The Influence of Executive Functions and Intelligence Quotients on Time Preferences, Risk Aversion, and Ambiguity Aversion

The present study extends the literature on cognitive skills and economic decision-making in a new direction. We explore how the relationship between economic decisions vary according to cognitive ability. This paper investigates whether behaviors as regards risk aversion, ambiguity aversion, and impatience are systematically related with cognitive ability, using a sample of 98 young adults. Experimental measures include certainty equivalents (CEs) and matching probabilities within the framework of the Ellsberg choice task for measuring risk and ambiguity aversion, respectively, and trade-offs between immediate rewards and rewards available at different points in time for measuring impatience. Measures of cognitive ability include a short version of the Wechsler Adult Intelligence Scale (WAIS-IV) and a Stroop task to obtain Intelligence Quotient (IQ) and Executive Function (EF) scores, respectively. Our findings highlight a comparison between the influence of IQ and EF skills on economic choices. We introduce noteworthy associations between EF and decision-making, unveiling the potential influence of self-regulating skills on economic behavior. The findings on the relationship between risk aversion, ambiguity aversion and impatience with cognitive ability are consistent with findings in psychological and economic studies. Our results support evidence on the dual system theory and have relevant implications for both theoretical and empirical research in behavioral economics.