Aging and decision making: a comparison between neurologically healthy elderly and young individuals

Kovalchik, Stephanie; Camerer, Colin F.; Grether, David M.; Plott, Charles R.; Allman, John M.

doi:10.1016/j.jebo.2003.12.001

Cited by 189 publications

(170 citation statements)

References 33 publications

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“…For instance, there is some evidence that the effect is larger in older than in younger adults (Gächter, Johnson, & Herrmann, 2010; but see Kovalchik, Camerer, Grether, Plott, & Allman, 2005), but the cognitive mechanisms underlying such potential age differences are not yet understood. Fitting computational models (e.g., variants of cumulative prospect theory) to the selling and buying prices of older and younger adults would make it possible to compare the age groups in terms of the estimated parameter profiles in general, but also in terms of which buyer-seller difference in the estimated parameters best accounts for age differences.…”

Section: Applications Of the Cognitive Modeling Approachmentioning

confidence: 99%

Unpacking buyer-seller differences in valuation from experience: A cognitive modeling approach

Pachur

Scheibehenne

2017

Psychon Bull Rev

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People often indicate a higher price for an object when they own it (i.e., as sellers) than when they do not (i.e., as buyers)-a phenomenon known as the endowment effect. We develop a cognitive modeling approach to formalize, disentangle, and compare alternative psychological accounts (e.g., loss aversion, loss attention, strategic misrepresentation) of such buyer-seller differences in pricing decisions of monetary lotteries. To also be able to test possible buyer-seller differences in memory and learning, we study pricing decisions from experience, obtained with the sampling paradigm, where people learn about a lottery's payoff distribution from sequential sampling. We first formalize different accounts as models within three computational frameworks (reinforcement learning, instance-based learning theory, and cumulative prospect theory), and then fit the models to empirical selling and buying prices. In Study 1 (a reanalysis of published data with hypothetical decisions), models assuming buyer-seller differences in response bias (implementing a strategicmisrepresentation account) performed best; models assuming buyer-seller differences in choice sensitivity or memory (implementing a loss-attention account) generally fared worst. In a new experiment involving incentivized decisions (Study 2), models assuming buyer-seller differences in both outcome sensitivity (as proposed by a loss-aversion account) and response bias performed best. In both Study 1 and 2, the models implemented in cumulative prospect theory performed best. Model recovery studies validated our cognitive modeling approach, showing that the models can be distinguished rather well. In summary, our analysis supports a loss-aversion account of the endowment effect, but also reveals a substantial contribution of simple response bias. Keywords Computational modeling . Endowment effect . Risky decision making . Decision from experience . Loss aversionThe minimum price at which people are willing to accept to sell an object they own is often higher than the maximum price they are willing to pay for the same object when they do not own it. This systematic difference between buying and selling prices-which can also occur within the same person when taking different perspectives-is known as the endowment effect (Kahneman, Knetsch, & Thaler, 1990, 1991Thaler, 1980; see also Birnbaum & Stegner, 1979). The endowment effect has attracted considerable attention because it contradicts a central tenet of economic theory: According to the Coase theorem, the value of an object should be independent of its initial ownership (Kahneman et al., 1990).There have been several proposals as to which cognitive mechanisms give rise to the endowment effect, or how buyers' and sellers' cognitive mechanisms might differ generally.1 For instance, there may be asymmetries between buyers and sellers in terms of the order in which they search for positive 1 Note that this issue is orthogonal to the question of which aspects of being endowed-such as ownership, expectations...

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Section: Applications Of the Cognitive Modeling Approachmentioning

confidence: 99%

Unpacking buyer-seller differences in valuation from experience: A cognitive modeling approach

Pachur

Scheibehenne

2017

Psychon Bull Rev

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“…Thus, it is quite possible that age does not diminish our faculties, but does change the decision-making approach. The set of experiments used by Kovalchik et al (2005) differs substantively from our experiment with almost no role for the type of heuristics 11 As the logistic choice model cannot identify each parameter and the variance of the distribution, parameters should be interpreted as β/σ, complicating intuitive comparisons across age groups.…”

Section: Heuristicsmentioning

confidence: 93%

“…While the effect of sex on decision making in economic experiments has received considerable attention (Croson and Gneezy 2009, Eckel and Grossman 2008, Cox and Deck 2006, the effect of age has been much less studied. One notable exception is Kovalchik et al (2005) who find little difference between older and younger subjects in a variety of experiments. In contrast, we find significant differences and discuss this apparent disparity later in the paper.…”

Section: Introductionmentioning

confidence: 99%

Age Effects and Heuristics in Decision Making

et al. 2010

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Using controlled experiments, we examine how individuals make choices when faced with multiple options. Choice tasks are designed to mimic the selection of health insurance, prescription drug, or retirement savings plans. In our experiment, available options can be objectively ranked allowing us to examine optimal decision making. First, the probability of a person selecting the optimal option declines as the number of options increases, with the decline being more pronounced for older subjects. Second, heuristics differ by age with older subjects relying more on suboptimal decision rules. In a heuristics validation experiment, older subjects make worse decisions than younger subjects.

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“…Older adults often continue to work in important jobs, and even those who retire must make important choices that will affect their well-being and the well-being of their posterity. There has recently been a surge in excellent research aimed at understanding decision-making across the lifespan (Kovalchik et al, 2004;Wood et al, 2005;Peters et al, 2007;Schott et al, 2007;. One important aspect of decision-making is that decisions can rarely be considered as isolated events.…”

Section: Introductionmentioning

confidence: 99%