Behavioral Biases and Cognitive Reflection

Exploring emotions and irrationality in attitudes towards consumer indebtedness: Individual perspectives of UK payday loan consumption

“…Research into personal indebtedness and individual behaviour has focused on key aspects such as financial literacy and decision making (for example, Estelami, 2009;Lusardi and Tufano, 2009;Stango and Zinman, 2011;Duca and Kumar, 2014) and studies of cognitive bias (the way in which people think and make judgements based on aspects such as predisposition, personality, moral systems and experience that may, or may not be rational) (for example, Frederik, 2005;Baumeister, et al, 2007;Oechssler et al, 2009;Banks et al, 2010;Bertrand and Morse, 2011;Hoppe and Kusterer, 2011;Wu and Cheng, 2011;Brahmana et al, 2012).…”

“…The Financial Services Authority deliberated several biases in considering financial capability through a behavioural economics perspective, namely; procrastination, loss aversion, regret aversion, mental accounting and status quo bias (FSA, 2008). Existing literature within this area is mainly quantitative in approach (Oechssler, Roider and Schmitz, 2009;Banks et al, 2010;Bertrand and Morse, 2011;Hoppe and Kusterer, 2011).…”

Cognitive Skills and Confidence: Interrelations With Overestimation, Overplacement and Overprecision

“…It is thus not clear if cognitive abilities are correlated with overestimation, overprecision, or both. A more recent study by Hoppe and Kusterer () finds that subjects scoring high on a cognitive reflection test are more accurate in the assessments of their performance in a general knowledge questionnaire, but the proportion of overconfident subjects does not significantly differ among the group of more intuitive decision makers scoring low on the cognitive reflection test, and more analytical decision makers scoring high. This result may indicate that the effects of cognitive skills that were reported in earlier studies mainly root in a correlation with the calibration‐based type of overconfidence.…”

Cognitive Abilities, Analytic Cognitive Style and Overconfidence: A Commentary on Duttle (2016)

“…As a matter of simplicity, in the remainder of the text the CRT therefore is referred to as a measure of cognitive skills ’ (Duttle, , p. 46). Although a similar approach has been taken in some other economical works (Oechssler et al ., ; Hoppe and Kusterer, ; Brañas‐Garza et al ., ), we cannot find any justification for substituting one cognitive notion with another psychologically distinct concept (especially if these measures correlate merely at r = .4, as reported in the aforementioned work). Proposing that cognitive abilities predict less overconfidence is conceptually different from stating that cognitive style predicts it.…”

“…Such findings have recently been reported in the studies of Oechssler et al . (); Hoppe and Klusterer (), and Noori (), who showed that less reflective individuals tend to be more overconfident and have less calibrated self‐assessments in tests that are orthogonal to cognitive abilities.…”