UNSW - UQ
Economic Theory Festival

Reasoning, Personality and Preferences   Antonio Penta 

Making a difficult choice requires thought and introspection. This reasoning occurs in steps, it is cognitively costly, and individuals perform a limited number of these steps, typically making a decision before they have acquired a complete understanding of the problem.

In this series of lectures, I will first present recent work with Larbi Alaoui that explores the extent to which this problem may be modelled as a cost-benefit analysis, and the extent to which this approach may explain observed behaviour, both in decision problems and in strategic settings.

The way a difficult decision is made does not only depend on cognitive skills, but also on preferences and personality. In the next part, I will thus discuss ongoing research (also with L. Alaoui) that aims to model aspects of personality traits within a standard model of decision making.

The study of personality (noncognitive skills) has significantly increased in economics. But these concepts and their measurement is borrowed from psychology, and we lack definitions in terms of standard economic primitives, the way we do for instance with risk and time preferences. This limits our ability to write models, perform comparative statics, evaluate policies, etc. Our aim is to provide these notions, starting from individuals' attitudes towards success and failure, and the thresholds that separate one from the other. Through the lens of this framework, we obtain a unified perspective on several models of reference dependent preferences.