the causes of preference reversal observed preference reversal cannot be adequately explained by violations of independence the reduction axiom or transitivity the primary cause of preference reversal is the failure of procedure invariance especially the overpricing of low probability high payoff bets this result violates regret theory and generalized nonindependent utility models preference reversal and a new reversal involving time preferences are explained by scale compatibility which implies that payoffs are weighted more heavily in pricing than in choice copyright 1990 by american economic association

green goods are they good or bad news for the environment evidence from a laboratory experiment on impure public goods green goods such as recycled paper stationary or carbon neutral flights provide increasingly popular examples of impure public goods motivated by theoretical treatments of green goods as a bundle of private and public characteristics in proportions fixed by the provider we design an experiment with two linked treatments to test how the presence of impure public goods affects behaviour towards public good causes we set parameters such that from a standard economic perspective the presence of the impure public good is behaviourally irrelevant in a treatment where the impure public good provides only small contributions to the public good we observe that on aggregate pro social behaviour is lower in the presence of the impure public good on the contrary in the treatment where the impure public good is more generous towards the public good component at the expense of private earnings individuals are unaffected in their behaviour we observe that impure public goods that are theoretically irrelevant and are mostly self interested may hinder pro social behaviour and look for explanations in social psychology such as the phenomenon of thoughtful anchoring motivated reasoning and reluctant altruism the results from this experiment question the role of green goods in enhancing environmentally friendly behaviours

compensation and rewards for environmental services cres and efficient design of contracts in developing countries behavioral insights from a natural field experiment the use of economic incentives for biodiversity mostly compensation and reward for environmental services including payment for es has been widely supported in the past decades and became the main innovative policy tools for biodiversity conservation worldwide these policy tools are often based on the insight that rational actors perfectly weigh the costs and benefits of adopting certain behaviors and well crafted economic incentives and disincentives will lead to socially desirable development scenarios this rationalist mode of thought has provided interesting insights and results but it also misestimates the context by which real individuals come to decisions and the multitude of factors influencing development sequences in this study our goal is to examine how these policies can take advantage of some unintended behavioral reactions that might in return impact either positively or negatively general policy performances we test the effect of income s origin low effort based money vs high effort based money on spending decisions necessity vs superior goods and subsequent pro social preferences future pro environmental behavior within madagascar rural areas using a natural field experiment our results show that money obtained under low effort leads to different consumption patterns than money obtained under high efforts superior goods are more salient in the case of low effort money in parallel money obtained under low effort leads to subsequent higher pro social behavior compensation and rewards policies for ecosystem services may mobilize knowledge on behavioral biases to improve their design and foster positive spillovers on their development goals

is there a glass ceiling in sweden using 1998 data we show that the gender log wage gap in sweden increases throughout the wage distribution and accelerates in the upper tail we interpret this as a strong glass ceiling effect we use quantile regression decompositions to examine whether this pattern can be ascribed primarily to gender differences in labor market characteristics or in the rewards to those characteristics even after extensive controls for gender differences in age education both level and field sector industry and occupation we find that the glass ceiling effect we see in the raw data persists to a considerable extent

licensing effect in consumer choice abstract most choices in the real world follow other choices or judgments the authors show that a prior choice which activates and boosts a positive self concept subsequently licenses the choice of a more self indulgent option the authors propose that licensing can operate by committing to a virtuous act in a preceding choice which reduces negative self attributions associated with the purchase of relative luxuries five studies demonstrate the proposed licensing effect of a prior commitment to a virtuous act on subsequent choice consistent with the authors theory the preference for an indulgent option diminishes if the licensing task is attributed to an external motivation the authors also report a mediation analysis in support of their theoretical explanation that the licensing effect operates by providing a temporary boost in the relevant self concept

vicarious goal fulfillment when the mere presence of a healthy option leads to an ironically indulgent decision this research examines how consumers food choices differ when healthy items are included in a choice set compared with when they are not available results demonstrate that individuals are ironically more likely to make indulgent food choices when a healthy item is available compared to when it is not available the influence of the healthy item on indulgent choice is stronger for those with higher levels of self control support is found for a goal activation based explanation for these findings whereby the mere presence of the healthy food option vicariously fulfills nutrition related goals and provides consumers with a license to indulge

price framing effects on the purchase of hedonic and utilitarian bundles abstract marketers are increasingly offering bundles that combine cross category seemingly unrelated items this article examines the conditions under which framing a discount as savings on certain items of cross category bundles is more effective for increasing bundle purchase three experiments show that the purchase of a cross category bundle is more likely when the discount is framed as savings on the relatively hedonic component rather than as savings on the utilitarian component or on the total bundle the authors explain the findings based on the notion that a discount provides a justification that increases the likelihood of hedonic purchases but has little impact on utilitarian consumption the article concludes with a discussion of managerial implications of the findings

is there a glass ceiling over europe exploring the gender pay gap across the wages distribution using harmonised data from the european union household panel we analyse gender pay gaps by sector across the wages distribution for ten countries we find that the mean gender pay gap in the raw data typically hides large variations in the gap across the wages distribution we use quantile regression qr techniques to control for the effects of individual and job characteristics at different points of the distribution and calculate the part of the gap attributable to differing returns between men and women we find that first gender pay gaps are typically bigger at the top of the wage distribution a finding that is consistent with the existence of glass ceilings for some countries gender pay gaps are also bigger at the bottom of the wage distribution a finding that is consistent with sticky floors third the gender pay gap is typically higher at the top than the bottom end of the wage distribution suggesting that glass ceilings are more prevalent than sticky floors and that these prevail in the majority of our countries fourth the gender pay gap differs significantly across the public and the private sector wages distribution for each of our eu countries

