Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
Cognitive Reflection and Decision Making
Journal of Economic Perspectives
vol. 19,
no. 4, Fall 2005
(pp. 25–42)
(Complimentary)
Abstract
This paper introduces a three-item "Cognitive Reflection Test" (CRT) as a simple measure of one type of cognitive ability—the ability or disposition to reflect on a question and resist reporting the first response that comes to mind. The author will show that CRT scores are predictive of the types of choices that feature prominently in tests of decision-making theories, like expected utility theory and prospect theory. Indeed, the relation is sometimes so strong that the preferences themselves effectively function as expressions of cognitive ability—an empirical fact begging for a theoretical explanation. The author examines the relation between CRT scores and two important decision-making characteristics: time preference and risk preference. The CRT scores are then compared with other measures of cognitive ability or cognitive "style." The CRT scores exhibit considerable difference between men and women and the article explores how this relates to sex differences in time and risk preferences. The final section addresses the interpretation of correlations between cognitive abilities and decision-making characteristics.Citation
Frederick, Shane. 2005. "Cognitive Reflection and Decision Making." Journal of Economic Perspectives, 19 (4): 25–42. DOI: 10.1257/089533005775196732JEL Classification
- D01 Microeconomic Behavior: Underlying Principles
- D81 Criteria for Decision-Making under Risk and Uncertainty
- D91 Intertemporal Household Choice; Life Cycle Models and Saving
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