The conventional model of Homo Economicus is based on assumptions of selfish preferences where utility depends only on own payoffs, and full rationality where people have complete self-control when making decisions. In the real world, however, the fact that people are boundedly rational (i.e. limited by cognitive and emotional abilities) is well established. People engage in behaviors to help others although this is costly, engage in unfavorable gambles and postpone costly events to the future to enjoy benefits today.
Intuitive and reflective modes of thinking have been proposed to account for many of the anomalies observed in the real world. Kahneman (2011) proposed that people use two ways of thinking - intuition (“System 1”) and reflection (“System 2”) and our behavior are a consequence of how these two systems interact. Although dual-process models of thinking have received much attention, knowledge is currently lacking about under what circumstances decisions are driven by intuitive and reflective thinking, respectively. Very few studies have conducted experiments that exogenously induce processing modes before people make incentivized decisions.
In the present project we will begin to systematically fill this research gap by employing three types of experimental manipulations to induce intuitive and reflective modes of thinking; time pressure, cognitive load and hormone (ghrelin) injection. The overall objective is to document how different modes of thinking influence basic economic decision-making that is central to understanding a wide variety of everyday decisions: 1) prosocial choices 2) risky choices and 3) intertemporal choices.
Applying a dual-process framework to economic decisions raises a series of questions that this project will seek to answer: Do individuals act more or less selfish when making intuitive as opposed to reflective decisions? Do individuals become more or less risk averse when making intuitive decisions? Do individuals become more or less present-oriented when making intuitive decisions? What biological, psychological and neural factors at the individual level mediate observed behaviors?