can small victories help win the war evidence from consumer debt management abstract the question of how people should structure goal directed activity to maximize the likelihood of goal attainment is one of theoretical and practical significance in particular should people begin by attempting relatively easy tasks or more difficult ones how might these differing strategies affect the likelihood of completing the overarching goal the authors examine this question in the context of an important goal for a large number of consumers getting out of debt using a data set obtained from a debt settlement firm they find that 1 closing debt accounts is predictive of debt elimination regardless of the dollar balance of the closed accounts whereas 2 the dollar balance of closed accounts is not predictive of debt elimination when controlling for the fraction of accounts closed these findings suggest that completing discrete subtasks might motivate consumers to persist in pursuit of a goal the authors discuss implications for goal pursuit generally and for consumer debt managemen

product market competition and gender discrimination award winning work by the call for competition in the markets a partnership between the office for strategy and studies of the ministry of economy gee and the associacao mutualista montepio

incentive equivalence with fixed migration costs abstract if migration between communities is costless and if policy makers in each community anticipate the migration response to policy changes then the interests of the two communities are perfectly aligned decentralization is efficient this incentive equivalence is well known however the first order approach used in virtually all the literature may obscure the fact that no convexity assumptions need be made about technology or tastes this fact underscores the relevance of incentive equivalence even when there are scale economies in the public sector here the consequences of positive migration costs for this incentive equivalence are considered in contrast with much of the literature migration costs are assumed the same for everyone this formulation differs from the more common attachment to home assumption of heterogeneous migration costs conditional on the direction of migration interests of different communities are still perfectly aligned but natives of different communities may prefer different directions of migration weakening incentive equivalence if local policy makers have the power to induce large changes in migration flows however incentive equivalence fails only if economies of scale in population are important so that communities may be under populated

asymmetric competition among nation states a differential game approach abstract this paper analyzes the impact of foreign investments on a small country s economy in the context of international competition to that end we model tax and public input competition within a differential game framework between two unequally sized countries the model accounts for the widely recognized characteristic that small states are more flexible in their political decision making than larger countries however we also acknowledge that small size is associated with limited institutional capacity in the provision of public services the model shows that the long term outcome of international competition crucially depends on the degree of capital mobility in particular we show that flexibility mitigates against but does not eliminate the likelihood of collapse in a small economy finally we note that the beneficial effect of flexibility in a small state increases with its inefficiency in providing public services and with the degree of international openness

on the desirability of tax coordination when countries compete in taxes and infrastructure in our paper we demonstrate that when countries compete in taxes and infrastructure coordination through a uniform tax rate or a minimum rate does not necessarily create the welfare effects observed under pure tax competition the divergence is even worse when the competing jurisdictions differ in institutional quality if tax revenues are used to gauge the desirability of coordination our model demonstrates that imposing a uniform tax rate is pareto inferior to the non cooperative equilibrium when countries compete in taxes and infrastructure this result is completely reversed under pure tax competition if the countries are sufficiently similar in size if a minimum tax rate is set within the range of those resulting from the non cooperative equilibrium the low tax country will never be better off finally the paper demonstrates that the potential social welfare gains from tax harmonization crucially depend on the degree of heterogeneity among the competing countries

consumption self control by rationing purchase quantities of virtue and vice consumers attempts to control their unwanted consumption impulses influence many everyday purchases with broad implications for marketers pricing policies addressing theoreticians and practitioners alike this paper uses multiple empirical methods to show that consumers voluntarily and strategically ration their purchase quantities of goods that are likely to be consumed on impulse and that therefore may pose self control problems for example many regular smokers buy their cigarettes by the pack although they could easily afford to buy 10 pack cartons these smokers knowingly forgo sizable per unit savings from quantity discounts which they could realize if they bought cartons by rationing their purchase quantities they also self impose additional transactions costs on marginal consumption which makes excessive smoking overly difficult and costly such strategic self imposition of constraints is intuitively appealing yet theoretically problematic the marketing literature lacks operationalizations and empirical tests of such consumption self control strategies and of their managerial implications this paper provides experimental evidence of the operation of consumer self control and empirically illustrates its direct implications for the pricing of consumer goods moreover the paper develops a conceptual framework for the design of empirical tests of such self imposed constraints on consumption in consumer goods markets within matched pairs of products we distinguish relative virtue and vice goods whose preference ordering changes with whet her consumers evaluate immediate or delayed consumption consequences for example ignoring long term health effects many smokers prefer regular relative vice to light relative virtue cigarettes because they prefer the taste of the former however ignoring these short term taste differences the same smokers prefer light to regular cigarettes when they consider the long term health effects of smoking these preference orders can lead to dynamically inconsistent consumption choices by consumers whose tradeoffs between the immediate and delayed consequences of consumption depend on the time lag between purchase and consumption this creates a potential self control problem because these consumers will be tempted to over consume the vices they have in stock at home purchase quantity rationing helps them solve the self control problem by limiting their stock and hence their consumption opportunities such rationing implies that per purchase occasion vice consumers will be less likely than virtue consumers to buy larger quantities in response to unit price reductions such as quantity discounts we first test this prediction in two laboratory experiments we then examine the external validity of the results at the retail level with a field survey of quantity discounts and with a scanner data analysis of chain wide store level demand across a variety of different pairs of matched vice regular and virtue reduced fat calorie or caffeine etc product categories the analyses of these experimental field and scanner data provide strong convergent evidence of a characteristic crossover in demand schedules for relative vices and virtues for categories as diverse as among others potato chips chocolate chip cookies cream cheese beer soft drinks ice cream and frozen yogurt chewing gum coffee and beef andturkey bologna vice consumers demand increases less in response to price reductions than virtue consumers demand although their preferences are not generally weaker for vices than for virtues constraints on vice purchases are self imposed and strategic rather than driven by simple preferences we suggest that rationing their vice inventories at the point of purchase allows consumers to limit subsequent consumption as a result of purchase quantity rationing however vice buyers forgo savings from price reductions through quantity discounts effectively paying price premiums for the opportunity to engage in self control thus purchase quantity rationing vice consumers are relatively price in sensitive from a managerial and public policy perspective our findings should offer marketing practitioners in many consumer goods industries new opportunities to increase profits through segmentation and price discrimination based on consumer self control they can charge premium prices for small sizes of vices relative to the corresponding quantity discounts for virtues virtue consumers on the other hand will buy larger amounts even when quantity discounts are relatively shallow a key conceptual contribution of this paper lies in showing how marketing researchers can investigate a whole class of strategic self constraining consumer behaviors empirically moreover this research is the first to extend previous theoretical work on impulse control by empirically demonstrating its broader implications for marketing decision making

