The SWE colloquium on Thursday 3 December (12:00-13:00) will be presented by Zwetelina Iliewa, Assistant Professor in Finance, University of Bonn. The talk will be totally virtual, streamed live through Zoom.

Dynamic inconsistency in risky choice: evidence from the lab and field

Many economically important settings, from financial markets to consumer choice, involve dynamic decisions under risk. People are willing to accept risk as part of a sequence of choices—even when it is fair or has a negative expected value—while at the same time rejecting positive-expected value gambles offered in isolation. We use a unique brokerage dataset containing traders’ ex-ante investment plans and their subsequent decisions (N=190,000) and two pre-registered experiments (N=940) to study what motivates decisions to take risk in dynamic environments. In both settings, people accept risk as part of a “loss-exit” strategy—planning to take more risk after gains and stop after losses. Notably, this strategy generates a positively-skewed outcome distribution that is not available when the same gambles are offered in isolation. People’s actual behavior exhibits the reverse pattern, deviating from their intended strategy by cutting gains early and chasing losses. More individuals are willing to accept risk when offered a commitment to the initial strategy, which suggests at least partial sophistication about this dynamic inconsistency. We use our data to formally identify a model of decision-making that predicts both the observed deviations in planned versus actual behavior, as well as the discrepancy in risk-taking in static and dynamic environments. We then use this model to quantify the welfare costs of naivete in our setting. Together, our results have implications for evaluating the welfare consequences of behavioral biases in dynamic settings, such as the disposition effect, and highlight potentially unintended effects of regulation mandating non-binding commitment.

Supporting literature: Heimer, R., Iliewa, Z., Imas, A., and Weber, M. (2020). Dynamic inconsistency in risky choice: Evidence from the lab and field. Available at: SSRN: https://ssrn.com/abstract=3600583 or http://dx.doi.org/10.2139/ssrn.3600583

The SWE colloquium on Thursday 19 November (12:00-13:00) will be presented by Daniel Lakens, Associate Professor, Human-Technology Interaction Group, Eindhoven University of Technology. The talk will be totally virtual, streamed live through Zoom.

The new heuristics

Scientific reform in the last decade has lead to a wide range of proposed changes in how we design, analyze, report, and publish scientific findings. As the implementation of better research practices spreads through the scientific community, there is a risk of merely changing old flawed heuristics with new flawed heuristics. In this talk, the speaker will discuss some examples of norms scientists rely on when they design and analyze studies, and that editors rely on when evaluating work, without knowing why these norms exist, or whether these norms make sense. The speaker will try to argue this is a problem, and invite you to think along about ways in which scientists can learn to justify the choices they make when they do or evaluate research, instead of merely following norms.

The SWE colloquium on Thursday 12 November (12:00-13:00) will be presented by Thomas Hancock, Research Fellow in the Institute for Transport at the University of Leeds. The talk will be totally virtual, streamed live through Zoom.

Decision Field Theory for choices in real-world settings

Psychologists and economists have separately constructed many different choice models that are used to understand and predict the choices we make in a wide variety of contexts. Thus far, these models have been used to pursue different research agendas, with economists typically interested in forecasting future choices and psychologists focusing on understanding the decision-making process in of itself. In our work, we look at bridging the gap by improving the underlying mechanics of Decision Field Theory, a model developed by psychologists, such that it can “step out of the laboratory” to perform in the real-world settings that are typically studied by economists.  We then show how our updated version of DFT can be implemented in a number of case studies including transport mode choice for trips to London and driving behaviour problems such as modelling the choice of when to merge lanes onto a motorway.

The SWE colloquium on Thursday 5 November (12:00-13:00) will be presented by Ulrich Ebner-Priemer, Karlsruhe Institute of Technology. The talk will be totally virtual, streamed live through Zoom.

Monitoring the dynamics of real life using ambulatory assessment

Real-time mobile smartphone sampling of psychopathological symptoms and behaviour, sometimes also called Ambulatory Assessment [1], has become more and more popular in psychological research, offering three key advantages: (1) real-time assessment eliminates retrospective biases; (2) real-life assessment enables investigating symptomatology in the most important context: the everyday lives of our patients; (3) the within-subject perspective offers the possibility to elucidate psychopathological mechanisms in everyday life. According to current research, the dynamics of affective states and the intentional regulation of emotions are even more important to psychological health and maladjustment than the affective states itself. However, capturing the ebb and flow in everyday life is not trivial. Recent technical developments resulted in both fancy hardware to collect data in everyday life and powerful data-modelling techniques to analyse it. All three advantages come with the promise of increasing validity and reliability and therewith decreasing costs and sample size for future studies. In the talk, the speaker will focus on examples of ambulatory assessment to illustrate opportunities in psychological research: using high-frequency data assessment to model affective dynamics, using location-triggered e-diaries to investigate the relation between stress-reactivity and environmental components, monitoring physical activity and telecommunication behaviour to predict upcoming episodes in bipolar patients. The speaker will conclude by specifying disadvantages and pitfalls of ambulatory assessment. In conclusion, ambulatory assessment offers a wealth of methodological approaches to enhance the understanding of psychopathological symptoms in the most important context: the daily lives of our patients.

Reference

1. Trull, T. J., & Ebner-Preimer, U. (2913). Ambulatory assessment. Annual Review of Clinical Psychology, 9, 151–176.