Alex_Imas_10.jpg

William S. Dietrich II Assistant Professor in Behavioral Economics
Social and Decision Sciences, Carnegie Mellon University

Assistant Professor in Economics
Heinz College of Public Policy (by courtesy)
Tepper School of Business (by courtesy)

CESifo Research Network Affiliate

Research Interests
Behavioral Economics, Judgment and Decision Making

Contact Information
(224) 392-3669
aimas@andrew.cmu.edu

CV

I study topics in behavioral economics with a focus on dynamic decision-making, including applications to mental accounting, discrimination and finance. My research explores how prior outcomes affect people’s risk-taking and social interactions, how people update their beliefs in response to the behavior of others, and how behavioral economics can be applied to incentive design. I use a variety of empirical and theoretical methods to address these questions, including lab experiments, field experiments, analysis of observational data and theoretical modeling.

An overview of my research agenda can be found here: [Link]

Data, experimental instructions and supplementary materials for all published papers can be accessed on my Open Science Framework profile or the journal’s website.

Dynamics of Mental Accounting and Financial Decision-Making

1. "The Realization Effect: Risk-Taking after Realized versus Paper Losses." American Economic Review, 2016.
[Abstract] [Published Paper] [Online Appendix] [Metadata]

Understanding how prior outcomes affect risk attitudes is critical for the study of choice under uncertainty. A large literature documents the significant influence of prior losses on risk attitudes. The findings appear contradictory: some studies find greater risktaking after a loss, whereas others show the opposite – that people take on less risk. I reconcile these seemingly inconsistent findings by distinguishing between realized versus paper losses. Using new and existing data, I replicate prior findings and demonstrate that following a realized loss, individuals avoid risk; if the same loss is not realized, a paper loss, individuals take on greater risk.

2. "Experimental Methods: Eliciting Risk Preferences," with G. Charness and U. Gneezy. Journal of Economic Behavior and Organizations, 2013.
[Abstract] [Published Paper]

Economists and psychologists have developed a variety of experimental methodologies to elicit and assess individual risk attitudes. Choosing which to utilize, however, is largely dependent on the question one wants to answer, as well as the characteristics of the sample population. The goal of this paper is to present a series of prevailing methods for eliciting risk preferences and outline the advantages and disadvantages of each. We do not attempt to give a comprehensive account of allthe methods or nuances of measuring risk, but rather to outline some advantages and disadvantages of different methods.

3. "Mental Money Laundering," with C. Morewedge and G. Loewenstein. Revision requested from Journal of the European Economic Association.
[Abstract] [Updated Draft Coming Soon]

Across three experiments we document the phenomenon of mental money laundering, whereby people exploit flexibility in mental accounting to justify spending money in more selfish ways. Unlike earlier research showing that people spend money differently depending on how it is earned and labeled, our findings demonstrate that mental accounting operations can be motivated. People capitalize on and actively seek out opportunities to dissociate earnings from undesirable sources to rationalize less virtuous spending. The first study shows that, whereas people are more likely to donate unethically earned money to charity than money earned ethically, when the unethically earned money is exchanged for the same sum from a different, ‘clean’, source, they treat the entire amount as if it was ethically earned. Such behavior represents an extreme violation of fungibility: Unethically obtained cash traded for an identical sum significantly changes the individual’s propensity to spend the money on charitable giving. The second study demonstrates the generalizability of the effect, showing that people engage in mental money laundering when they mix money earned from both ethical and unethical sources: when earnings are pooled together, people spend the entire sum as if it were ethically earned. Finally, we show that people actively seek out laundering opportunities when they receive money from ethically questionable sources, even when doing so exposes the money to risk.

4. "Selling Fast and Buying Slow: Heuristics and Trade Performance of Institutional Investors," with K. Aepanidtaworn, R. Di Mascio and L. Schmidt. (New Draft!)
[Abstract] [Working Paper]

Most research on heuristics and biases in financial decision-making has focused on non-experts, such as retail investors who hold modest portfolios. We use a unique data set to show that financial market experts -- institutional investors with portfolios aver- aging $573 million -- exhibit costly, systematic biases. A striking finding emerges: while investors display clear skill in buying, their selling decisions underperform substantially -- even relative to strategies involving no skill such as randomly selling existing positions. We present evidence consistent with limited attention as a key driver of this discrepancy, with investors devoting more attentional resources to buy decisions than sell decisions. When attentional resources are more likely to be equally distributed between prospective purchases and sales, specifically around company earnings announcement days, outper- form counterfactual strategies similar to buys. We document managers' use of a heuristic that overweights a salient attribute of portfolio assets -- past returns -- when selling, whereas we do not observe similar heuristic use for buys. Assets with extreme returns are more than 50% more likely to be sold than those that just under- or over-performed. Finally, we document that the use of the heuristic appears to a mistake and is linked empirically with the overall underperformance in selling. These estimated performance measures are robust to risk-adjustment and generalize across markets.

