toward the diffusion of rural energy technologies some lessons from the indian biogas program abstract india has committed substantial resources to construct several hundred thousand biogas plants this program is reviewed within the context of the current status of biogas systems including technical economic manpower and training and organizational issues experience with a dozen village scale systems is analyzed in detail problems with the indian biogas program show the importance of basing technology diffusion efforts on an intimate understanding of rural resource flows and the local political economy the biogas experience illustrates a broader problem in development an imbalance between technology focused and people focused development assistance some of the causes and implications of this imbalance are discussed and some suggestions are offered to help both developing countries and various donors increase the effectiveness of development efforts by stimulating the growth of local organizations

an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

joseph schumpeter lecture ideology i develop a model of ideologies as collectively sustained yet individually rational distortions in beliefs concerning the proper scope of governments versus markets in processing and interpreting signals of the efficacy of public and market provision of education health insurance pensions etc individuals optimally trade off the value of remaining hopeful about their future prospects or their children s versus the costs of misinformed decisions because these future outcomes also depend on whether other citizens respond to unpleasant facts with realism or denial endogenous social cognitions emerge thus an equilibrium in which people acknowledge the limitations of interventionism coexists with one in which they remain obstinately blind to them embracing a statist ideology and voting for an excessively large government conversely an equilibrium associated with appropriate public responses to market failures coexists with one dominated by a laissez faire ideology and blind faith in the invisible hand with public sector capital this interplay of beliefs and institutions leads to history dependent dynamics the model also explains why societies find it desirable to set up constitutional protections for dissenting views even when ex post everyone would prefer to ignore unwelcome news jel h11 d72 d83 p16 z1

self rewards and personal motivation self administered rewards are ubiquitous they serve as incentives for personal accomplishments and are widely recommended to increase personal motivation we show that in a model with time inconsistent and reference dependent preferences self rewards can be a credible and effective tool to overcome self control problems we also discuss the different types of self rewards the individual can use such as vice goods and virtue goods and analyze which types of goods the individual prefers

screening and preventable illness if an agent does not discount the future at a constant rate as in some forms of myopia her optimal strategy is unattainable without some commitment device we apply this familiar idea to a model of screening and disease prevention and explore how financial incentives can correct suboptimal health choices in general myopia need not imply under screening while the optimal intervention for prevention effort is a state invariant subsidy the optimal intervention for screening may involve a tax or a subsidy when screening and prevention are coincident a simple and practical subsidy equal to one minus the discount factor to both screening and intervention is indicated

are there reasons against open ended research into solar radiation management a model of intergenerational decision making under uncertainty solar radiation management srm has been proposed as a means of last resort against dangerous climate change we propose a stylized model of intergenerational decision making on srm research greenhouse gas abatement and srm deployment under uncertainties about a the extent of future climate damage and b effectiveness and potential harmful side effects of srm open ended research may reveal either that srm effectively reduces climate damage or that it would cause more harm than benefits we find that srm research increases the likelihood of deployment slippery slope and derive conditions that it decreases abatement effort in expectation moral hazard neither of these provides a rationale against srm research though the rational decision is to perform srm research unless i discounting is hyperbolic and ii the absolute prudence of expected climate damage is smaller than absolute risk aversion these results generalize to the case where srm research also provides information on climate sensitivity

the hyperbolic consumption model calibration simulation and empirical evaluation ur preferences for the long run tend to conflict with our short run behavior when planning for the long run we intend to meet our deadlines exercise regularly and eat healthfully but in the short run we have little interest in revising manuscripts jogging on the stairmaster and skipping the chocolate souffleala mode delay of gratification is a nice long term goal but instant gratification is disconcertingly tempting this gap between long run intentions and short run actions is apparent across a wide range of behaviors including saving choices a 1997 survey found that 76 percent of respondents believe they should be saving more for retirement looking only at respondents who believed they were at an age where you should be seriously saving already the survey found that 55 percent reported being behind in their savings and only 6 percent reported being ahead farkas and johnson 1997 the report on the survey concluded t he gaps between people s atti tudes intentions and behavior are troubling and threaten increased insecurity and dissatisfaction for people when they retire americans are simply not doing what logic and their own reasoning suggests they should be doing a 1993 luntz webber merrill lynch survey found similar answers when baby boomers were asked what percentage of your annual household income do you think you should save for retirement and what percentage of your annual

subjective discounting in an exchange economy this paper describes the equilibrium of a discrete time exchange economy in which consumers with arbitrary subjective discount factors and homothetic period utility functions follow linear markov consumption and portfolio strategies explicit expressions are given for state prices and consumption wealth ratios we provide an analytically convenient continuous time approximation and show how subjective rates of time preference affect risk free rates but not instantaneous risk return trade offs hyperbolic discount factors can be a source of return volatility but they cannot be used to address asset pricing puzzles related to high frequency sharpe ratios

