IDEAS home Printed from https://ideas.repec.org/a/kap/jrisku/v68y2024i2d10.1007_s11166-024-09426-6.html
   My bibliography  Save this article

Choice under uncertainty and cognitive load

Author

Listed:
  • Adam Dominiak

    (Aarhus University
    Virginia Tech)

  • Peter Duersch

    (University of Mannheim)

Abstract

Does exposure to cognitive load affect key properties of economic behavior? In this experiment, subjects face a series of simple binary decision tasks between prospects, testing for monotonicity in monetary payments, consistency with (first-order) stochastic dominance, reduction of compound lotteries, risk attitudes, and ambiguity attitudes. Cognitive load is manipulated via simultaneous memory tasks. Our data show treatment differences resulting from cognitive load for decision tasks with risky outcomes. However, cognitive load has no impact on monotonicity and ambiguity attitudes. Under a dual-process view of human decision-making, our findings suggest that ambiguity attitudes and preferences for “more certain money” are intuitive, not reasoned.

Suggested Citation

  • Adam Dominiak & Peter Duersch, 2024. "Choice under uncertainty and cognitive load," Journal of Risk and Uncertainty, Springer, vol. 68(2), pages 133-161, April.
    • Handle: RePEc:kap:jrisku:v:68:y:2024:i:2:d:10.1007_s11166-024-09426-6
    DOI: 10.1007/s11166-024-09426-6
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11166-024-09426-6
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11166-024-09426-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Segal, Uzi, 1990. "Two-Stage Lotteries without the Reduction Axiom," Econometrica, Econometric Society, vol. 58(2), pages 349-377, March.
    2. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2010. "Are Risk Aversion and Impatience Related to Cognitive Ability?," American Economic Review, American Economic Association, vol. 100(3), pages 1238-1260, June.
    3. Allred, Sarah & Duffy, Sean & Smith, John, 2016. "Cognitive load and strategic sophistication," Journal of Economic Behavior & Organization, Elsevier, vol. 125(C), pages 162-178.
    4. David K. Levine & Drew Fudenberg, 2006. "A Dual-Self Model of Impulse Control," American Economic Review, American Economic Association, vol. 96(5), pages 1449-1476, December.
    5. Drew Fudenberg & David K. Levine, 2011. "Risk, Delay, and Convex Self-Control Costs," American Economic Journal: Microeconomics, American Economic Association, vol. 3(3), pages 34-68, August.
    6. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    7. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jürgen Schupp & Gert G. Wagner, 2011. "Individual Risk Attitudes: Measurement, Determinants, And Behavioral Consequences," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 522-550, June.
    8. Jürgen Eichberger & David Kelsey, 2011. "Are the treasures of game theory ambiguous?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 313-339, October.
    9. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    10. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    11. Eichberger, Jurgen & Kelsey, David, 2002. "Strategic Complements, Substitutes, and Ambiguity: The Implications for Public Goods," Journal of Economic Theory, Elsevier, vol. 106(2), pages 436-466, October.
    12. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde, 2018. "On the Relationship between Cognitive Ability and Risk Preference," Journal of Economic Perspectives, American Economic Association, vol. 32(2), pages 115-134, Spring.
    13. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 392-406, April.
    14. Huck, Steffen & Weizsacker, Georg, 1999. "Risk, complexity, and deviations from expected-value maximization: Results of a lottery choice experiment," Journal of Economic Psychology, Elsevier, vol. 20(6), pages 699-715, December.
    15. Michael Kirchler & David Andersson & Caroline Bonn & Magnus Johannesson & Erik Ø. Sørensen & Matthias Stefan & Gustav Tinghög & Daniel Västfjäll, 2017. "The effect of fast and slow decisions on risk taking," Journal of Risk and Uncertainty, Springer, vol. 54(1), pages 37-59, February.
    16. Schulz, Jonathan F. & Fischbacher, Urs & Thöni, Christian & Utikal, Verena, 2014. "Affect and fairness: Dictator games under cognitive load," Journal of Economic Psychology, Elsevier, vol. 41(C), pages 77-87.