5. "Doing Less with More: Access to Leverage Can Hurt Trading Performance," with R. Heimer. (New Paper!)
[Abstract] [Working Paper]

According to standard theories of decision-making, access to leverage should make investors better off. The ability to borrow expands investors’ choice sets, allowing them to take advantage of trading opportunities without having to liquidate current holdings. This paper argues that leverage can interact with existing behavioral biases – specifically, the reluctance to realize losses – to impair decision-making and hurt performance. Two data sources provide support for this claim. First, we exploit regulation that restricts the amount of leverage available to U.S. retail traders of foreign exchange. Traders constrained by the regulation are more willing to realize losses, exhibiting a smaller disposition effect, and improve their market timing. We replicate these findings in an experimental asset market. Access to leverage leads to significantly lower earnings. This decrease in performance is driven by levered participants holding on to losses for longer, deviating further from an optimal trading strategy than those without access to leverage. Together, our findings imply more choice may not always be better than less and suggest scope for policy to improve financial decision-making.

6. "Mental Accounting and Preferences over the Timing of Outcomes," with E. Evers and G. Loewenstein.
[Abstract] [Draft Coming Soon]

Understanding preferences over the timing of gains and losses is a critical question for the study of judgment and decision making. Applying the hedonic editing hypothesis directly leads to the prediction that people should prefer to group losses together and segregate gains over time. Support for these predictions has been mixed, particularly for losses. Drawing on the theory of mental accounting, we argue and show that preferences over the timing of outcomes depend on their categorization. Losses belonging to the same category are grouped together, while different losses are segregated over time. Category membership has the reverse effect for gains.

Discrimination

7. "The Dynamics of Discrimination: Theory and Evidence," with J. A. Bohren and M. Rosenberg. Conditionally accepted at American Economic Review.
[Abstract] [Working Paper]

We model the dynamics of discrimination and show how its evolution can identify the underlying source. We test these theoretical predictions in a field experiment on a large online platform where users post content that is evaluated by other users on the platform. We assign posts to accounts that exogenously vary by gender and evaluation histories. With no prior evaluations, women face significant discrimination. However, following a sequence of positive evaluations, the direction of discrimination reverses: women’s posts are favored over men’s. Interpreting these results through the lens of our model, this dynamic reversal implies discrimination driven by biased beliefs.

8. "The Language of Discrimination: Using Experimental versus Observational Data," with J. A. Bohren and M. Rosenberg. American Economic Association: Papers and Proceedings, 2018.
[Abstract] [Published Paper]

We use experimental and observational data to examine whether people respond differently to questions posed by females versus males. We document significant differences in the language of responses, both in terms of the distribution of language utilized, and the sentiment of this language (positive or negative). In the observational data, we also document differences in the language and sentiment of questions posed by gender. This highlights the importance of using experimental data to identify the causal role that gender plays in influencing the language choice of individuals responding to questions from males versus females.

9. "Inaccurate Statistical Discrimination," with J. A. Bohren, K. Haggag and D. Pope.
[Abstract] [Draft Coming Soon]

Discrimination has been widely studied in economics and other disciplines. In addition to identifying evidence of discrimination, economists often categorize discrimination as either taste-based or statistical. Categorizing discrimination in this way is valuable for policy and welfare reasons. In this paper, we argue that for similar reasons, a further categorization is important and needed. Specifically, in many situations economic agents may have inaccurate beliefs about the productivity or expected performance of an individual’s social group. Thus, statistical discrimination can be separately categorized as accurate (based on correct beliefs) or inaccurate (based on inaccurate beliefs). We provide evidence from an online experiment that illustrates how to distinguish between accurate and inaccurate statistical discrimination and how ignoring this distinction – as is commonly done in the discrimination literature – can lead to erroneous interpretations of the motives and implications of discriminatory behavior.

Incentive Design

10. "Is Altruism Sensitive to Scope? The Role of Tangibility," with G. Loewenstein. American Economic Association: Papers and Proceedings, 2018.
[Abstract] [Published Paper]

Prior work has shown that people appear insensitive to the scope of their altruistic acts and prosocial behavior. While they respond positively when their choices lead to increasing rewards for themselves, people do not change their behavior when the outcomes for others increase. We demonstrate that the scope sensitivity of altruism depends critically on its tangibility, and suggest that this relationship operates through mental accounting. We show that by increasing the level of tangibility, people can become just as sensitive to changes in the size of rewards for others as if they were earning the rewards themselves.