magnitude time and risk differ similarly between joint and single evaluations arguably all choice options involve three basic attributes magnitude outcome size time of occurrence and probability of occurrence and are evaluated in one of two basic evaluation modes je joint evaluation involving comparison of multiple options and se single evaluation without comparison this research explores how reactions to the three basic attributes and their associated functions utility time discounting and probability weighting vary between the two basic evaluation modes nine studies tapping diverse contexts yield two general results first for all these attributes people are more sensitive to variations near endpoints zero magnitude no delay and 0 or 100 probability than in other regions and this differential sensitivity is more pronounced in se than in je second when faced with options involving a trade off between magnitude and time delay or between magnitude and probability risk people are both more delay averse and more risk averse in se than in je

home field advantage location decisions of portuguese entrepreneurs an investor s home bias in industrial location decisions may stem from personal factors social capital other non transferable assets and imperfect information about the urban and regional environment this paper explores the distinction between home base and non home location decisions in portugal we reach two important conclusions first the introduction of a variable accounting for prior base of economic activity significantly improves the statistical results second we find that the weighting of distinct location attributes differs between home and non home locations notably non home location choices are strongly governed by agglomeration economies and proximity to major urban centers possibly replicating prior location decisions to economize on search costs the results also enable us to quantify the investor s willingness to opt for a possible home field advantage for example entrepreneurs accept over three times higher labor costs to compete in their resident area of business 2002 elsevier science usa all rights reserved

regulation and growth why some countries grow faster than others is one of the most important questions in economics solving this puzzle has the obvious appeal of improving the living standards for a significant proportion of the world population we go further towards answering this question by studying a major determinant of growth regulations governing business activity our results also have significant implications for policy they suggest that countries should put priority on reforming their business regulations when designing growth policies measures of institutions currently used in the growth literature indicate the extent of problems but not how to resolve them by contrast the indicators in the doing business database are directly linked to specific reforms for example the procedures to register a business or property can be cut by combining them at a one stop shop for businesses establishing a credit bureau or reducing mandated severance pay for workers will also improve performance on the business regulations index our findings imply that identifying and implementing such reforms can accelerate economic growth

comparing capital mobility across provincial and national borders the persistence of high savings investment correlations and home country bias in portfolio construction at the national level is contrasted with new evidence on savings behaviour in canadian provinces we confirm that national borders clearly divert flows of capital to domestic investments but provincial borders have no such effect in particular while there is a significant correlation between national savings and investment among provinces that effect disappears we discuss the implications for interpreting the distinction

moral self licencing and social dilemmas an experimental analysis from a taking game in madagascar this article explores whether previous good deeds may license antisocial behaviour such as appropriating a social surplus for private benefits in a developing country context namely madagascar we design a two step framed experiment with one control treatment a neutral task and three test treatments tasks enabling subjects to earn moral credits in three different ways followed by a taking game in which subjects are given the opportunity to take an amount from a fund allocated to their university on average we find that participants in the three licencing conditions appropriate more than those in the control group and that further differences emerge according to the way the moral credits have been earned

competition and gender prejudice are discriminatory employers doomed to fail according to becker s famous theory on discrimination gary becker 1957 the economics of discrimination university of chicago press entrepreneurs with a strong prejudice against female workers forgo profits by submitting to their tastes in a competitive market their firms lack efficiency and are therefore forced to leave we present new empirical evidence for this prediction by studying the survival of start up firms in longitudinal matched employer employee data we find that firms with strong preferences for discrimination approximated by a low share of female employees relative to the industry average have significantly shorter survival rates this is especially relevant for firms starting out with female shares in the lower tail of the distribution competition at the industry level additionally reduces firm survival and accelerates the rate at which prejudiced firms are weeded out we also find evidence for employer learning as highly discriminatory start up firms that manage to survive submit to market powers and increase their female workforce over time

how construals of money versus time impact consumer charitable giving while past research has suggested that consumers have fundamentally different responses to thinking about money versus time the current work clarifies an important nuance in terms of how consumers construe these two resources we demonstrate that in the domain of charitable giving money is construed relatively more concretely whereas time is construed relatively more abstractly this difference in the construal of these two resources has implications for how appeals for charitable contributions or money versus time should be framed when the construal level at which the consumer considers the cause is aligned misaligned with the construal level of the resource being requested contribution intentions and behaviors increase decrease in addition the moderating role of resource abundance is examined in particular when money is considered abundant vs nonabundant consumers no longer exhibit more concrete thoughts in response to money compared to time finally when the donation request makes consumers think of money in a more abundant manner monetary donations can be successfully motivated with a more abstract call for charitable support the theoretical and practical implications for marketers and charitable organizations are discussed

