Cognitive Load and Strategic Sophistication

We study the relationship between the cognitive load manipulation and strategic sophistication. The cognitive load manipulation is designed to reduce the subject's cognitive resources that are available for deliberation on a choice. In our experiment, subjects are placed under a large cognitive load (given a difficult number to remember) or a low cognitive load (given a number which is not difficult to remember). Subsequently, the subjects play a one-shot game then they are asked to recall the number. This procedure is repeated for various games, where a new number is given for each game. We find a nuanced and nonmonotonic relationship between cognitive load and strategic sophistication. This relationship is consistent with two effects. First, subjects under a high cognitive load tend to exhibit behavior consistent with the reduced ability to compute the optimal decision. Second, the cognitive load tends to affect the subject's perception of their relative standing in the distribution of the available cognitive resources. The net result of these two effects depends on the strategic setting. Our experiment provides evidence on the literature which examines the relationship between measures of cognitive ability and strategic sophistication

Cognitive abilities and economic behavior

At the heart of behavioral and experimental economics is the goal to better understand behavior through observation so that economic models can be improved. However, despite the predictions of classical economics, the researcher is often confronted with a great deal of behavioral heterogeneity. One way to approach this heterogeneity is to acknowledge that decision makers differ from each other in fundamental ways and these differences contribute to the differences in observed economic behavior

Institutions and Behavior: Experimental Evidence on the Effects of Democracy

We present results from a novel experiment on the effect of a policy designed to encourage cooperation in a prisoner's dilemma game. We find that the effect of this policy on the level of cooperation is greater when it was chosen democratically by the subjects than when it was exogenously imposed. This difference remains after controlling for selection (those that choose the plicy may be more likely to be affected by it). We conclude that the treatment effect of policies may depend on whether they are endogenous or exogenous to the society on which they are imposed. Therefore, democratic institutions may have an effect on behavior in addition to the effect in terms of policy choice. More generally, our findings have implications for empirical studies of treatment effects in other contexts: the effect of a treatment may depend on whether it is endogenous or exogenous.

Cognitive reflection test: whom, how, when

The use of the Cognitive Reflection Test as a covariate to explain behavior in Economics and Psychology experiments has significantly increased in the past few years. Experiments have shown its usefulness in predicting behavior. However, little is known about if the test is gender biased, whether incentives matter or how different implementation procedures impact outcomes. Here we report the results of a meta-study of 118 Cognitive Reflection Test studies comprising of 44,558 participants across 21 countries. We find that there is a negative correlation between being female and the overall, and individual, correct answers to CRT questions. Monetary incentives do not impact performance. Regarding implementation procedures, taking the test at the end of the experiment negatively impacts performance. Students perform better compared to non-students. We obtain mixed evidence on whether the sequence of questions matters. Finally, we find that computerized tests marginally improve results

A Flexible and Customizable Method for Assessing Cognitive Abilities

Raven\u27s Progressive Matrices are a broadly used tool for measuring cognitive ability. This paper develops and validates a set of nonverbal puzzles that can be viewed as an extension of or substitute for the well-known Ravens tasks. Specifically, we describe the characteristics of our puzzles and provide a calibration of the matrices in terms of response accuracy and response time as a function of these characteristics. Then we directly compare within-subject performance on our puzzles and Ravens tasks. Finally, we replicate a previous experimental paper, substituting our puzzles for the Ravens matrices, and show the two tools have similar predictive success. Our approach offers several benefits due to the relatively large number of novel puzzles of a given difficulty level that can be generated

Search, Memory, and Choice Error: An Experiment

Multiple attribute search is a central feature of economic life: we consider much more than price when purchasing a home, and more than wage when choosing a job. An experiment is conducted in order to explore the effects of cognitive limitations on choice in these rich settings, in accordance with the predictions of a new model of search memory load. In each task, subjects are made to search the same information in one of two orders, which differ in predicted memory load. Despite standard models of choice treating such variations in order of acquisition as irrelevant, lower predicted memory load search orders are found to lead to substantially fewer choice errors. An implication of the result for search behavior, more generally, is that in order to reduce memory load (thus choice error) a limited memory searcher ought to deviate from the search path of an unlimited memory searcher in predictable ways-a mechanism that can explain the systematic deviations from optimal sequential search that have recently been discovered in peoples' behavior. Further, as cognitive load is induced endogenously (within the task), and found to affect choice behavior, this result contributes to the cognitive load literature (in which load is induced exogenously), as well as the cognitive ability literature (in which cognitive ability is measured in a separate task). In addition, while the information overload literature has focused on the detrimental effects of the quantity of information on choice, this result suggests that, holding quantity constant, the order that information is observed in is an essential determinant of choice failure.Financial support from the Spanish Ministerio de Ciencia y Tecnología and Feder Funds (SEJ-2007-62656) and the Spanish Ministry of Economics and Competition (ECO2012-34928, http://www.biodiversa.org/102) is gratefully acknowledged

Timing of social feedback shapes observational learning in strategic interaction

Abstract Many types of social interaction require the ability to anticipate others' behavior, which is commonly referred to as strategic sophistication. In this context, observational learning can represent a decisive tool for behavioral adaptation. However, little is known on whether and when individuals learn from observation in interactive settings. In the current study, 321 participants played one-shot interactive games and, at a given time along the experiment, they could observe the choices of an overtly efficient player. This social feedback could be provided before or after the participant’s choice in each game. Results reveal that players with a sufficient level of strategic skills increased their level of sophistication only when the social feedback was provided after their choices, whereas they relied on blind imitation when they received feedback before their decision. Conversely, less sophisticated players did not increase their level of sophistication, regardless of the type of social feedback. Our findings disclose the interplay between endogenous and exogenous factors modulating observational learning in strategic interaction