11. "Do People Anticipate Loss Aversion?" with S. Sadoff and A. Samek. Management Science, 2016.
[Abstract] [Published Paper]

There is growing interest in the use of loss contracts that offer performance incentives as upfront payments that employees can lose. Standard behavioral models predict a tradeoff in the use of loss contracts: employees will work harder under loss contracts than under gain contracts; but, anticipating loss aversion, they will prefer gain contracts to loss contracts. In a series of experiments, we test these predictions by measuring performance and preferences for payoff-equivalent gain and loss contracts. We find that people indeed work harder under loss than gain contracts, as the theory predicts. Surprisingly, rather than a preference for the gain contract, we find that people actually prefer loss contracts. In exploring mechanisms for our results, we find suggestive evidence that people do anticipate loss aversion but select into loss contracts as a commitment device to improve performance.

12. "Working for the 'Warm Glow': On the Benefits and Limits of Prosocial Incentives." Journal of Public Economics, 2013.
[Abstract] [Published Paper]

We study whether using prosocial incentives, where effort is tied directly to charitable contributions, may lead to better performance than standard incentive schemes. In a real-effort task, individuals indeed work harder for charity than for themselves, but only when incentive stakes are low. When stakes are raised, effort increases when individuals work for themselves but not when they work for others and, as a result, the difference in provided effort disappears. Individuals correctly anticipate these effects, choosing to work for charity at low incentives and for themselves at high incentives. The results are consistent with warm glow giving and have implications for optimal incentive design.

13. "Preference Reversals Between One-Shot and Repeated Decisions: The Case of Regret," with D. Lame and A. Wilson. Revision requested from Economic Journal.
[Abstract] [Working Paper]

Under regret theory, decision-makers derive utility both from the outcome of their chosen action and the counterfactual. Evidence for anticipatory regret aversion has been found in one-shot settings, with “regret lotteries” that provide counterfactual information being valued higher than more-standard lotteries. These one-shot findings have motivated a literature that advocates the use of regret as a policy tool to boost incentives for behaviors such as exercise and drug adherence, often as recurrent decisions. However, differences in learning opportunities and the interaction between anticipated and realized regret make the consequences of regret in repeated settings far from clear. Through a series of controlled experiments, we replicate the one-shot result that regret lotteries have higher valuations than standard lotteries. In contrast, for sequential repeated decisions, the pattern reverses. For repeated decisions, regret lotteries are valued significantly less than standard lotteries, from the very first decision and onwards. Our results serve to highlight the issues that can arise when extrapolating behavioral effects from one-shot to repeated settings.

14. "Opting In to Prosocial Incentives," with D. Schwartz, E. A. Keenan and A. Gneezy. Revision requested from Organizational Behavior and Human Decision Processes. (New!)
[Abstract] [Working Paper] [Online Appendix]

Under regret theory, decision-makers derive utility both from the outcome of their chosen action and the counterfactual. Evidence for anticipatory regret aversion has been found in one-shot settings, with “regret lotteries” that provide counterfactual information being valued higher than more-standard lotteries. These one-shot findings have motivated a literature that advocates the use of regret as a policy tool to boost incentives for behaviors such as exercise and drug adherence, often as recurrent decisions. However, differences in learning opportunities and the interaction between anticipated and realized regret make the consequences of regret in repeated settings far from clear. Through a series of controlled experiments, we replicate the one-shot result that regret lotteries have higher valuations than standard lotteries. In contrast, for sequential repeated decisions, the pattern reverses. For repeated decisions, regret lotteries are valued significantly less than standard lotteries, from the very first decision and onwards. Our results serve to highlight the issues that can arise when extrapolating behavioral effects from one-shot to repeated settings.

Emotions, Visceral States and Deliberative Processing

15. "Conscience Accounting: Emotion Dynamics in Social Behavior," with U. Gneezy and K. Madarasz. Management Science, 2014.
[Abstract] [Published Paper]

This paper presents theory and experiments where people's prosocial attitudes fluctuate over time following the violation of an internalized norm. We report the results of two experiments in which people who first made an immoral choice were then more likely to donate to charity than those who did not. In addition, those who knew that a donation opportunity would follow the potentially immoral choice behaved more unethically than those who did not know. We interpret this increase in charitable behavior as being driven by a temporal increase in guilt induced by past immoral actions. We term such behavior conscience accounting and discuss its importance in charitable giving and in the identification of social norms in choice behavior through time inconsistency.