in store spending dynamics how budgets invert relative spending patterns the authors conduct four controlled lab experiments and one field study in a brick and mortar grocery store to demonstrate that relative spending the price of the purchased item relative to the mean price of the product category evolves nonlinearly and distinctly for budget and nonbudget shoppers while the relative spending of budget shoppers evolves in a concave manner the relative spending of nonbudget shoppers evolves inversely in a convex manner thus budget nonbudget shoppers spend relatively more less in the middle than at the beginning and toward the end of their shopping trip mediation analyses confirm that the pain of paying experienced while shopping drives price salience which then drives relative spending moreover manipulating shoppers pain of paying by altering the opportunity costs associated with their spending or drawing shoppers attention to their spending via real time spending feedback is shown to influence these spending patterns the research offers theoretical contributions to the in store decision making budgeting and pain of paying literature and has important implications for marketing and promotion strategies in retail and mobile technology environments as it suggests when a shopper may be more sensitive to price related factors

market boundaries and product choice illustrating attraction and substitution effects what happens to the share of choices each item receives when the choice set boundaries are extended by adding a new item that is extremely good on one dimension but poor on the others first there is a substitution effect whereby the new item takes choice share mainly from similar items in the set second there is an attraction effect resulting in a general shift of preference toward the added item experimental studies show that choice patterns conflict with current theoretical and common sense ideas about the effect of added alternatives on choice

behavioral environmental economics promises and challenges environmental issues provide a rich ground for identifying the existence and consequences of human limitations in this paper we present a growing literature lying at the interface between behavioral and environmental economics this literature identifies alternative solutions to traditional economic instruments in environmental domains that often work imperfectly but it also faces a set of challenges including the difficulty of computing welfare effects and the identification of a robust environmental policy based on context dependent socio psychological effects we illustrate our critical discussion with two behavioral schemes that have been widely implemented green nudges and corporate environmental responsibility

for better or for worse empirical evidence of moral licensing in a behavioral energy conservation campaign isolated environmental campaigns focusing on defined target behaviors are rolled out to millions of households every year yet it is still unclear whether these programs trigger cross domain adoption of additional environment friendly behaviors positive spillover or reduced engagement elsewhere a thorough evaluation of the real net performance of these programs is lacking this paper investigates whether positive or perverse side effects dominate by exemplifying the impact of a water conservation campaign on electricity consumption the study draws on daily water 10 780 data points and weekly electricity 1386 data points consumption data of 154 apartments in a controlled field experiment at a multifamily residence the results show that residents who received weekly feedback on their water consumption lowered their water use 6 0 on average but at the same time increased their electricity consumption by 5 6 compared with control subjects income effects can be excluded while follow up research is needed on the precise mechanism of the psychological process at work the findings are consistent with the concept of moral licensing which can more than offset the benefits of focused energy efficiency campaigns at least in the short term we advocate the adoption of a more comprehensive view in environmental program design evaluation in order to quantify and mitigate these unintended effects

the time vs money effect shifting product attitudes and decisions through personal connection the results of five field and laboratory experiments reveal a time versus money effect whereby activating time vs money leads to a favorable shift in product attitudes and decisions because time increases focus on product experience activating time vs money augments one s personal connection with the product thereby boosting attitudes and decisions however because money increases the focus on product possession the reverse effect can occur in cases where merely owning the product reflects the self i e for prestige possessions or for highly materialistic consumers the time versus money effect proves robust across implicit and explicit methods of construct activation

an extension of the home attachment criteria under dynamic tax competition in this short note we extend the home attachment setting of mansoorian and myers 1993 and ogura 2006 to allow the study of tax competition in a dynamic framework when international business relocation occurs over successive periods the dynamic framework we propose also helps to understand why tax rates may change over time our modified home attachment rule is illustrated by a simple model of dynamic tax competition in discrete time

new evidence on sex segregation and sex differences in wages from matched employee employer data we use new matched employer employee data to estimate the contributions of sex segregation and wage differences by sex within occupation industry establishment and occupation establishment cells to the overall sex gap in wages in contrast to earlier data used to study this question our data cover all industries and occupations across all regions of the united states we find that segregation of women into lower paying occupations industries establishments and occupations within establishments accounts for a sizable fraction of the sex gap in wages nonetheless approximately one half of the sex gap in wages remains attributable to the individual s sex

economic integration and fiscal devolution abstract in this paper we investigate how economic integration influences the political decision of integration and separation of jurisdictions in a model with imperfect capital mobility we consider that not only the redistributive policy itself but also the level of policy centralization is decided by a majority vote we find that the net benefit from integration is not monotonic with the level of world capital market integration and present a case where integration of two regions occurs only for intermediate levels of mobility this conclusion relies on the comparison of the regional majorities utility under the various regimes the benefits from integration arise from the elimination of tax competition across jurisdictions which allows for more income redistribution whereas the costs are linked to the diversity of preferences across regions namely that of the decisive voters we also show that a federal regime is better than complete centralization in keeping a nation united

gender gaps in the labor market and economic growth this paper studies the effects of policies aimed at mitigating discrimination against women in the marketplace on the gender wage gap decisions to invest in skills the composition of employment and unemployment and long run growth the analysis uses a gender based overlapping generations model with labor market rigidities gender bias in the workplace varies inversely with the presence of skilled women as agents of change in the labor market and has a direct impact on their bargaining power in the family the model is calibrated for morocco experiments show that although the benefits of policies aimed at mitigating gender bias in the workplace can promote growth and be significantly magnified through a stronger presence of skilled women in the labor market a trade off may emerge with respect to female unemployment when anti discrimination policies are combined with policies aimed at subsidizing women s training to internalize this trade off anti discrimination policies in the marketplace may need to be complemented by measures aimed at reducing labor costs and raising productivity

