• Cognitive ability, risk preferences and errors

Drouvelis, M. & Pearce, G.

Reject & Resubmit at The Economic Journal

This project is funded by Bangor Business School. 

I presented this project at the Inaugural European Economic Review Summer School & Workshop on Behavioural and Experimental Economics  at the University of Crete, Greece.

In this paper we examine the link between cognitive ability, risk preferences and the errors that people make. We build a unique dataset that contains over 260,000 decisions made under uncertainty in a variety of tasks by almost 13,000 individuals, with each person having completed a test designed explicitly to measure their cognitive ability. We use both reduced form and structural analyses to distinguish between behavioural differences driven by risk aversion from those that are a consequence of errors. We find that intelligence (1) has a small and behaviourally irrelevant impact on risk preferences and (2) a robust link to errors, reducing the probability of errors through increased preference stability. Our results have implications for the development of theories that seek to explain the impact of cognitive ability on decision making.

• Loss aversion and cooperation in the infinitely repeated prisoner's dilemma

I recently presented an early version of this project at LUISS, Italy, and at CARBS, Cardiff University, Wales.

Drouvelis, M., & Pearce, G.

We examine how loss aversion, a cognitive bias where a loss is felt more intensely than an equally sized gain, can sustain cooperation in indefinitely repeated games.