16. "The Materazzi Effect and the Strategic Use of Anger," with U. Gneezy. Proceedings of the National Academy of Sciences, 2014.
[Abstract] [Published Paper]

We propose that individuals use anger strategically in interactions. We first show that in some environments angering people makes them more effective in competitions, whereas in others, anger makes them less effective. We then show that individuals anticipate these effects and strategically use the option to anger their opponents. In particular, they are more likely to anger their opponents when anger negatively affects the opponents’ performances. This finding suggests people understand the effects of emotions on behavior and exploit them to their advantage.

17. "Paying to be Nice: Costly Prosocial Behavior and Consistency," with A. Gneezy, L.D. Nelson, M.I. Norton and A. Brown. Management Science, 2012.
[Abstract] [Published Paper]

Building on previous research in economics and psychology, we propose that the costliness of initial prosocial behavior positively influences whether that behavior leads to consistent future behaviors. We suggest that costly prosocial behaviors serve as a signal of prosocial identity and that people subsequently behave in line with that self-perception. In contrast, costless prosocial acts do not signal much about one’s prosocial identity, so subsequent behavior is less likely to be consistent and may evenshow the reductions in prosocial behavior associated with licensing. The results of a laboratory experiment and a large field experiment converge to support our account.

18. "The Impact of Agency on Time and Risk Preferences," with A. Gneezy and A. Jaroszewicz. Revision requested from Nature: Communications. (New!)
[Abstract] [Working Paper]

Scholars have long argued for the central role of agency in the human experience. In this paper, we demonstrate the importance of agency in shaping people’s patience and risk tolerance. We focus on the context of resource scarcity, which has been associated with both impatience and a lack of agency. Using data from a representative sample of over 86,000 individuals worldwide and two experiments, we replicate the decrease in patience among those exposed to scarcity. However, we show that endowing individuals with agency over scarcity fully moderates this effect, increasing patience substantially. We further show that agency’s impact on patience is partly driven by greater risk tolerance. These results hold even though individuals with greater agency do not exercise it; simply knowing one could alleviate one’s scarcity is sufficient to change behavior. Finally, we demonstrate that these effects of agency generalize beyond scarcity, highlighting the potential for agency-based policy and institutional design.

19. "Waiting to Choose," with M. A. Kuhn and V. Mironova.
[Abstract] [Working Paper]

We study the impact of deliberation on intertemporal choice. Using studies in an online labor market, the laboratory, and a field experiment in the Democratic Republic of Congo, we show that the introduction of waiting periods – that temporally separate news about choice sets from choices themselves – cause substantially more patient decisions. These results cannot be captured by standard models of exponential discounting, nor behavioral models of present bias, and we directly compare the impacts of deliberation and present bias. Our results highlight the role of deliberation in decision-making and have implications for consumer finance policy and the design of interventions.

Book Chapters

20. "Lab in the Field: Measuring Preferences in the Wild," with U. Gneezy. In Handbook of Field Experiments, Abhijit Banerjee and Esther Duflo, editors, 2017.
[Abstract] [Published Paper]

In this chapter, we discuss the “lab-in-the-field” methodology, which combines elements of both lab and field experiments in using standardized, validated paradigms from the lab in targeting relevant populations in naturalistic settings. We begin by examining how the methodology has been used to test economic models with populations of theoretical interest. Next, we outline how lab-in-the-field studies can be used to complement traditional Randomized Control Trials in collecting covariates to test theoretical predictions and explore behavioral mechanisms. We proceed to discuss how the methodology can be utilized to compare behavior across cultures and contexts, and test for the external validity of results obtained in the lab. The chapter concludes with an overview of lessons on how to use the methodology effectively.

Other Research

1. "Plasminogen Activator Inhibitor-1 Regulates Integrin αvβ3 Expression and Autocrine TGFβ Signaling," with B. S. Pedjora, L. E. Kang, P. Carmeliet and A. M. Bernstein. Journal of Biological Chemistry, 2009. [Published Paper]

2. "EEG-based Method for Biometric Identity Confirmation," with M. Milgramm. U.S. Patent No. 7,594,122. [Patent Document]

3. "EEG-based Method for Real Time Attitude Assessment," with M. Milgramm. U.S. Patent No. 7,570,991. [Patent Document]

4. "EEG-based Method for Attention and Productivity Monitoring," with M. Milgramm. U.S. Patent No. 7,574,254. [Patent Document]