The Bobst Center for Peace and Justice at Princeton University and the Social Science Experimental Laboratory (SSEL) at New York University Abu Dhabi are inviting social science PhD students, postdoctoral fellows, and junior Assistant Professors in experimental social science to submit a paper/research design to the Winter Experimental Social Sciences Institute (WESSI) Workshop at New York University Abu Dhabi to be held January 17-19, 2018.
More info on WESSI Workshop.
By What Authority? Uncovering The Conditional Mandate from Referendums in EU Membership Decisions
A virtue of democratic decision-making procedures is that the foundations in which decisions are made are thought to enhance the legitimacy of the decision. We study the nuances of this assumption and ask under what conditions democratic decisions are seen as legitimate in the eyes of the people. Specically, we investigate what mandate citizens award an EU membership referendum in three European non-member and three member countries based on the level of turnout, size of majority, and favorability of the outcome.
Learning in Categories and the Attention Constraints of Investors
Investment based on asset categories (aka style investing) is considered a cause of major financial anomalies, such as the abnormal stock price gains of companies that changed to dotcom names during the Internet bubble without other changes in strategy. However, the reasons for this categorical behavior are unclear. In this project, we will conduct the first experimental test of the hypothesis that attention constraints contribute to style investing. The efficient allocation of limited attention can encourage learning in categories, because category-level data provides information about all members, whereas stock-specific data provides information only about the individual stock. This theory predicts that attention to categories is driven by the confluence of psychological elements, like information-processing ability, and economic elements, like the number of stocks within a category. We plan to directly investigate these predictions by measuring the amount of time participants spend looking at category-level vs stock-specific information in a simulated financial environment, varying these psychological and economic predictors. Moreover, we can test whether information-processing ability in our financial context relates to broader cognitive traits. Thus, we hope to shed light on how limits on the ability to process information may result in economic anomalies that persist and even grow at large scales.
Overreaction in Macroeconomic Expectations (w/ Nicola Gennaioli, Yueran Ma, Andrei Shleifer)
We examine the rationality of individual and consensus professional forecasts of macroeconomic and financial variables using the methodology of Coibion and Gorodnichenko (2015), which focuses on the predictability of forecast errors from earlier forecast revisions. We document two principal findings: at the individual level, forecasters typically over-react to information, while consensus forecasts exhibit under-reaction. To reconcile these findings, we combine the diagnostic expectations model of belief formation from Bordalo, Gennaioli, and Shleifer (2018) with Woodford’s (2003) noisy information model of belief aggregation. The model accounts for the findings, but also yields a number of new implications related to the forward looking nature of diagnostic expectations, which we also test and confirm. Finally, we compare our model to mechanical extrapolation, rational inattention, and natural expectations.
Correcting cognitive biases through Brief Information Provision
This paper sets out a debiasing strategy based on Brief Information Provision (BIP), and tests its effectiveness in debiasing the Anchoring Bias, Availability Bias, Optimism Bias, and Present Bias, four of the key cognitive biases involved in the consumption of negative externalities such as cigarettes and fast foods.
A BIP debiasing strategy involves providing individuals with brief, easy to understand information on the bias they are likely to suffer from, including:
- A layman’s definition of the bias
- A common example of how the bias may occur in everyday life
The previous debiasing literature has put forward various measures for addressing cognitive biases, from training interventions to feedback mechanisms informing individuals of their biased decision making, but such strategies consistently lack a method of effective application outside of the laboratory. BIP takes a different approach; rather than teaching participants how to avoid biases, it asks whether biases can be alleviated simply by telling participants about them. In this regard, BIP has wide ranging applicability; a two or three sentence informational intervention could be posted on cigarette boxes, at the bottom of gambling adverts, or even printed on food menus in the same way as compulsory calorie posting.
The effectiveness of BIP as a debiasing strategy will be tested in a simple Individual Random Assignment Design (IRA), involving a treatment group (exposure to BIP) and a control group (no exposure to BIP). The treatment group will first read BIP, and then proceed to answer the same questionnaire as the control group, which is designed to elicit the four biases mentioned above. Mean differences between the two groups will be compared for each bias, where the effectiveness of BIP would be demonstrated by a statistically significant reduction in the bias shown by the treatment group.