26
Nov
14

Cognitive load and strategic sophistication – Munich Personal RePEc Archive

Abstract

 

We study the relationship between the cognitive load manipulation and strategic sophistication. The cognitive load manipulation is designed to reduce the subject’s cognitive resources that are available for deliberation on a choice. In our experiment, subjects are placed under a high cognitive load (given a difficult number to remember) or a low cognitive load (given a number that is not difficult to remember). Subsequently, the subjects play a one-shot game then they are asked to recall the number. This procedure is repeated for various games. We find a nuanced and nonmonotonic relationship between cognitive load and strategic sophistication. This relationship is consistent with two effects. First, subjects under a high cognitive load tend to exhibit behavior consistent with the reduced ability to compute the optimal decision. Second, the cognitive load tends to affect the subject’s perception of their relative standing in the distribution of the available cognitive resources. The net result of these two opposing effects depends on the strategic setting. Our experiment provides evidence on the literature that examines the relationship between measures of cognitive ability and strategic sophistication.

 #neuroeconomy

 

Source: mpra.ub.uni-muenchen.de

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