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Tomáš Jagelka (CREST) – “Preferences, Ability, and Personality: Explaining Heterogeneity in Decisions Under Uncertainty and Delay”

December 12, 12:15 am - 1:30 pm

CREST Microeconomics Seminar : 

Time: 12:15 pm – 1:30pm
Date:  5th December 2018
Place: Room 3001.

 

Tomáš Jagelka (CREST) – “Preferences, Ability, and Personality: Explaining Heterogeneity in Decisions Under Uncertainty and Delay”

Abstract:  We estimate a random preference model (RPM) of decision-making under uncertainty and delay using data from a unique Canadian field experiment with information on over 100 incentivized choice tasks for each of more than 1,200 individuals. We are able to separate true (or average) preferences from stochastic components affecting choices and estimate their distributions. Our results reveal a large amount of cross-sectional heterogeneity in risk and time preferences and suggest that reducing them to their average values in structural micro- and macro- economic models is likely insufficient and may lead to inaccurate estimates. We then explain up to 50% of the cross-sectional variation in preferences, in their stability, and in individuals’ propensity to make mistakes using a parsimonious set of cognitive and non-cognitive factors. These findings have ramifications for understanding the mechanism through which ability and personality impact economic decisions. They suggest that the latter should be included as controls in empirical work when direct preference estimates are unavailable. As we find that stochastic elements play an important role in decision making, we recommend that they be taken into account in welfare analysis. Our approach includes a robust treatment of random errors and is generalizeable to diverse settings in which one wishes to explain observed heterogeneity in risky or intertemporal choices through latent factors measured by multiple noisy indicators.

 

Organizers:
Roxana Fernandez Machado (CREST), Marie Laure Allain (CREST), and Pierre Boyer (CREST)

Sponsors:
CREST

Lunch registration:
Food provided, no registration needed.

 

Details

Date:
December 12
Time:
12:15 am - 1:30 pm
Event Category:

Venue

3001