Advanced Counter-Biasing

31 Pages Posted: 21 May 2019

See all articles by Jeffrey P. Carpenter

Jeffrey P. Carpenter

Middlebury College - Department of Economics; IZA Institute of Labor Economics

Kevin Benscheidt

Middlebury College

Date Written: March 2019

Abstract

Viewed through the lens of the prominent two-system model of decision making, behavioral economics is seen as studying the tension between impulses (System 1) and rationality (System 2). In this context, two strategies, "de-biasing" informing agents of their biases and "counter-biasing" using "nudges" to activate biases to positively influence choice, have improved the welfare of behavioral agents. We advance the notion of counter-biasing by demonstrating that one bias (present bias) can be pit against another (choking at high stakes) to counteract the ill effects of the second. Our results demonstrate the potential of counter-biasing as an effective policy tool.

Keywords: behavioral economics, counter-biasing, present bias, choking, experiment

JEL Classification: C91, D91, M52

Suggested Citation

Carpenter, Jeffrey P. and Benscheidt, Kevin, Advanced Counter-Biasing (March 2019). IZA Discussion Paper No. 12253. Available at SSRN: https://ssrn.com/abstract=3390243

Jeffrey P. Carpenter (Contact Author)

Middlebury College - Department of Economics ( email )

Munroe Hall
Middlebury, VT 05753
United States
802-443-3241 (Phone)
802-443-2084 (Fax)

HOME PAGE: http://community.middlebury.edu/~jcarpent/index.ht

IZA Institute of Labor Economics

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

Kevin Benscheidt

Middlebury College

Middlebury, VT 05753
United States

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