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Cognitive Resource Depletion, Choice Consistency, and Risk Preferences

Author

Listed:
  • Marco Castillo

    (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)

  • David Dickinson

    (Department of Economics, Appalachian State University)

  • Ragan Petrie

    (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)

Abstract

We investigate the consistency and stability of individual risk preferences by slightly manipulating the cognitive resources of subjects through sleepiness. Participants are recruited and randomly assigned to an experiment session at a preferred time of day relative to their diurnal preference (circadian matched) or at a non-preferred time of day (circadian mismatched). For the decision task, subjects and are asked to choose how much to allocate between two state-dependent assets (using the Choi et al., 2007, design). We have two main findings. First, the consistency of behavior for circadian matched and mismatched subjects is statistically the same. This is true whether it is (nonparametrically) defined as consistency with GARP, payoff dominance, expected utility, disappointment aversion or cumulative prospect theory. Second, while our cognitive resource manipulation yields no difference in consistency of behavior, it results in an increased tendency to take risk. Our experiment confirms theoretical predictions that preferences are consistent yet state-dependent. Length: 30

Suggested Citation

  • Marco Castillo & David Dickinson & Ragan Petrie, 2012. "Cognitive Resource Depletion, Choice Consistency, and Risk Preferences," Working Papers 1036, George Mason University, Interdisciplinary Center for Economic Science, revised Nov 2012.
    • Handle: RePEc:gms:wpaper:1036
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    References listed on IDEAS

    as
    1. 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.
    2. Dickinson, David L. & McElroy, Todd, 2010. "Rationality around the clock: Sleep and time-of-day effects on guessing game responses," Economics Letters, Elsevier, vol. 108(2), pages 245-248, August.
    3. David Cesarini & Christopher T. Dawes & Magnus Johannesson & Paul Lichtenstein & Björn Wallace, 2009. "Genetic Variation in Preferences for Giving and Risk Taking," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(2), pages 809-842.
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    Cited by:

    1. de Haan, Thomas & van Veldhuizen, Roel, 2015. "Willpower depletion and framing effects," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 47-61.

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