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Edited by Shengwu Li, Harvard University, Cambridge, MA, and accepted by Editorial Board Member Paul R. Milgrom June 27, 2019 (received for review December 14, 2018)
Significance
A large literature in behavioral and experimental economics has identified a long list of robust phenomena that are hard to explain within the classic model of economic choice. These are, however, typically analyzed independently. We study the joint distribution of 11 of the most prominent behaviors using an incentivized laboratory experiment involving undergraduate students. Our main aim is to provide empirical guidance in the construction of a unified, parsimonious model of economic behavior, an important step in integrating behavioral insights into broader economic and policy analysis. We find that some of these phenomena are strongly related to each other, while others are independent. This provides evidence in support of some of the proposed attempts at unification, but not others.
Abstract
We study the joint distribution of 11 behavioral phenomena in a group of 190 laboratory subjects and compare it to the predictions of existing models as a step in the development of a parsimonious, general model of economic choice. We find strong correlations between most measures of risk and time preference, between compound lottery and ambiguity aversion, and between loss aversion and the endowment effect. Our results support some, but not all attempts to unify behavioral economic phenomena. Overconfidence and gender are also predictive of some behavioral characteristics.
Footnotes
↵1M.D. and P.O. contributed equally to this work.
- ↵2To whom correspondence may be addressed. Email: pietro.ortoleva{at}princeton.edu.
Author contributions: M.D. and P.O. designed research, performed research, analyzed data, and wrote the paper.
The authors declare no conflict of interest.
This article is a PNAS Direct Submission. S.L. is a guest editor invited by the Editorial Board.
This article contains supporting information online at www.pnas.org/lookup/suppl/doi:10.1073/pnas.1821353116/-/DCSupplemental.
Published under the PNAS license.
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The empirical relationship between nonstandard economic behaviors
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