adding asymmetrically dominated alternatives violations of regularity and the similarity hypothesis an asymmetrically dominated alternative is dominated by one item in the set but not by another adding such an alternative to a choice set can increase the probability of choosing the item that dominates it this result points to the inadequacy of many current choice models and suggests product line strategies that might not otherwise be intuitively plausible

the politics of 1992 fiscal policy and european integration the internal market in europe will greatly increase the international mobility of resources how will this affect fiscal policy in different countries we consider taxation of capital in a two country model where a democratically chosen government in each country chooses tax policy higher capital mobility changes the politico economic equilibrium in two ways on the one hand it leads to more tax competition between the countries this economic effect tends to lower tax rates in both countries on the other hand it alters voters preferences and makes them elect a different government this political effect offsets the increased tax competition although not completely

the effects of competition and equal treatment laws on gender wage differentials discrimination if it is inefficient can be eliminated by competition in most countries it is also forbidden by law this paper evaluates the influence of economic and legal factors on the portion of male female wage differentials that is not explained by other worker characteristics and may be due to discrimination we use a new international data set of suitable gender wage gap measures constructed from the results of existing studies meta analysis of the data shows that increased competition and adoption of international conventions concerning equal treatment laws both reduce gender wage gaps while legislation that prevents women from performing strenuous or dangerous jobs tends to increase it doris weichselbaumer and rudolf winter ebmer

sex discrimination and product market competition the case of the banking industry this paper examines the relationship between product market competition and employment discrimination using an especially constructed data set that links microeconomic data on female employment with measures of market concentration in the banking industry the use of firm specific data drawn from this one industry allows estimation of this relationship in a manner that avoids the problems of interindustry differences that have troubled previous studies the results provide strong support for a negative relationship between market concentration and the relative employment of women further we find that individual market shares are unrelated to female employment suggesting that the relationship is due primarily to differences across markets rather than individual firms

ethical products less strong how explicit and implicit reliance on the lay theory affects consumption behaviors many consumers implicitly associate sustainability with lower product strength this so called ethical less strong intuition elsi poses a major threat for the success of sustainable products this article explores this pervasive lay theory and examines whether it is a key barrier for sustainable consumption patterns even more importantly little is known about the underlying mechanisms that might operate differently at the implicit and explicit levels of the consumer s decision making to fill this gap three studies examine how the implicit judgments that consumers activate automatically shape their consumption behaviors in concert with their more controlled explicit beliefs about sustainable products the main study investigates the elsi s imprint on actual shopping patterns and disentangles the implicit and explicit mechanisms of the lay theory this paper also asks how this negative influence can be attenuated by examining whether the consumer s interest in sustainable consumption reduces reliance on the elsi two follow up studies confirm the robustness from different methodological and practical perspectives implications for companies and policy makers are derived

self control for the righteous toward a theory of precommitment to indulgence prior research has examined consumers use of self control to avoid hedonic myopic temptations such as overspending and smoking in this research we investigate the opposite form of self control whereby consumers force themselves to indulge and avoid default forms of spending on utilitarian necessities and or savings in particular consumers who have difficulty choosing items that are perceived as indulgences or luxuries e g a cruise over necessities e g saving for college education and cash in everyday decisions may use precommitments to indulgence especially when the psychological cost of such commitments is less concrete these propositions were tested in a series of studies involving real and hypothetical choices as well as process measures the results indicate that a substantial segment of consumers choose hedonic luxury rewards over cash of equal or greater value consumers typically explain such choices based on the need to precommit to indulgence to make sure that the award does no

self signaling and the costs and benefits of temptation in consumer choice abstract the literature on self control emphasizes that temptation is costly the authors propose that temptation entails not only costs but also benefits for consumers these arise from self signaling effects of how consumers handle tempting choice options succumbing to temptation is a costly self signal of weak willpower whereas resisting temptation is a beneficial self signal of strong willpower five experiments demonstrate that these self signaling costs and benefits of temptation depend not only on the chosen item but also on the temptation from the nonchosen options the authors discuss theoretical implications of their findings for research on impulsive choice and self control and on self signaling and managerial implications for pricing and assortment strategies

the effect of competition on executive compensation and incentives evidence from a quasi natural experiment the research was partially funded by fundacao para a ciencia e a tecnologia through the applied microeconomics research unit nima award no pest oe ege ui3181 2014

prices information and nudges for residential electricity conservation a meta analysis incentivising households to lower their electricity consumption is increasingly used as a tool to create a more flexible electricity demand previous reviews estimate that electricity savings of 6 4 7 4 can be achieved through monetary informational and behavioural incentives this papers argues that a more realistic estimate is of a 1 9 3 9 reduction in consumption based on the most recent experimental data from both peer reviewed and grey literature sources using data from 52 studies published during the smart grid era 2005 onwards the effects of incentives from 128 observations amounting to 713 002 households are analysed the results show that individual and real time feedback as well as personalised advice on how to save electricity are more effective than feedback on electricity costs and general electricity savings tips which lead to relative increases in consumption despite improvements in the quality of more recent studies the analysis highlights the importance of methodological rigour in carrying out and reporting effects of incentives an absence of a control group of socio demographic data and the self selection of participants into treatment leads to overestimation of effects

preference dynamics in sequential consumer choice with defaults this research examines the impact of defaults on product choice in sequential decision settings whereas prior research has shown that a default can affect what consumers purchase by promoting choi