    17. Alós-Ferrer, Carlos & Strack, Fritz, 2014. "From dual processes to multiple selves: Implications for economic behavior," Journal of Economic Psychology, Elsevier, vol. 41(C), pages 1-11.
    18. Peter Klibanoff & Massimo Marinacci & Sujoy Mukerji, 2005. "A Smooth Model of Decision Making under Ambiguity," Econometrica, Econometric Society, vol. 73(6), pages 1849-1892, November.
    19. Deck, Cary & Jahedi, Salar, 2015. "The effect of cognitive load on economic decision making: A survey and new experiments," European Economic Review, Elsevier, vol. 78(C), pages 97-119.
    20. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
    21. Machina, Mark J & Schmeidler, David, 1992. "A More Robust Definition of Subjective Probability," Econometrica, Econometric Society, vol. 60(4), pages 745-780, July.
    22. Doron Sonsino & Uri Benzion & Galit Mador, 2002. "The Complexity Effects on Choice with Uncertainty — Experimental Evidence," Economic Journal, Royal Economic Society, vol. 112(482), pages 936-965, October.
    23. Wanqun Zhao, 2020. "Cost of Reasoning and Strategic Sophistication," Games, MDPI, vol. 11(3), pages 1-27, September.
    24. Ola Andersson & Håkan J. Holm & Jean-Robert Tyran & Erik Wengström, 2016. "Risk Aversion Relates To Cognitive Ability: Preferences Or Noise?," Journal of the European Economic Association, European Economic Association, vol. 14(5), pages 1129-1154, October.
    25. Duffy, Sean & Smith, John, 2014. "Cognitive load in the multi-player prisoner's dilemma game: Are there brains in games?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 51(C), pages 47-56.
    26. Dominiak, Adam & Lefort, Jean-Philippe, 2015. "“Agreeing to disagree” type results under ambiguity," Journal of Mathematical Economics, Elsevier, vol. 61(C), pages 119-129.
    27. Keith Stanovich & Maggie Toplak, 2012. "Defining features versus incidental correlates of Type 1 and Type 2 processing," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 11(1), pages 3-13, June.
    28. Andreas C Drichoutis & Rodolfo M Nayga, 2020. "Economic Rationality under Cognitive Load," The Economic Journal, Royal Economic Society, vol. 130(632), pages 2382-2409.
    29. Carpenter, Jeffrey & Graham, Michael & Wolf, Jesse, 2013. "Cognitive ability and strategic sophistication," Games and Economic Behavior, Elsevier, vol. 80(C), pages 115-130.
    30. Syngjoo Choi & Jeongbin Kim & Eungik Lee & Jungmin Lee, 2022. "Probability Weighting and Cognitive Ability," Management Science, INFORMS, vol. 68(7), pages 5201-5215, July.
    31. Daniel Ellsberg, 1961. "Risk, Ambiguity, and the Savage Axioms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 75(4), pages 643-669.
    32. Dow, James & Werlang, Sergio Ribeiro da Costa, 1992. "Uncertainty Aversion, Risk Aversion, and the Optimal Choice of Portfolio," Econometrica, Econometric Society, vol. 60(1), pages 197-204, January.
    33. Shane Frederick, 2005. "Cognitive Reflection and Decision Making," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 25-42, Fall.
    34. Reut Blaywais & Mosi Rosenboim, 2019. "The effect of cognitive load on economic decisions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 40(8), pages 993-999, December.
    35. Katarzyna Samson & Patrycjusz Kostyszyn, 2015. "Effects of Cognitive Load on Trusting Behavior – An Experiment Using the Trust Game," PLOS ONE, Public Library of Science, vol. 10(5), pages 1-10, May.
    36. Deck, Cary & Jahedi, Salar & Sheremeta, Roman, 2021. "On the consistency of cognitive load," European Economic Review, Elsevier, vol. 134(C).
    37. Wilcox, Nathaniel T, 1993. "Lottery Choice: Incentives, Complexity and Decision Time," Economic Journal, Royal Economic Society, vol. 103(421), pages 1397-1417, November.
    38. Cappelletti, Dominique & Güth, Werner & Ploner, Matteo, 2011. "Being of two minds: Ultimatum offers under cognitive constraints," Journal of Economic Psychology, Elsevier, vol. 32(6), pages 940-950.
    39. Bock, Olaf & Baetge, Ingmar & Nicklisch, Andreas, 2014. "hroot: Hamburg Registration and Organization Online Tool," European Economic Review, Elsevier, vol. 71(C), pages 117-120.
    40. Mukerji, Sujoy, 1998. "Ambiguity Aversion and Incompleteness of Contractual Form," American Economic Review, American Economic Association, vol. 88(5), pages 1207-1231, December.
