Effects of Stress on Economic Decision-Making: Evidence from Laboratory Experiments
35 Pages Posted: 5 Apr 2014
The ways in which preferences respond to the varying stress of economic environments is a key question for behavioral economics and public policy. We conducted a laboratory experiment to investigate the effects of stress on financial decision making among individuals aged 50 and older. Using the cold pressor task as a physiological stressor, and a series of intelligence tests as cognitive stressors, we find that stress increases subjective discounting rates, has no effect on the degree of risk-aversion, and substantially lowers the effort individuals make to learn about financial decisions.
Keywords: stress, financial decisions, discounting, risk aversion, learning
JEL Classification: D91, I310
Suggested Citation: Suggested Citation