does size asymmetry exacerbate the inefficiency of tax competition many authors demonstrate that the tax gap resulting from tax competition increases with the size asymmetry of the competing countries consequently increasing country size disparities exacerbates the inefficiency of tax competition the aim of this note is to show that this classical view has no general validity if we consider that countries compete not only in taxes but also in the provision of infrastructure the simple model we develop for this purpose demonstrates that the effect of size disparity on efficiency depends crucially on the degree of international capital mobility

what is missing in research on non monetary incentives in the household energy sector abstract based on current research the impact of non monetary incentives on energy consumption and green energy uptake in the household sector remains unclear studies often only provide tests for combinations of measures and consider short time intervals we provide a systematic review of the literature point to several shortcomings in existing published studies and make recommendations for future research aiming to inform policy and other decision makers

managerial incentives and product market competition are imperfectly competitive leibenstein 1966 claims that there may be a substantial amount of x inefficiency where x inefficiency measures the degree to which actual profits depart from the maximum of profits that could be obtained if all operations in the firm were carried out at minimal costs he offers empirical evidence from case studies showing that the welfare loss due to organizational slack is of an order of magnitude bigger than the welfare loss due to monopolistic price distortions on imperfectly competitive markets these results support the common presumption that increasing competition reduces organizational and in particular managerial slack however this early literature does not offer a theoretical explanation for the link between competition and managerial incentives in particular it ignores the fact that managerial incentives can be affected by the design of an incentive scheme in this paper i derive the optimal incentive scheme for a manager as a function of the competitiveness of the environment in which his firm operates the basic impact of increased competition is that it reduces the profits of a firm this has two effects in the model first if a firm has high costs then the reduction of profits may be sufficient to render the firm unprofitable so the probability that it has to be liquidated goes up this unambiguously induces the manager of the firm to work harder for a cost reduction in order to avoid liquidation and to keep his job second the reduction in profits may affect

the effect of recycling versus trashing on consumption theory and experimental evidence abstractthis article proposes a utilitarian model in which recycling could reduce consumers negative emotions from wasting resources i e taking more resources than what is being consumed and increase consumers positive emotions from disposing of consumed resources the authors provide evidence for each component of the utility function using a series of choice problems and formulate hypotheses on the basis of a parsimonious utilitarian model experiments with real disposal behavior support the model hypotheses the findings suggest that the positive emotions associated with recycling can overpower the negative emotions associated with wasting as a result consumers could use a larger amount of resources when recycling is an option and more strikingly this amount could go beyond the point at which their marginal consumption utility becomes zero the authors extend the theoretical model and introduce acquisition utility and the moderating effect of the costs of recycling financial physical and m

the red and the black mental accounting of savings and debt in the standard economic account of consumer behavior the cost of a purchase takes the form of a reduction in future utility when expenditures that otherwise could have been made are forgone the reality of consumer hedonics is different when people make purchases they often experience an immediate pain of paying which can undermine the pleasure derived from consumption the ticking of the taxi meter for example reduces one s pleasure from the ride we propose a double entry mental accounting theory that describes the nature of these reciprocal interactions between the pleasure of consumption and the pain of paying and draws out their implications for consumer behavior and hedonics a central assumption of the model which we call prospective accounting is that consumption that has already been paid for can be enjoyed as if it were free and that the pain associated with payments made prior to consumption but not after is buffered by thoughts of the benefits that the payments will finance another important concept is coupling which refers to the degree to which consumption calls to mind thoughts of payment and vice versa some financing methods such as credit cards tend to weaken coupling whereas others such as cash payment produce tight coupling our model makes a variety of predictions that are at variance with economic formulations contrary to the standard prediction that people will finance purchases to minimize the present value of payments our model predicts strong debt aversion that they should prefer to prepay for consumption or to get paid for work after it is performed such pay before sequences confer hedonic benefits because consumption can be enjoyed without thinking about the need to pay for it in the future likewise when paying beforehand the pain of paying is mitigated by thoughts of future consumption benefits contrary to the economic prediction that consumers should prefer to pay at the margin for what they consume our model predicts that consumers will find it less painful to pay for and hence will prefer flat rate pricing schemes such as unlimited internet access at a fixed monthly price even if it involves paying more for the same usage other predictions concern spending patterns with cash charge or credit cards and preferences for the earmarking of purchases we test these predictions in a series of surveys and in a conjoint like analysis that pitted our double entry mental accounting model against a standard discounting formulation and another benchmark that did not incorporate hedonic interactions between consumption and payments our model provides a better fit of the data for 60 of the subjects the discounting formulation provides a better fit for only 29 of the subjects even when allowing for positive and negative discount rates the pain of paying we argue plays an important role in consumer self regulation but is hedonically costly from a hedonic perspective the ideal situation is one in which payments are tightly coupled to consumption so that paying evokes thoughts about the benefits being financed but consumption is decoupled from payments so that consumption does not evoke thoughts about payment from an efficiency perspective however it is important for consumers to be aware of what they are paying for consumption this creates a tension between hedonic efficiency and what we call decision efficiency various institutional arrangements such as financing of public parks through taxes or usage fees play into this tradeoff a producer developing a pricing structure for their product or service should be aware of these two conflicting objectives and should try to devise a structure that reconciles them

choice based on reasons the case of attraction and compromise effects building on previous research this article proposes that choice behavior under preference uncertainty may be easier to explain by assuming that consumers select the alternative supported by the best reasons this approach provides an explanation for the so called attraction effect and leads to the prediction of a compromise effect consistent with the hypotheses the results indicate that 1 brands tend to gain share when they become compromise alternatives in a choice set 2 attraction and compromise effects tend to be stronger among subjects who expect to justify their decisions to others and 3 selections of dominating and compromise brands are associated with more elaborate and difficult decisions

