A behavioral model shows that loss-averse, paycheck-to-paycheck depositors can trigger bank runs when they assign high probability to bad income states, and a Call Report exercise finds modest, imprecise empirical support.
Mind the (DH) Gap! A Contrast in Risky Choices Between Reasoning and Conversational LLMs
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abstract
The use of large language models either as decision support systems, or in agentic workflows, is rapidly transforming the digital ecosystem. However, the understanding of LLM decision-making under uncertainty remains limited. We study LLM risky choices along two dimensions: (1) prospect representation (based on an explicit representation or outcome history) and (2) decision rationale (explanation). Our study, which involves 20 frontier and open LLMs, is complemented by a matched human subjects experiment, which provides one reference point, while an expected payoff maximizing rational agent model provides another. We find that LLMs cluster into two categories: reasoning models (RMs) and conversational models (CMs). RMs tend towards rational behavior, are insensitive to the order of prospects, gain/loss framing, and explanations, and behave similarly whether prospects are explicit or presented via a history of outcomes. CMs are significantly less rational, slightly more human-like, sensitive to prospect ordering, framing, and explanation, and exhibit a large description-history gap. Paired comparisons of open LLMs suggest that a key factor differentiating RMs and CMs is training for mathematical reasoning.
fields
econ.TH 1years
2026 1verdicts
CONDITIONAL 1representative citing papers
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Bank Run Exposure in a Paycheck-to-Paycheck Economy with Loss-Averse Depositors
A behavioral model shows that loss-averse, paycheck-to-paycheck depositors can trigger bank runs when they assign high probability to bad income states, and a Call Report exercise finds modest, imprecise empirical support.