Consumption and Account Balances in Crises: Have we neglected cognitive load?

Title: Consumption and Account Balances in Crises: Have we neglected cognitive load? (with Tiziana Assenza and Alberto Cardaci)

Abstract: Geopolitical, financial and fiscal crises, Covid, and life events occupy people's minds while they make important economic decisions. We conducted an incentivized online experiment among a representative sample of 2000 French households. Facing a taxing and persistent cognitive load reduced consumption, especially under furlough risk, and increased account balances, especially for those not facing such risk. These effects did not arise from supply constraints or a worsening of credit constraints. Cognitive load affected primarily the optimality of the chosen policy rules and degraded the ability of the standard economic model to describe consumption behavior, but less so for college-educated subjects.