processes 130:58–68.CrossrefGoogle Scholar
  • Spiliopoulos L, Ortmann A (2018) The BCD of response time analysis in experimental economics. Experiment. Econom. 21(2):383–433.CrossrefGoogle Scholar
  • Sydnor J (2010) (Over) insuring modest risks. Amer. Econom. J. Appl. Econom. 2(4):177–199.CrossrefGoogle Scholar
  • Tversky A, Fox CR (1995) Weighing risk and uncertainty. Psych. Rev. 102(2):269.CrossrefGoogle Scholar
  • Tversky A, Kahneman D (1992) Advances in prospect theory: Cumulative representation of uncertainty. J. Risk Uncertainty 5(4):297–323.CrossrefGoogle Scholar
  • Tversky A, Wakker P (1995) Risk attitudes and decision weights. Econometrica 63(6):1255–1280.CrossrefGoogle Scholar
  • Wakker PP (2004) On the composition of risk preference and belief. Psych. Rev. 111(1):236.CrossrefGoogle Scholar
  • Wakker PP (2008) Explaining the characteristics of the power (CRRA) utility family. Health Econom. 17(12):1329–1344.CrossrefGoogle Scholar
  • Wakker PP (2010) Prospect Theory: For Risk and Ambiguity (Cambridge University Press, Cambridge, United Kingdom).CrossrefGoogle Scholar
  • Wu G, Zhang J, Gonzalez R (2004) Decision Under Risk Koehler DJ, Harvey N, eds. (Blackwell Handbook of Judgment and Decision Making, Hoboken, NJ).CrossrefGoogle Scholar
  • Young DL, Goodie AS, Hall DB, Wu E (2012) Decision making under time pressure, modeled in a prospect theory framework. Organ. Behav. Human Decision Processes 118(2):179–188.CrossrefGoogle Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.