Effects of Stress on Economic Decision-Making: Evidence from Laboratory Experiments

35 Pages Posted: 5 Apr 2014

See all articles by Liam Delaney

Liam Delaney

University College Dublin (UCD) - Geary Institute and Department of Economics

Günther Fink

Harvard University - Department of Population and International Health

Colm P. Harmon

The University of Sydney - School of Economics; IZA Institute of Labor Economics

Abstract

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

Delaney, Liam D. and Fink, Günther and Harmon, Colm P., Effects of Stress on Economic Decision-Making: Evidence from Laboratory Experiments. IZA Discussion Paper No. 8060. Available at SSRN: https://ssrn.com/abstract=2420705

Liam D. Delaney (Contact Author)

University College Dublin (UCD) - Geary Institute and Department of Economics ( email )

Newman Building (Room G215)
Belfield, Dublin 4
Ireland

Günther Fink

Harvard University - Department of Population and International Health ( email )

665 Huntington Avenue
Boston, MA 02115
United States

Colm P. Harmon

The University of Sydney - School of Economics ( email )

Rm 370 Merewether (H04)
Sydney, NSW 2006 2008
Australia

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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