The Evolution of Our Preferences: Evidence from Capuchin Monkey Trading Behavior

27 Pages Posted: 7 Jun 2005

See all articles by M. Keith Chen

M. Keith Chen

University of California, Los Angeles (UCLA) - Anderson School of Management

Venkat Lakshminarayanan

Yale University

Laurie Santos

Yale University - Department of Psychology

Date Written: June 2005

Abstract

Behavioral economics has demonstrated systematic decision-making biases in both lab and field data. But are these biases learned or innate? We investigate this question using experiments on a novel set of subjects - capuchin monkeys. By introducing a fiat currency and trade to a capuchin colony, we are able to recover their preferences over a wide range of goods and risky choices. We show that standard price theory does a remarkably good job of describing capuchin purchasing behavior; capuchin monkeys react rationally to both price and wealth shocks. However, when capuchins are faced with more complex choices including risky gambles, they display many of the hallmark biases of human behavior, including reference-dependent choices and loss-aversion. Given that capuchins demonstrate little to no social learning and lack experience with abstract gambles, these results suggest that certain biases such as loss-aversion are an innate function of how our brains code experiences, rather than learned behavior or the result of misapplied heuristics.

Keywords: prospect theory, loss aversion, reference dependence, evolution, neuroeconomics, capuchin monkeys, monkey business

JEL Classification: C91, C99, D12, D46, D80, D81

Suggested Citation

Chen, Keith and Lakshminarayanan, Venkat and Santos, Laurie, The Evolution of Our Preferences: Evidence from Capuchin Monkey Trading Behavior (June 2005). Cowles Foundation Discussion Paper No. 1524. Available at SSRN: https://ssrn.com/abstract=675503

Keith Chen (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.anderson.ucla.edu/faculty/keith.chen/index.html

Venkat Lakshminarayanan

Yale University ( email )

New Haven, CT 06520
United States

Laurie Santos

Yale University - Department of Psychology ( email )

P.O. Box 208205
New Haven, CT 06520-8205
United States

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