Valuing Cultural Differences in Behavioral Economics
Behavioral economic research has tended to ignore the role of cultural differences in economic decision-making. The authors suggest that a systematic bias affects existing behavioral economic theory-- cognitive biases are often assumed to be universal. To examine how cultural background informs economic decision-making, and to test framing effects, morality effects, and out-group effects in a cross-cultural study, the authors conducted an experiment in the United States and China. The experiment was designed to test cultural and cognitive effects on a fundamental economic phenomenon-- how people estimate the financial values of objects over time.
Results of the experiment demonstrated dramatic cultural differences in financial value estimations, as well as on the influence of variables such as framing effects. Chinese participants made higher object value estimates than Americans did, even when adjusting for differing national inflation rates. In addition, the results showed that contextual information, such as framing, morality information, and group membership affected judgments of financial values in complex ways, particularly for Chinese participants. The results underscore the importance of understanding the influence of cultural background on economic decision-making. The authors discuss the results in the context of behavioral law and economics, and propose that importing cultural competence into behavioral models can lead to cognitive debiasing, both temporary and permanent.
Economics | Law and Economics | Law and Psychology | Law and Society
Date of this Version
Justin D. Levinson and Kaiping Peng, "Valuing Cultural Differences in Behavioral Economics" (April 28, 2006). bepress Legal Series. bepress Legal Series.Working Paper 1296.