Mental Models

Question 1

What are mental models?

Answer 1

Beliefs about the relationship between variables
- causal or correlational

Question 2

Characteristics of mental models 4

Answer 2

1.) Differ from expert models
2.) Heterogeneous
3.) Simplified/Incomplete
4.) Implicit nature, spontaneous retrieval

Question 3

Measuring Approaches

Answer 3

Indirect approach:
- Infer mental model from e.g panel data
pos: less prone to demand effects
neg: - Lost opportunity
- less control
- Alternative mechanisms

Direct approach:
- Prediction X -> ?
- Explanation ? -> Y
- Specific link between X & Y

Question 4

Standard Survey vs. Vignette

Answer 4

Brevity vs Control and customizability

Question 5

Closed Form vs Open Ended

Answer 5

Easily understandable, easy economic interpretation ( upper bound)
vs.
No enforced structure, natura, hard to respond (lower bound)

Question 6

Quantitative vs Qualitative

Answer 6

Precision vs. Reliability

Question 7

Subjective Models about economy

Answer 7

Survey elicits beliefs about parameter, in a vignette approach to identify causal effect of increasing the interest rate c.p.
Laypeople’s explanation differs fromm expert explanations.
-> points to incomplete mental models
Experts point to demand consequences from inflation, laypeople assume supply side effects

Question 8

DAG’s & Narratives on Inflation from the Pandemic

Answer 8

Can be elicited in open form structure and represented in DAG’s. These DAG’s can be grouped to represent expert panel vs. laypeople panel.
Further these DAG’s can be used to illustrate narratives about what causes inflation

Question 9

Interpretation of new information, based on narratives, Setup

Answer 9

Wohlfahrt et. al randomize on two levels. First randomization is over which narrative about the drivers of inflation respondents receive (Gov. Spending or Energy Crisis Narrative). Then in the second round respondents receive a randomized signal whether government aims to increase spending or keep it constant.

Question 10

Interpretation of Information, Result

Answer 10

Participants that received Gov. spending narrative update their inflation expectation conditional on receiving the signal that gov. aims to increase spending more than respondents who received the energy narrative.

Question 11

Narrative Persuasion Paper

Answer 11

Supports the finding of narratives shaping mental models. People update mental models even when they know people have incentive to persuade them. Moreover it shows that people respond too strongly to past success narratives.
Financial Advisors -> Investors, shown the same record of a company

Question 12

Learning through noticing
Pod size study

Answer 12

People are irresponsive to their own actions and do not update their beliefs without their attention being externally directed.

Question 13

Common Misspecification (4)

Answer 13

• Factor neglect
• Cursedness
• Correlation neglect
• Indirect effect neglect

Question 14

How can mental models be elicited?

Answer 14

• Beliefs about parameters
• Directed acyclic graphs
• Likelihood function
• Factor models