Project acronym BEHAVIORAL THEORY
Project Behavioral Theory and Economic Applications
Researcher (PI) Botond Koszegi
Host Institution (HI) KOZEP-EUROPAI EGYETEM
Call Details Starting Grant (StG), SH1, ERC-2012-StG_20111124
Summary "This proposal outlines projects to develop robust and portable theories studying the impact of psychological phenomena in economic settings. The proposed work falls in three broad research agendas.
My first main agenda is to formally model and economically apply a simple observation: that when people make decisions, they do not focus equally on all attributes of their available options, and overweight the attributes they focus on. I will build a set of portable models of focusing in attribute-based choice and risky choice based on the idea that a person focuses more on attributes in which her options differ more. I will also use the framework to develop novel, focus-based, theories of intertemporal choice and social preferences, as well as analyze the implications of focusing for product design, principal-agent relationships, and other economic questions.
My second main agenda is to explore some implications for market outcomes, welfare, and policy of the possibility that consumers misperceive certain aspects of products. I will investigate the circumstances that facilitate the profitable deception of consumers; firms' incentives for ""innovating"" deceptive products, including novel financial products aimed at exploiting investors; how firms' ability to distinguish naive and sophisticated consumers affects the consequences of deception; whether learning on the part of consumers will help them to avoid making mistakes; and how regulators and other observers can detect consumer mistakes from market data.
Two further projects apply the model of reference-dependent utility I have developed in earlier work to understand the pricing and advertising behavior of firms. I will also aim to disseminate some of my work, along with other cutting-edge research in psychology and economics, in a Journal of Economic Literature survey on ""Behavioral Contract Theory."""
Summary
"This proposal outlines projects to develop robust and portable theories studying the impact of psychological phenomena in economic settings. The proposed work falls in three broad research agendas.
My first main agenda is to formally model and economically apply a simple observation: that when people make decisions, they do not focus equally on all attributes of their available options, and overweight the attributes they focus on. I will build a set of portable models of focusing in attribute-based choice and risky choice based on the idea that a person focuses more on attributes in which her options differ more. I will also use the framework to develop novel, focus-based, theories of intertemporal choice and social preferences, as well as analyze the implications of focusing for product design, principal-agent relationships, and other economic questions.
My second main agenda is to explore some implications for market outcomes, welfare, and policy of the possibility that consumers misperceive certain aspects of products. I will investigate the circumstances that facilitate the profitable deception of consumers; firms' incentives for ""innovating"" deceptive products, including novel financial products aimed at exploiting investors; how firms' ability to distinguish naive and sophisticated consumers affects the consequences of deception; whether learning on the part of consumers will help them to avoid making mistakes; and how regulators and other observers can detect consumer mistakes from market data.
Two further projects apply the model of reference-dependent utility I have developed in earlier work to understand the pricing and advertising behavior of firms. I will also aim to disseminate some of my work, along with other cutting-edge research in psychology and economics, in a Journal of Economic Literature survey on ""Behavioral Contract Theory."""
Max ERC Funding
1 275 448 €
Duration
Start date: 2012-11-01, End date: 2018-10-31
Project acronym CRISP
Project Cognitive Aging: From Educational Opportunities to Individual Risk Profiles
Researcher (PI) Anja LEIST
Host Institution (HI) UNIVERSITE DU LUXEMBOURG
Call Details Starting Grant (StG), SH3, ERC-2018-STG
Summary Cognitive impairment and dementia have dramatic individual and social consequences, and create high economic costs for societies. In order to delay cognitive aging of future generations as long as possible, we need evidence about which contextual factors are most supportive for individuals to reach highest cognitive levels relative to their potential. At the same time, for current older generations, we need scalable methods to exactly identify individuals at risk of cognitive impairment. The project intends to apply recent methodological and statistical advancements to reach two objectives. Firstly, contextual influences on cognitive aging will be comparatively assessed, with a focus on inequalities related to educational opportunities and gender inequalities. This will be done using longitudinal, population-representative, harmonized cross-national aging surveys, merged with contextual information. Secondly, the project will quantify the ability of singular and clustered individual characteristics, such as indicators of cognitive reserve and behaviour change, to predict cognitive aging and diagnosis of dementia. Project methodology will rely partly on parametric ‘traditional’ multilevel- or fixed-effects modelling, partly on non-parametric statistical learning approaches, to address objectives both hypothesis- and data-driven. Applying statistical learning techniques in the field of cognitive reserve will open new research avenues for efficient handling of large amounts of data, among which most prominently the accurate prediction of health and disease outcomes. Quantifying the role of contextual inequalities related to education and gender will guide policymaking in and beyond the project. Assessing risk profiles of individuals in relation to cognitive aging will support efficient and scalable risk screening of individuals. Identifying the value of behaviour change to delay cognitive impairment will guide treatment plans for individuals affected by dementia.
