Saving behavior and cognitive abilities

Experiments on saving behavior reveal substantial heterogeneity of behavior and performance. We show that this heterogeneity is reliable and examine several potential sources of it, including cognitive ability and personality scales. The strongest predictors of both behavior and performance are two cognitive ability measures. We conclude that complete explanations of heterogeneity in dynamic decision making require attention to complexity and individual differences in cognitive constraints.

[1]  Miles S. Kimball.  Precautionary Saving in the Small and in the Large , 1989 .

[2]  Frederic S. Mishkin,et al.  The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households , 1980 .

[3]  Catherine C. Eckel,et al.  Is Trust a Risky Decision? , 2004 .

[4]  D. Stahl,et al.  On Players' Models of Other Players: Theory and Experimental Evidence , 1995 .

[5]  N. Mankiw,et al.  Permanent Income, Current Income, and Consumption , 1987 .

[6]  Colin Camerer,et al.  Learning and Visceral Temptation in Dynamic Savings Experiments , 2008 .

[7]  P. Slovic,et al.  The affect heuristic , 2007, European Journal of Operational Research.

[8]  L. Cronbach.  Coefficient alpha and the internal structure of tests , 1951 .

[9]  S. Frederick.  Journal of Economic Perspectives—Volume 19, Number 4—Fall 2005—Pages 25–42 Cognitive Reflection and Decision Making , 2022 .

[10]  R. Selten,et al.  Money Does Not Induce Risk Neutral Behavior, but Binary Lotteries Do even Worse , 1999 .

[11]  Enrica Carbone,et al.  The Effect of Unemployment on Consumption: An Experimental Analysis , 2004 .

[12]  J. Cacioppo,et al.  Effects of need for cognition on message evaluation, recall, and persuasion. , 1983 .

[13]  J. Cacioppo,et al.  DISPOSITIONAL DIFFERENCES IN COGNITIVE MOTIVATION : THE LIFE AND TIMES OF INDIVIDUALS VARYING IN NEED FOR COGNITION , 1996 .

[14]  Enrica Carbone,et al.  Understanding intertemporal choices , 2006 .

[15]  R. Thaler.  Psychology and Savings Policies , 1994 .

[16]  J. Conlisk.  Costly optimizers versus cheap imitators , 1980 .

[17]  Colin Camerer,et al.  A Cognitive Hierarchy Model of Games , 2004 .

[18]  A. Tversky,et al.  Prospect Theory : An Analysis of Decision under Risk Author ( s ) : , 2007 .

[19]  David I. Laibson,et al.  Golden Eggs and Hyperbolic Discounting , 1997 .

[20]  J. Hey,et al.  Optimal Consumption under Uncertainty: An Experimental Investigation , 1988 .

[21]  R. Engle,et al.  Is working memory capacity task dependent , 1989 .

[22]  Andreas Ortmann,et al.  How financial incentives and cognitive abilities affect task performance in laboratory settings: an illustration † , 2004 .

[23]  Eric J. Johnson,et al.  Adaptive Strategy Selection in Decision Making. , 1988 .

[24]  C. Carroll,et al.  Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis , 1996 .

[25]  Randall W Engle,et al.  Working memory, short-term memory, and general fluid intelligence: a latent-variable approach. , 1999, Journal of experimental psychology. General.

[26]  G. A. Miller,et al.  Book Review Nisbett, R. , & Ross, L.Human inference: Strategies and shortcomings of social judgment.Englewood Cliffs, N.J.: Prentice-Hall, 1980. , 1982 .

[27]  V. Smith.  Microeconomic Systems as an Experimental Science , 1982 .

[28]  Jerome H. Remick Co.,et al.  I'll Try Anything Once , 1911 .

[29]  G. Harrison.  Theory and Misbehavior of First-Price Auctions , 1989 .

[30]  C. Spearman.  General intelligence Objectively Determined and Measured , 1904 .

[31]  J. Kagel,et al.  Bidding in Common Value Auctions: How the Commercial Construction Industry Corrects for the Winner's Curse , 1996 .

[32]  Andrew A. Mitchell.  The effect of information on consumer and market behavior , 1978 .

[33]  Marjorie Flavin,et al.  The Adjustment of Consumption to Changing Expectations About Future Income , 1981, Journal of Political Economy.

[34]  D. Kahneman,et al.  Experimental Tests of the Endowment Effect and the Coase Theorem , 1990, Journal of Political Economy.

[35]  A. Rustichini,et al.  Pay Enough or Don't Pay at All , 2000 .

[36]  David I. Laibson,et al.  Life-cycle consumption and hyperbolic discount functions , 1998 .

[37]  L. Ross,et al.  Human Inference: Strategies and Shortcomings of Social Judgment. , 1981 .

[38]  A. Miyake,et al.  Models of Working Memory: Mechanisms of Active Maintenance and Executive Control , 1999 .

[39]  Colin F. Camerer,et al.  Experiments on Intertemporal Consumption with Habit Formation and Social Learning , 2006 .

[40]  Michael F. Bunting,et al.  Working memory span tasks: A methodological review and user’s guide , 2005, Psychonomic bulletin & review.