    41. Gerhardt, Holger & Biele, Guido P. & Heekeren, Hauke R. & Uhlig, Harald, 2016. "Cognitive load increases risk aversion," SFB 649 Discussion Papers 2016-011, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gerhardt, Holger & Schildberg-Hörisch, Hannah & Willrodt, Jana, 2017. "Does self-control depletion affect risk attitudes?," European Economic Review, Elsevier, vol. 100(C), pages 463-487.
    2. Anja Achtziger & Carlos Alós-Ferrer & Alexander Ritschel, 2020. "Cognitive load in economic decisions," ECON - Working Papers 354, Department of Economics - University of Zurich.
    3. Deck, Cary & Jahedi, Salar & Sheremeta, Roman, 2021. "On the consistency of cognitive load," European Economic Review, Elsevier, vol. 134(C).
    4. Mark Schneider, 2016. "Dual Process Utility Theory: A Model of Decisions Under Risk and Over Time," Working Papers 16-23, Chapman University, Economic Science Institute.
    5. Evren, Özgür, 2019. "Recursive non-expected utility: Connecting ambiguity attitudes to risk preferences and the level of ambiguity," Games and Economic Behavior, Elsevier, vol. 114(C), pages 285-307.
    6. Michalis Drouvelis & Johannes Lohse, 2020. "Cognitive abilities and risk taking: the role of preferences," Discussion Papers 20-02, Department of Economics, University of Birmingham.
    7. Sean Duffy & J. J. Naddeo & David Owens & John Smith, 2024. "Cognitive Load and Mixed Strategies: On Brains and Minimax," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 26(03), pages 1-34, September.
    8. Mark Schneider, 2018. "A Dual System Model of Risk and Time Preferences," Working Papers 18-18, Chapman University, Economic Science Institute.
    9. Allred, Sarah & Duffy, Sean & Smith, John, 2016. "Cognitive load and strategic sophistication," Journal of Economic Behavior & Organization, Elsevier, vol. 125(C), pages 162-178.
    10. Jeffrey Butler & Luigi Guiso & Tullio Jappelli, 2014. "The role of intuition and reasoning in driving aversion to risk and ambiguity," Theory and Decision, Springer, vol. 77(4), pages 455-484, December.
    11. Laurent Denant-Boemont & Olivier L’Haridon, 2013. "La rationalité à l'épreuve de l'économie comportementale," Revue française d'économie, Presses de Sciences-Po, vol. 0(2), pages 35-89.
    12. Duffy, Sean & Gussman, Steven & Smith, John, 2021. "Visual judgments of length in the economics laboratory: Are there brains in stochastic choice?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 93(C).
    13. Constantinos Antoniou & Glenn Harrison & Morten Lau & Daniel Read, 2015. "Subjective Bayesian beliefs," Journal of Risk and Uncertainty, Springer, vol. 50(1), pages 35-54, February.
    14. Ball, Sheryl & Katz, Benjamin & Li, Flora & Smith, Alec, 2023. "The effect of cognitive load on economic decision-making: a replication attempt," Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 226-242.
    15. Tamás Csermely & Alexander Rabas, 2016. "How to reveal people’s preferences: Comparing time consistency and predictive power of multiple price list risk elicitation methods," Journal of Risk and Uncertainty, Springer, vol. 53(2), pages 107-136, December.
    16. Deck, Cary & Jahedi, Salar, 2015. "The effect of cognitive load on economic decision making: A survey and new experiments," European Economic Review, Elsevier, vol. 78(C), pages 97-119.
    17. König-Kersting, Christian & Kops, Christopher & Trautmann, Stefan T., 2023. "A test of (weak) certainty independence," Journal of Economic Theory, Elsevier, vol. 209(C).
    18. Stephen G. Dimmock & Roy Kouwenberg & Peter P. Wakker, 2016. "Ambiguity Attitudes in a Large Representative Sample," Management Science, INFORMS, vol. 62(5), pages 1363-1380, May.
    19. Colasante, Annarita & Riccetti, Luca, 2020. "Risk aversion, prudence and temperance: It is a matter of gap between moments," Journal of Behavioral and Experimental Finance, Elsevier, vol. 25(C).
    20. Aurélien Baillon & Philipp Koellinger & Theresa Treffers, 2014. "Sadder but wiser: The Effects of Affective States and Weather on Ambiguity Attitudes," Tinbergen Institute Discussion Papers 14-044/I, Tinbergen Institute.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jrisku:v:68:y:2024:i:2:d:10.1007_s11166-024-09426-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.