Effects of stress on economic decision-making: Evidence from laboratory experiments

Citation

Delaney L, Fink G & Harmon C (2014) Effects of stress on economic decision-making: Evidence from laboratory experiments. Stirling Economics Discussion Paper, 2014-02.

Abstract
The ways in which preferences respond to the varying stress of economic environments is a key question for behavioral economics and public policy. We conducted a laboratory experiment to investigate the effects of stress on financial decision making among individuals aged 50 and older. Using the cold pressor task as a physiological stressor, and a series of intelligence tests as cognitive stressors, we find that stress increases subjective discounting rates, has no effect on the degree of risk-aversion, and substantially lowers the effort individuals make to learn about financial decisions.

Keywords
stress; financial decisions; discounting; risk aversion; learning

JEL codes

• D91: Intertemporal Household Choice; Life Cycle Models and Saving
• I31: General Welfare; Well-Being