Summary
Cognitive impairment and dementia have dramatic individual and social consequences, and create high economic costs for societies. In order to delay cognitive aging of future generations as long as possible, we need evidence about which contextual factors are most supportive for individuals to reach highest cognitive levels relative to their potential. At the same time, for current older generations, we need scalable methods to exactly identify individuals at risk of cognitive impairment. The project intends to apply recent methodological and statistical advancements to reach two objectives. Firstly, contextual influences on cognitive aging will be comparatively assessed, with a focus on inequalities related to educational opportunities and gender inequalities. This will be done using longitudinal, population-representative, harmonized cross-national aging surveys, merged with contextual information. Secondly, the project will quantify the ability of singular and clustered individual characteristics, such as indicators of cognitive reserve and behaviour change, to predict cognitive aging and diagnosis of dementia. Project methodology will rely partly on parametric ‘traditional’ multilevel- or fixed-effects modelling, partly on non-parametric statistical learning approaches, to address objectives both hypothesis- and data-driven. Applying statistical learning techniques in the field of cognitive reserve will open new research avenues for efficient handling of large amounts of data, among which most prominently the accurate prediction of health and disease outcomes. Quantifying the role of contextual inequalities related to education and gender will guide policymaking in and beyond the project. Assessing risk profiles of individuals in relation to cognitive aging will support efficient and scalable risk screening of individuals. Identifying the value of behaviour change to delay cognitive impairment will guide treatment plans for individuals affected by dementia.
Max ERC Funding
1 148 290 €
Duration
Start date: 2019-01-01, End date: 2023-12-31
Project acronym ELWar
Project Electoral Legacies of War: Political Competition in Postwar Southeast Europe
Researcher (PI) Josip GLAURDIC
Host Institution (HI) UNIVERSITE DU LUXEMBOURG
Call Details Starting Grant (StG), SH2, ERC-2016-STG
Summary We know remarkably little about the impact of war on political competition in postwar societies in spite of the fact that postwar elections have garnered tremendous interest from researchers in a variety of fields. That interest, however, has been limited to establishing the relationship between electoral democratization and the incidence of conflict. Voters’ and parties’ electoral behaviour after the immediate post‐conflict period have remained largely neglected by researchers. The proposed project will fill this gap in our understanding of electoral legacies of war by analysing the evolution of political competition over the course of more than two decades in the six postwar states of Southeast Europe: Bosnia-Herzegovina, Croatia, Kosovo, Macedonia, Montenegro, and Serbia. Organised around three thematic areas/levels of analysis – voters, parties, communities – the project will lead to a series of important contributions. Through a combination of public opinion research, oral histories, and the innovative method of matching of individual census entries, the project will answer to which extent postwar elections are decided by voters’ experiences and perceptions of the ended conflict, as opposed to their considerations of the parties’ peacetime economic platforms and performance in office. In-depth study of party documents and platforms, party relations with the organisations of the postwar civil sector, as well as interviews with party officials and activists will shed light on the influence of war on electoral strategies, policy preferences, and recruitment methods of postwar political parties. And a combination of large-N research on the level of the region’s municipalities and a set of paired comparisons of several communities in the different postwar communities in the region will help expose the mechanisms through which war becomes embedded into postwar political competition and thus continues to exert its influence even decades after the violence has ended.
Summary
We know remarkably little about the impact of war on political competition in postwar societies in spite of the fact that postwar elections have garnered tremendous interest from researchers in a variety of fields. That interest, however, has been limited to establishing the relationship between electoral democratization and the incidence of conflict. Voters’ and parties’ electoral behaviour after the immediate post‐conflict period have remained largely neglected by researchers. The proposed project will fill this gap in our understanding of electoral legacies of war by analysing the evolution of political competition over the course of more than two decades in the six postwar states of Southeast Europe: Bosnia-Herzegovina, Croatia, Kosovo, Macedonia, Montenegro, and Serbia. Organised around three thematic areas/levels of analysis – voters, parties, communities – the project will lead to a series of important contributions. Through a combination of public opinion research, oral histories, and the innovative method of matching of individual census entries, the project will answer to which extent postwar elections are decided by voters’ experiences and perceptions of the ended conflict, as opposed to their considerations of the parties’ peacetime economic platforms and performance in office. In-depth study of party documents and platforms, party relations with the organisations of the postwar civil sector, as well as interviews with party officials and activists will shed light on the influence of war on electoral strategies, policy preferences, and recruitment methods of postwar political parties. And a combination of large-N research on the level of the region’s municipalities and a set of paired comparisons of several communities in the different postwar communities in the region will help expose the mechanisms through which war becomes embedded into postwar political competition and thus continues to exert its influence even decades after the violence has ended.
