[[{“value”:”We report a large-scale examination of behavioral attenuation: due to information-processing constraints, the elasticity of people’s decisions with respect to economic fundamentals is generally too small. We implement more than 30 experiments, 20 of which were crowd-sourced from leading experts. These experiments cover a broad range of economic decisions, from choice and valuation to belief
The post Behavioral attenuation appeared first on Marginal REVOLUTION.”}]]
We report a large-scale examination of behavioral attenuation: due to information-processing constraints, the elasticity of people’s decisions with respect to economic fundamentals is generally too small. We implement more than 30 experiments, 20 of which were crowd-sourced from leading experts. These experiments cover a broad range of economic decisions, from choice and valuation to belief formation, from strategic games to generic optimization problems, involving investment, savings, effort supply, product demand, taxes, environmental externalities, fairness, cooperation, beauty contests, information disclosure, search, policy evaluation, memory, forecasting and inference. In 93% of our experiments, the elasticity of decisions to fundamentals decreases in participants’ cognitive uncertainty, our measure of the severity of information-processing constraints. Moreover, in decision problems with objective solutions, we observe elasticities that are universally smaller than is optimal. Many widely-studied decision anomalies represent special cases of behavioral attenuation. We discuss both its limits and why it often gives rise to the classic phenomenon of diminishing sensitivity.
That is from a new and very important working paper by Benjamin Enke, Thomas Graeber, Ryan Oprea, and Jeffrey Yang.
It could be said that incentives matter, but they do not matter enough. This is likely one of the most important economics papers of the year.
The post Behavioral attenuation appeared first on Marginal REVOLUTION.
Data Source, Economics, Uncategorized
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