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Intelligence predicts choice in decision-making strategies

Author

Listed:
  • Maran, Thomas
  • Ravet-Brown, Theo
  • Angerer, Martin
  • Furtner, Marco
  • Huber, Stefan E.

Abstract

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.

Suggested Citation

  • Maran, Thomas & Ravet-Brown, Theo & Angerer, Martin & Furtner, Marco & Huber, Stefan E., 2020. "Intelligence predicts choice in decision-making strategies," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 84(C).
    • Handle: RePEc:eee:soceco:v:84:y:2020:i:c:s2214804319302666
    DOI: 10.1016/j.socec.2019.101483
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    References listed on IDEAS

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    More about this item

    Keywords

    Decision-making; Psychology; Economics; Cognitive ability; Intelligence;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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