Max ERC Funding
1 499 788 €
Duration
Start date: 2017-04-01, End date: 2022-03-31
Project acronym KNOWLEDGEFLOWS
Project Channels and Consequences of Knowledge Flows
from Developed Economies to Central and Eastern Europe
Researcher (PI) Miklós Koren
Host Institution (HI) KOZEP-EUROPAI EGYETEM
Call Details Starting Grant (StG), SH1, ERC-2012-StG_20111124
Summary In this project, I study how economic development is shaped by cross-country knowledge flows via trade, foreign direct investment (FDI), and other channels. Using novel micro data for several Central and Eastern European (CEE) countries, I measure the quantitative importance of three channels: technical knowledge embodied in imported machinery, technical and organizational knowledge embodied in expatriate managers, and disembodied knowledge transfers taking place within multinational firms. I then analyze what impact foreign knowledge has on the firms and the workers of the host economy, and what are its implications for aggregate productivity and income inequality.
The project relies on several existing databases for Hungary and Romania, which will be complemented with newly purchased, collected and compiled data. The outcome of the project will be seven research studies and a collection of firm-level data sets covering CEE countries, including a large cross-country firm survey on the local supplier linkages of multinational companies.
My proposed project improves upon the state of the art in four ways. First, as a comprehensive study using novel micro data, it uncovers new facts about the relative importance of the channels of knowledge flows. Second, it improves the identification of causal effects relative to existing studies by exploiting the detailed micro data. Third, it uses the micro estimates to quantify the aggregate impact of foreign knowledge on the economy. Fourth, it discusses how foreign knowledge affects different firms and workers differently, and, more specifically, how it may contribute to income inequality.
More broadly, the research findings help evaluate the relative efficacy of trade, FDI, and immigration policies in promoting economic growth and can inform theories about the channels and barriers of productivity convergence.
Summary
In this project, I study how economic development is shaped by cross-country knowledge flows via trade, foreign direct investment (FDI), and other channels. Using novel micro data for several Central and Eastern European (CEE) countries, I measure the quantitative importance of three channels: technical knowledge embodied in imported machinery, technical and organizational knowledge embodied in expatriate managers, and disembodied knowledge transfers taking place within multinational firms. I then analyze what impact foreign knowledge has on the firms and the workers of the host economy, and what are its implications for aggregate productivity and income inequality.
The project relies on several existing databases for Hungary and Romania, which will be complemented with newly purchased, collected and compiled data. The outcome of the project will be seven research studies and a collection of firm-level data sets covering CEE countries, including a large cross-country firm survey on the local supplier linkages of multinational companies.
My proposed project improves upon the state of the art in four ways. First, as a comprehensive study using novel micro data, it uncovers new facts about the relative importance of the channels of knowledge flows. Second, it improves the identification of causal effects relative to existing studies by exploiting the detailed micro data. Third, it uses the micro estimates to quantify the aggregate impact of foreign knowledge on the economy. Fourth, it discusses how foreign knowledge affects different firms and workers differently, and, more specifically, how it may contribute to income inequality.
More broadly, the research findings help evaluate the relative efficacy of trade, FDI, and immigration policies in promoting economic growth and can inform theories about the channels and barriers of productivity convergence.
Max ERC Funding
1 313 776 €
Duration
Start date: 2012-12-01, End date: 2017-11-30
Project acronym NETWORKS
Project Economic Allocations in Social Networks: Evidence and Theory
Researcher (PI) Adam Gyorgy Szeidl
Host Institution (HI) KOZEP-EUROPAI EGYETEM
Call Details Starting Grant (StG), SH1, ERC-2011-StG_20101124
Summary Social networks affect many economic interactions, and the social capital embedded in them may help explain broad, macro level outcomes. A recent theory literature develops models of economic allocations in networks. But at this point, we have little evidence on which network mechanisms are most important in practice, how networks interact with markets, and how these micro forces translate into aggregate outcomes.
