Economists model self-control problems through time-inconsistent preferences. Empirical tests of these preferences largely rely on experimental elicitation methods using monetary rewards, with several recent studies failing to find present bias for money. In this paper, we compare estimates of present bias for money with estimates for healthy and unhealthy foods. In a within-subjects longitudinal experiment with 697 low-income Chinese high school students we find strong present bias for both money and food, and that individual measures of present bias are moderately correlated across reward types. Our experimental measures of time preferences over money predict field behaviours better than preferences elicited over foods.

Glimcher P. W. and Tymula A. (2019) Expected Subjective Value Theory (ESVT): A representation of decision under risk and certainty, revision requested from Management Science

We present a descriptive model of choice with normative foundations based on how the brain is thought to represent value. An individual’s behavior is fully described by two primitives: an individual’s expectation and one free parameter we call “predisposition’. The model captures the same apparent preference phenomena illustrated by Prospect Theory but unlike Prospect Theory accounts for individual heterogeneity in parameters, employs far fewer parameters than full prospect theory, and retains neurobiological plausibility as a causal model of the choice process. Additionally, our theory makes a series of novel predictions amenable to future testing and includes an alternative explanation for endowment effect.

Guo J. and Tymula A. (2020) Waterfall illusion in risky choice, revision requested from European Economic Review

Based on recent discoveries in economics, neuroscience, and psychology, we hypothesize that pure exposure to high-value or low-value rewards can change people’s valuation of gambles and confirm this hypothesis in a laboratory experiment. In particular, the same participants within the same experimental session provide higher valuations for the same gambles after they have been exposed to low-value rewards than after they have been exposed to high-value rewards. These results are consistent with the current understanding of how the nervous system encodes rewards and imply that even brief experiences that do not change wealth can impact an individual’s valuations.

Slonim R., Taush F. and Tymula A. (2020) Altruism among Consumers as Donors, revision requested from the Journal of Economic Behavior and Organization

Tymula A. and Wang X. (2020) Increased risk-taking, not loss tolerance, drives adolescents’ propensity to gamble more under peer observation

Relative to adults, adolescents make more welfare-decreasing decisions, especially in the presence of peers. The consequences of these decisions result in substantial individual and societal losses in terms of lives lost, injury, hospitalization costs, and foregone opportunities. In this paper, we used a laboratory experiment with 12- to 24-year-old participants to identify which economic preference is affected by peer observation in adolescence — risk attitudes in gains, risk attitudes in losses, and/or loss aversion. We found that older adolescents (18-24 years old) while observed by peers become more risk-tolerant both in gains and in losses but more loss averse. We discuss potential mechanisms driving the result and its implications for policy.

Robinson T. and Tymula, A. (2019) Divisive normalization of value explains choice-reversals in decision-making under risk

We present a neuroeconomic model for risky choice that species a utility function that is context-dependent. We demonstrate how and under what conditions the model generates choice (but not preference) reversals. In a laboratory experiment, we test the predictions of our model and compare it against other popular models of context-dependent choice. We nd that divisive normalization captures violations of the independence of irrelevant alternatives that cannot be otherwise explained with salience theory, range normalization, or attraction eect theories. Moreover, we identify a new setting in which the well-established attraction effects do not occur.

Berger A. and Tymula A. (2019) Controlling ambiguity: The illusion of control in decision-making under risk and ambiguity [supplement]

The finding that individuals are ambiguity averse in the domain of medium likelihood gains is robust across laboratory studies. We conducted a laboratory experiment to examine whether we can lower this aversion to ambiguity by giving participants an illusion of control over the probability of winning by allowing them to choose the winning color in what objectively are 50-50 gambles. We found that while our illusion of control manipulation does not increase participants’ preference for risky gambles with known probability of winning, it does increase participants’ tolerance for ambiguous gambles with unknown probability of winning. When the illusion of control is absent, the structural model estimates of ambiguity tolerance are 29% lower. Our results highlight the importance of considering the illusion of control in the estimation of ambiguity attitudes.

Kettlewell N., Rijsdijk F., Siribaddana S., Sumathipala A., Tymula A., Zavos H., Glozier N. (2019) The impact of war and tsunami on risk aversion: Evidence from Sri Lankan twins

We estimate whether risk preferences are affected by traumatic events by using a unique survey of Sri Lankan twins which contains information on individual’s exposure to the 2004 Indian Ocean Tsunami, participation as a combatant in the civil war, validated measures of mental health and risk preferences, and a rich set of control variables. Our estimation strategy utilises variation in experiences within twin pairs and allows us to explore wealth shocks and/or changes in mental health as mechanisms. We find that both events lead to less risk aversion, a result that is not driven by mental health or wealth changes.

Antrobus E., Baranov V., Cobb-Clark D., Mazerolle L. and Tymula A. (2017) The Risk and Time Preferences of Young Truants and Their Parents 

Non – traditional research output

Decision-making and ageing exhibit at the Museum of the National Academy of Sciences in Washington, DC (part of the Life Lab exhibit)

• on display May 2012 – September 2018