[41]  Colin Camerer,et al.  Regulation for Conservatives: Behavioral Economics and the Case for 'Asymmetric Paternalism' , 2003 .

[42]  Colin Camerer,et al.  The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework , 1999 .

[43]  Charles Vlek,et al.  Utility, Probability, and Human Decision Making , 1975 .

[44]  Nathaniel T. Wilcox,et al.  On a lottery pricing anomaly: Time tells the tale , 1993 .

[45]  L. Beach,et al.  A Contingency Model for the Selection of Decision Strategies , 1978 .

[46]  J. Carroll.  Human Cognitive Abilities-a sur-vey of factor-analytic studies , 1993 .

[47]  Martin Browning,et al.  Household Saving: Micro Theories and Micro Facts , 1996 .

[48]  C. F. Kao,et al.  The efficient assessment of need for cognition. , 1984, Journal of personality assessment.

[49]  A. Tversky,et al.  Prospect theory: analysis of decision under risk , 1979 .

[50]  R. Nagel.  Unraveling in Guessing Games: An Experimental Study , 1995 .

[51]  R. Engle,et al.  The role of prefrontal cortex in working-memory capacity, executive attention, and general fluid intelligence: An individual-differences perspective , 2002, Psychonomic bulletin & review.

[52]  Robin M. Hogarth,et al.  Decision Time as a Function of Task Complexity , 1975 .

[53]  Bruce W. Tuckman,et al.  The Development and Concurrent Validity of the Procrastination Scale , 1991 .

[54]  R. Engle.  Working Memory Capacity as Executive Attention , 2002 .

[55]  L. F. Barrett,et al.  Individual differences in working memory capacity and dual-process theories of the mind. , 2004, Psychological bulletin.

[56]  Jesse M. Shapiro,et al.  WHO IS 'BEHAVIORAL'? COGNITIVE ABILITY AND ANOMALOUS PREFERENCES. , 2013, Journal of the European Economic Association.

[57]  David Laibson,et al.  Commentary on “Choice Bracketing” by Read, Loewenstein and Rabin , 1999 .

[58]  E. Elisabet Rutström,et al.  Decision Making Costs and Problem Solving Performance , 2001 .

[59]  K. Stanovich,et al.  Individual differences in reasoning: Implications for the rationality debate? , 2000, Behavioral and Brain Sciences.

[60]  K. Turley-Ames,et al.  Strategy training and working memory task performance. , 2003 .

[61]  E. Hunt.  Intelligence and human resources: Past, present, and future. , 1999 .

[62]  Joyce E. Berg,et al.  Controlling Preferences for Lotteries on Units of Experimental Exchange , 1986 .

[63]  David I. Laibson,et al.  A Boundedly Rational Decision Algorithm , 2000 .

[64]  S. Whiteside,et al.  The Five Factor Model and impulsivity: using a structural model of personality to understand impulsivity , 2001 .

[65]  The Relationship Between Need For Cognition and Other Individual Difference Variables: a Two-Dimensional Framework , 1989 .

[66]  Vernon L. Smith,et al.  Papers in Experimental Economics: An Empirical Study of Decentralized Institutions of Monopoly Restraint , 1991 .

[67]  A. Miyake,et al.  The separability of working memory resources for spatial thinking and language processing: an individual differences approach. , 1996, Journal of experimental psychology. General.

[68]  R. Engle,et al.  Executive Attention, Working Memory Capacity, and a Two-Factor Theory of Cognitive Control. , 2003 .

[69]  Nathaniel T. Wilcox,et al.  Precautionary Saving and Social Learning Across Generations: An Experiment , 2003 .

[70]  G. Ainslie.  Specious reward: a behavioral theory of impulsiveness and impulse control. , 1975, Psychological bulletin.

[71]  R. Engle,et al.  The generality of working memory capacity: a latent-variable approach to verbal and visuospatial memory span and reasoning. , 2004, Journal of experimental psychology. General.

[72]  Ondřej Rydval.  The impact of financial incentives on task performance: The role of cognitive abilities and intrinsic motivation , 2007 .

[73]  O. Mitchell,et al.  Baby Boomer Retirement Security: The Roles of Planning, Financial Literacy, and Housing Wealth , 2006 .

[74]  Joseph R. Ferrari,et al.  Psychometric validation of two Procrastination inventories for adults: Arousal and avoidance measures , 1992 .

[75]  K. R. Olson,et al.  Curiosity and Need for Cognition , 1984 .

[76]  Ted O’Donoghue,et al.  Doing It Now or Later , 1999 .

[77]  N. Wilcox.  Lottery choice: incentives, complexity and decision time , 1993 .

[78]  Richard D. Roberts,et al.  Learning and Individual Differences: Process, Trait and Content Determinants , 1999 .

[79]  Priti Shah,et al.  Models of Working Memory: Models of Working Memory: An Introduction , 1999 .

[80]  A. H. Murphy,et al.  Experiments in the laboratory and the real world , 1973 .

[81]  R. Thaler,et al.  An Economic Theory of Self-Control , 1977, Journal of Political Economy.

[82]  J. Raven,et al.  Manual for Raven's progressive matrices and vocabulary scales , 1962 .