In this proposal I combine micro level measurement with theory to evaluate various mechanisms through which networks affect economic allocations. I explore this theme in four domains. (1) Borrowing and informal insurance in development. I measure the value of connections for borrowing, and study how transfers propagate through the network using field experiments in Peru. (2) Peer effects and the social multiplier. In field experiments I measure financial and peer-based incentives, and how they reinforce each other. I also measure knowledge diffusion about exporting in corporate networks, and the resulting multiplier effect of reducing trade barriers. (3) Information aggregation. I measure how different pieces of information are filtered and aggregated in the social network. (4) Favouritism. I study the economic causes and consequences of favouring friends in a field experiment. I also measure economic misallocation resulting from politicians favouring connected firms in Hungarian data, and the cost to aggregate productivity.
In all projects, my measurement emphasizes causality through field experiments and a unique firm level dataset with many sources of variation. Estimating models allows me to contrast theories and generalize the empirical findings. The results will help evaluate the importance of social networks for microeconomic and aggregate allocations, yield lessons on how organizations and policies leverage social mechanisms, and may open a new research area on mechanism design with network effects.
Summary
Social networks affect many economic interactions, and the social capital embedded in them may help explain broad, macro level outcomes. A recent theory literature develops models of economic allocations in networks. But at this point, we have little evidence on which network mechanisms are most important in practice, how networks interact with markets, and how these micro forces translate into aggregate outcomes.
In this proposal I combine micro level measurement with theory to evaluate various mechanisms through which networks affect economic allocations. I explore this theme in four domains. (1) Borrowing and informal insurance in development. I measure the value of connections for borrowing, and study how transfers propagate through the network using field experiments in Peru. (2) Peer effects and the social multiplier. In field experiments I measure financial and peer-based incentives, and how they reinforce each other. I also measure knowledge diffusion about exporting in corporate networks, and the resulting multiplier effect of reducing trade barriers. (3) Information aggregation. I measure how different pieces of information are filtered and aggregated in the social network. (4) Favouritism. I study the economic causes and consequences of favouring friends in a field experiment. I also measure economic misallocation resulting from politicians favouring connected firms in Hungarian data, and the cost to aggregate productivity.
In all projects, my measurement emphasizes causality through field experiments and a unique firm level dataset with many sources of variation. Estimating models allows me to contrast theories and generalize the empirical findings. The results will help evaluate the importance of social networks for microeconomic and aggregate allocations, yield lessons on how organizations and policies leverage social mechanisms, and may open a new research area on mechanism design with network effects.
Max ERC Funding
1 165 350 €
Duration
Start date: 2011-11-01, End date: 2017-02-28
Project acronym PreLog
Project Precursors of logical reasoning in human infants
Researcher (PI) Erno Teglas
Host Institution (HI) KOZEP-EUROPAI EGYETEM
Call Details Starting Grant (StG), SH4, ERC-2014-STG
Summary There is no other field that is more controversial in psychology than that of human reasoning. This project advances a novel theoretical framework focused on the nature and the origins of rationality and could potentially resolve some of these controversies. Theories targeting the mechanisms that allow rational inferences have defined rationality as a function of how much reasoning adheres to formal rules of probability calculus and logic. Classical research with adults and older children collected a large amount of data both in favor and against human rationality, suggesting that reasoning abilities follow a slow maturation. Recent findings on infants’ probabilistic reasoning, including my own earlier research, however, do not support this view. Already preverbal infants seem to form expectations about probabilistic events in accordance with Bayesian rules of inference (Téglás et al, 2011). Here I argue for a similar paradigm change in a related domain, that of deductive reasoning.
In contrast to earlier accounts, I propose that even preverbal infants may possess a core set of logical operations that empower them with sophisticated inferential abilities. First, I focus on the representational precursors of this competence. I argue that infants recruit specific abilities to exploit the conceptual structure of specific event categories that enable them to form logical representations. Thus, information could be stored in a format that can potentially serve as input for subsequent inferences. Further, I will investigate infants’ core logical operations and test how they integrate multiple steps of inferences. This system - indispensable for integrating different bits of knowledge - helps infants to discover information that was not actually present in the input. Such investigations, informed also by adequate neuropsychological evidence would thus contribute to understand the unique nature of human rationality.
