Essays on Modeling and Identifying Cognitive Mistakes in Decision Making

This dissertation studies modeling and identifying cognitive mistakes in decision making in the context of education system in China. Chapter 1 studies the cognitive distortion in complex school choice problems in Chinese centralized admission system. Chapter 2 studies the impact of education on students’ ability of decision making. Chapter 3 studies the psychological impact of religious obligation on education attainment./nIn Chapter 1 (coauthored with Shaoda Wang and Xiaoyang Ye), we empirically study an admission system that employs a constrained Deferred Acceptance Algorithm to understand how students construct their lists. Students appear overly cautious with their top choices and most of them do not always put safer choices at a lower-ranked spot on the list. We propose that the Model of Directed Cognition could explain such choices. Applicants using the model myopically focus on the spot they are contemplating and neglect its impact on the rest of the list. To differentiate from alternative hypotheses, we deploy an in-field experiment that pinpoints a core prediction of our model concerning framing effects and find clear evidence of it. Structural estimation suggests that 45%∼55% of the sample are better described by our model and that this boundedly rational decision rule explains 83% of outcome inequality across socioeconomic groups./nChapter 2 (coauthored with Binkai Chen and Wei Lin) intends to investigate the causal impact of collegiate economics courses on individual learning and decision-making under a development context. By exploiting a Chinese college-admission system that quasi-randomly assigns students to economics/business majors given students’ preferences and the College Entrance Exam’s cutoff scores for economics/business majors, we are able to isolate the treatment effects of an economics education on students’ responses to a decision-making survey. Specifically, we compare the survey responses of students who narrowly meet the cutoffs for the economics/business majors to those who do not and find that students educated in economics/business courses are more likely to be risk neutral and less prone to common biases in probabilistic beliefs. While students in economics/business majors do not show significant changes in social preferences, they appear more inclined to believe that others behave selfishly./nChapter 3 (coauthored with Shaoda Wang and Xiaoyang Ye). We reports a field experiment that tests the effect of motivated cognition on information acquisition. When the high-stakes College Entrance Exam is held in the month of Ramadan, Chinese Muslim students not only underestimate the cost of fasting when uninformed, but further, misread clear empirical evidence of the cost, which we obtain by analyzing administrative data on past students’ exam performance. Inspired by the theory of motivated cognition, we tackle this learning failure by randomly offering a subset of the students reading materials in which well-respected Muslim clerics explain that it is permissible to postpone the fast until after the exam. Students who receive the material are substantially less likely to misread our empirical analysis and more willing to postpone the fast./nThe findings in this dissertation can deepen our understanding of the impact of psychological factor and cognitive limitation on decision making, particularly in the context of education.

Advisor: DellaVigna, Stefano