tax competition with imperfectly mobile capital abstract this paper considers interjurisdictional tax competition in a two period model with imperfectly mobile capital in the first period capital is perfectly mobile in the second period however capital cannot move perfectly because of transactions costs once employed in a jurisdiction in the first period this imperfect mobility of capital may lead to the overprovision rather than the underprovision of public goods in the second period and may make jurisdictions compete more aggressively for capital in the first period

how technological efficiency improvements change consumer preferences towards a psychological theory of rebound effects abstract the use of technologies can influence consumer preferences and demand and hence impact on environmental sustainability this article contributes to research on rebound effects which focus on how energy efficiency improvements eei increase energy service demand most of 35 years of rebound research has been analyzed from micro and macro economic perspectives yet micro economic rebound research has so far investigated human behavior only on grounds of simple rational choice models and static assumptions about consumer preferences this article exposes the existing rebound discourse to psychological theories building on considerations of how eei can interfere with processes of decision making it develops a model of how eei via psychological processes may lead to motivational rebound effects as well as to beneficial effects which countervail rebounds the article then advances a typology of such rebound and beneficial effects that not only integrates the typology currently used in the micro economic rebound literature but goes beyond it model and typology explain how economic rebound research could benefit from psychological theory provide the basis for empirically investigating rebound effects on more solid theoretical grounds and empower a comprehensive discussion about policies and measures that aim at a sustainable use of technologies

a general equilibrium model of statistical discrimination we study a general equilibrium model with endogenous human capital formation in which ex ante identical groups may be treated asymmetrically in equilibrium the interaction between an informational externality and general equilibrium effects creates incentives for groups to specialize discrimination may arise even if the corresponding model with a single group has a unique equilibrium the dominant group gains from discrimination rationalizing why a majority may be reluctant to eliminate discrimination the model is also consistent with reverse discrimination as a remedy against discrimination since it may be necessary to decrease the welfare of the dominant group to achieve parity

attachment to home and efficient purchases of population in a fiscal externality economy abstract this paper examines the efficiency properties of an economy characterized by strategically competing regions and individuals with varying degrees of attachment to home in an otherwise standard fiscal externality setting regional authorities may make interregional transfers in purchasing preferred populations however there is a range of distributions of resources over which neither region makes transfers nevertheless all equilibrium allocations resulting from the nash behavior of regional authorities including those that involve no transfers are efficient therefore in contrast to the standard conclusions of the fiscal externality literature there is no efficiency role for a central authority

yes but this other one looks better works better how do consumers respond to trade offs between sustainability and other valued attributes consumers are increasingly facing product evaluation and choice situations that include information about product sustainability i e information about a product s relative environmental and social impact in many cases consumers have to make decisions that involve a trade off between product sustainability and other valued product attributes similarly product and marketing managers need to make decisions that reflect how consumers will respond to different trade off scenarios in the current research we study consumer responses across two different possible trade off scenarios one in which consumers face a trade off between product sustainability and hedonic value and another in which they must trade off between product sustainability and utilitarian value our results suggest that overall consumers are more likely to trade off hedonic value e g esthetics for sustainability than to trade off utilitarian value e g functional performance for sustainability in studies 1a and 1b we presented participants with a product choice task and also measured their anticipatory emotions as they contemplated their options the results suggest that given a trade off consumers are more likely to choose a sustainable product when they have to trade off hedonic value than when they have to trade off utilitarian value further these studies provide some insight into the emotions underlying this effect in study 2 we use a different consumer response measure relative purchase likelihood and investigate the effect of trade off type across categories that vary in the degree to which hedonic and utilitarian attributes are perceived to be important referred to as product type our results suggest that the effect of trade off type still holds yet is moderated by product type such that consumers greater willingness to trade off hedonic value vs utilitarian value for sustainability is attenuated as the relative importance of hedonic vs utilitarian attributes increases in addition to building on our theoretical understanding of decision making given trade offs with moral attributes this research is also intended to support managers as they define and choose among various strategic product development and marketing promotion options

the effect of statistical discrimination on black white wage inequality estimating a model with multiple equilibria this article presents the structural estimation of the parameters of a statistical discrimination model although the model is capable of displaying multiple equilibria an estimation strategy that identifies both the model parameters and the equilibrium selected by the economic agents is developed and empirically implemented a comparison between the selected equilibria and the other potential equilibria reveals that the decline in wage inequality experienced in the u s economy cannot be attributed to changes in the equilibrium selection nonetheless a counterfactual experiment shows that in a color blind society blacks wage would have been on average more than 20 higher

variety vice and virtue how assortment size influences option choice assortment size has been shown to influence whether consumers make a choice but could it also influence what they choose five studies demonstrate that because choosing from larger assortments is often more difficult it leads people to select options that are easier to justify virtues and utilitarian necessities are generally easier to justify than indulgences consequently choosing from larger assortments often shifts choice from vices to virtues and from hedonic to utilitarian options these effects reverse however when situational factors provide accessible reasons to indulge underscoring the role of justification implications for choice difficulty and justification processes are discussed

limited availability reduces the rate of satiation in general consumers enjoy products less with repeated consumption unfortunately there are few known ways to slow such satiation the authors show that consumers satiate more slowly on a product when it is available for consumption only at limited times specifically they find that perceived limited availability made a product more enjoyable and yet this effect largely emerged only after repeated consumption the authors attribute this finding to an urge to take advantage of a rare consumption opportunity which leads people to pay less attention to the quantity consumed and subsequently to experience less satiation a series of studies establish the effect of perceived limited availability on the rate of satiation show that it influences how much people eat provide mediation evidence of the proposed theoretical account and eliminate the effect by making salient the total amount consumed the authors conclude with implications of these findings