Summary
There is no other field that is more controversial in psychology than that of human reasoning. This project advances a novel theoretical framework focused on the nature and the origins of rationality and could potentially resolve some of these controversies. Theories targeting the mechanisms that allow rational inferences have defined rationality as a function of how much reasoning adheres to formal rules of probability calculus and logic. Classical research with adults and older children collected a large amount of data both in favor and against human rationality, suggesting that reasoning abilities follow a slow maturation. Recent findings on infants’ probabilistic reasoning, including my own earlier research, however, do not support this view. Already preverbal infants seem to form expectations about probabilistic events in accordance with Bayesian rules of inference (Téglás et al, 2011). Here I argue for a similar paradigm change in a related domain, that of deductive reasoning.
In contrast to earlier accounts, I propose that even preverbal infants may possess a core set of logical operations that empower them with sophisticated inferential abilities. First, I focus on the representational precursors of this competence. I argue that infants recruit specific abilities to exploit the conceptual structure of specific event categories that enable them to form logical representations. Thus, information could be stored in a format that can potentially serve as input for subsequent inferences. Further, I will investigate infants’ core logical operations and test how they integrate multiple steps of inferences. This system - indispensable for integrating different bits of knowledge - helps infants to discover information that was not actually present in the input. Such investigations, informed also by adequate neuropsychological evidence would thus contribute to understand the unique nature of human rationality.
Max ERC Funding
1 498 137 €
Duration
Start date: 2015-09-01, End date: 2020-08-31
Project acronym REPCOLLAB
Project Representational preconditions for understanding other minds in the service of human collaboration and social learning
Researcher (PI) Agnes Melinda Kovacs
Host Institution (HI) KOZEP-EUROPAI EGYETEM
Call Details Starting Grant (StG), SH4, ERC-2011-StG_20101124
Summary The central aim of the proposed research project is to systematically explore the empirical implications of a novel theoretical approach to the early representational preconditions and the functional structure of the mechanisms dedicated for understanding other minds. We aim to explore and shed new theoretical light on the basic cognitive and brain mechanisms of the human social mind. One of these mechanisms that has received much attention by earlier approaches to ‘theory-of-mind’ research concerns the ability to infer and represent the mental states of others. Standard theories and research in the last twenty five years have suggested that representing other’s beliefs is an effortful and late developing capacity (Wellman et al., 2001) whose main function is to explain others’ behavior. Here we advance and propose to explore a new theoretical perspective according to which the mechanisms of mental state monitoring and representation involve primarily automatic and effortless processes grounded in on-line cooperative social interactions. Our approach is part of an on-going paradigm change in the field of theory-of-mind research motivated by the recent evidence showing that infants in their second year understand mental states (Onishi & Baillargeon, 2005). Our own research has gone a significant step further by demonstrating that these mechanisms are present as early as 7 month of age, and by showing that both young infants and adults seem to automatically compute others’ beliefs even in situations where they are not required to do so (Kovács et al., 2010). The present project explores the functional sub-components and triggering conditions of young infants’ powerful belief computation abilities and to chart their developmental unfolding. Furthermore, we shall explore the implications of the new theoretical proposal that this dedicated system presupposes as its proper domain the on-going collaborative and communicative interactions.
Summary
The central aim of the proposed research project is to systematically explore the empirical implications of a novel theoretical approach to the early representational preconditions and the functional structure of the mechanisms dedicated for understanding other minds. We aim to explore and shed new theoretical light on the basic cognitive and brain mechanisms of the human social mind. One of these mechanisms that has received much attention by earlier approaches to ‘theory-of-mind’ research concerns the ability to infer and represent the mental states of others. Standard theories and research in the last twenty five years have suggested that representing other’s beliefs is an effortful and late developing capacity (Wellman et al., 2001) whose main function is to explain others’ behavior. Here we advance and propose to explore a new theoretical perspective according to which the mechanisms of mental state monitoring and representation involve primarily automatic and effortless processes grounded in on-line cooperative social interactions. Our approach is part of an on-going paradigm change in the field of theory-of-mind research motivated by the recent evidence showing that infants in their second year understand mental states (Onishi & Baillargeon, 2005). Our own research has gone a significant step further by demonstrating that these mechanisms are present as early as 7 month of age, and by showing that both young infants and adults seem to automatically compute others’ beliefs even in situations where they are not required to do so (Kovács et al., 2010). The present project explores the functional sub-components and triggering conditions of young infants’ powerful belief computation abilities and to chart their developmental unfolding. Furthermore, we shall explore the implications of the new theoretical proposal that this dedicated system presupposes as its proper domain the on-going collaborative and communicative interactions.
Max ERC Funding
1 449 836 €
Duration
Start date: 2012-03-01, End date: 2018-08-31