why is capital so immobile internationally possible explanations and implications for capital income taxation the evidence on international capital immobility is extensive including the lack of international portfolio diversification real interest differentials across countries and the high correlation between domestic savings and investment the authors develop a model with asymmetric information between countries that helps rationalize all the above observations and then examine the implications of this model for optimal domestic tax policy without asymmetric information past work showed that small open economies should not impose corporate income taxes with asymmetric information the optimal policy instead involves government subsidies to capital imports some omitted factors that argue against subsidizing capital imports are explored briefly copyright 1996 by american economic association

justification effects on consumer choice of hedonic and utilitarian goods abstract people want to have fun and they are more likely to have fun if the situation allows them to justify it this research studies how people s need for justifying hedonic consumption drives two choice patterns that are observed in typical purchase contexts first relative preferences between hedonic and utilitarian alternatives can reverse depending on how the immediate purchase situation presents itself a hedonic alternative tends to be rated more highly than a comparable utilitarian alternative when each is presented singly but the utilitarian alternative tends to be chosen over the hedonic alternative when the two are presented jointly second people have preferences for expending different combinations of time effort and money for acquiring hedonic versus utilitarian items they are willing to pay more in time for hedonic goods and more in money for utilitarian goods the author explores the topic through a combination of four experiments and field studies

consumer choice between hedonic and utilitarian goods abstract in this article the authors examine how consumer choice between hedonic and utilitarian goods is influenced by the nature of the decision task building on research on elaboration the authors propose that the relative salience of hedonic dimensions is greater when consumers decide which of several items to give up forfeiture choices than when they decide which item to acquire acquisition choices the resulting hypothesis that a hedonic item is relatively preferred over the same utilitarian item in forfeiture choices than in acquisition choices was supported in two choice experiments in a subsequent experiment these findings were extended to hypothetical choices in which the acquisition and forfeiture conditions were created by manipulating initial attribute level reference states instead of ownership finally consistent with the experimental findings a field survey showed that relative to market prices owners of relatively hedonic cars value their vehicles more than do owners of relat

gain without pain the extended effects of a behavioral health intervention we examine the extended effects of an incentive based behavioral health intervention designed to improve nutrition behavior although the intervention successfully improved the target behavior less is known about any spillovers positive or negative that impacted the program s net benefit this novel examination presents an opportunity to advance our knowledge of this important question particularly because many theories predict that balancing behaviors in other domains e g reduced exercise can occur our results show a positive and long lasting persistence effect for the treatment group even after the incentive was removed moreover we observe no negative spillover effects into related domains such as exercise and no negative impact on customer loyalty these results support the use of incentive based interventions and highlight the importance for both theory and practice of examining their extended effects this paper was accepted by uri gneezy behavioral economics

cost conscious the neural and behavioral impact of price primacy on decision making price is a key factor in most purchases but it can be presented at different stages of decision making the authors examine the sequence dependent effects of price and product information on the decision making process at both neural and behavioral levels during functional magnetic resonance imaging the price of a product was shown to participants either before or after the product itself was presented early exposure to price or price primacy altered the process of valuation as observed in altered patterns of activity in the medial prefrontal cortex immediately before making a purchase decision specifically whereas viewing products first resulted in evaluations strongly related to products attractiveness or desirability viewing prices first appeared to promote overall evaluations related to products monetary worth consistent with this framework the authors show that price primacy can increase purchase of bargain priced products when their worth is easily recognized together these results

a note on tax competition attachment to home and underprovision of public goods abstract this paper analyzes efficiency in the provision of public goods when there is tax competition but investors have attachment to home i e a biased preference for investing in the region where they live investors are assumed to be heterogeneous in the costs to invest outside the home region as a result in comparison with the no attachment case the capital outflow response to an increase in the tax rate is reduced because only investors facing small mobility costs will move capital out in a symmetric equilibrium tax rates are increased and the extent of the underprovision of public goods caused by tax competition is lessened

been there done that the impact of effort investment on goal value and consumer motivation in the present article we propose that consumers initial effort investment in pursuing a goal may increase or decrease the value of the goal and the consumer s subsequent motivation depending on whether the pursuit of the goal is perceived to be one s autonomous choice when consumers perceive that the goal they pursue is adopted through an autonomous choice the initial effort investment is experienced as reflecting the value of the goal therefore greater effort should increase the value of the goal as well as consumers subsequent motivation conversely if consumers perceive that the goal has been imposed on them they experience psychological reactance that is proportional to the amount of effort that they expend in pursuing the goal thus they devalue the goal as they invest more effort in its pursuit and show lower subsequent motivation

spending time versus spending money we find systematic differences in the way that people spend time versus money ex post people are able to more easily accommodate negative outcomes by adjusting the value of their temporal inputs ex ante people are willing to spend more time for higher risk higher return options whereas when spending money the pattern is reversed and the more standard pattern of increasing risk aversion is observed although accurate assessment of the opportunity costs of time is key to making good decisions ambiguity in the value of time promotes accommodation and rationalization

the influence of price discount versus bonus pack on the preference for virtue and vice foods abstract the authors find that consumers prefer a bonus pack to a price discount for virtue foods but they prefer a price discount to a bonus pack for vice foods prior research has shown that all else being equal consumers prefer bonus packs to price discounts the authors propose that this preference does not hold for vice food because consumers cannot generate good justifications for buying such food when a bonus pack is offered because this would mean consuming more of the vice however a price discount on a vice food can be justified because it acts as a guilt mitigating mechanism for virtue foods the absence of both anticipated postconsumption guilt and the resultant need to justify leads consumers to prefer a bonus pack to a price discount the authors demonstrate the proposed effect and test its underlying process across five experiments