commitment through risk abstract we show that risk averse hyperbolic discounting agents can benefit from positive exposure to risk and thus behave as if risk loving when the benefits of costly effort are delayed selecting some risk concerning the outcome of one s own effort can serve as an intrapersonal commitment device for exerting higher effort thereby attenuating the negative effect of time inconsistency comparing the effects of time inconsistency risk aversion and prudence we formulate an intuitive condition for risk exposure to be an optimal strategy and discuss several applications of this result

diffusion of rural innovations some analytical issues and the case of wood burning stoves abstract the literature on the diffusion of rural innovations in third world countries reveals a spectrum of approaches to the diffusion process it is argued here that the effectiveness of a particular approach in the diffusion of particular innovations would depend on the technical the economic and the social characteristics of the innovations a typology of innovations in terms of these characteristics has been drawn up this provides the analytical framework within which the instance of wood burning stoves is concerned a priori the characteristics of this innovation are seen to be such as to necessitate the close involvement of the users in the design process itself they point to the likely inappropriateness of the usual top down approach to diffusion available evidence relating to actual experience with promoting wood burning stoves is seen to bear this out

price dispersion and incomplete learning in the long run abstract in each period a seller chooses a price and the customer for that period buys either one unit or nothing the relationship between price and purchase probability is one of two linear functions it is shown that the seller behaving optimally does not necessarily learn which function is the actual relationship since there can be a positive probability of sequences of prices converging to the price at which the two functions give the same purchase probability

motivated health risk denial and preventative health care investments abstract people deny health risks invest too little in disease prevention and are highly sensitive to the price of preventative health care especially in developing countries moreover private sector r d spending on developing country diseases is almost non existent to explain these empirical observations i propose a model of motivated belief formation in which an agent s decision to engage in health risk denial balances the psychological benefits of reduced anxiety with the physical cost of underprevention i use the model to study firms price setting behavior and incentive to innovate i also show that tax funded prevention subsidies are welfare enhancing

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

time inconsistency and welfare program participation evidence from the nlsy we empirically implement a dynamic structural model of labor supply and welfare program participation for agents with potentially time inconsistent preferences using panel data on the choices of single women with children from the nlsy 1979 we provide estimates of the degree of time inconsistency and of its influence on the welfare take up decision with these estimates we conduct counterfactual experiments to quantify the utility loss stemming from the inability to commit to future decisions and the potential utility gains from commitment mechanisms such as welfare time limits and work requirements

communication and learning we study strategic information transmission in an organization consisting of an infinite sequence of individual decision makers each decision maker chooses an action and receives an informative but imperfect signal of the once and for all realization of an unobserved state the state affects all individuals preferences over present and future decisions decision makers do not directly observe the realized signals or actions of their predecessors instead they must rely on cheap talk messages in order to accumulate information about the state each decision maker is therefore both a receiver of information with respect to his decision and a sender with respect to all future decisions we show that if preferences are not perfectly aligned full learning equilibria ones in which the individuals posterior beliefs eventually place full weight on the true state do not exist this is so both in the case of private communication in which each individual only hears the message of his immediate predecessor and in the case of public communication in which a decision maker hears the message of all his predecessors surprisingly in the latter case full learning may be impossible even in the limit as all members of the organization become perfectly patient we also consider the case where all individuals have access to a mediator who can work across time periods arbitrarily far apart in this case full learning equilibria exist copyright 2012 oxford university press

rational irrationality some economics of self management abstract the paper first reviews some of the main challenges posed to our received economic paradigm by a variety of behaviors documented by psychologists and discusses possible responses to this challenge it then describes a specific attempt at unifying a number of themes in social psychology using a parsimonious modeling of human behavior

discretionary rewards as a feedback mechanism abstract this paper studies the use of discretionary rewards in a finitely repeated principal agent relationship with moral hazard the key aspect is that rewards have informational content when the principal obtains a private subjective signal about the agent s performance she may pay discretionary bonuses to provide credible feedback to the agent in accordance with the often observed compression of ratings we show that in equilibrium the principal communicates the agent s interim performance imperfectly i e she does not fully differentiate good and bad performance furthermore we show that small rewards can have a large impact on the agent s effort provided that the principal s stake in the project is small

to be consumed with moderation abstract we study the optimal behavior of a hyperbolic discounting agent who has incomplete information about his own preferences and can only learn them through consumption we show that even if moderate current consumption and moderate future consumption always dominates abstinence the agent may optimally decide not to consume as a commitment device against inefficient learning that would lead to future excesses this provides a rationale for why smokers gamblers or compulsive buyers stick to second best personal rules of behavior such as abstinence without invoking standard habit formation arguments we also study how urges modify the strategy of the individual

a theory of rational addiction we develop a theory of rational addiction in which rationality means a consistent plan to maximize utility over time strong addiction to a good requires a big effect of past consumption of the good on current consumption such powerful complementarities cause some steady states to be unstable they are an important part of our analysis because even small deviations from the consumption at an unstable steady state can lead to large cumulative rises over time in addictive consumption or to rapid falls in consumption to abstention our theory also implies that cold turkey is used to end strong addictions that addicts often go on binges that addicts respond more to permanent than to temporary changes in prices of addictive goods and that anxiety and tensions can precipitate an addiction

are we better off if our politicians have more information the model of public policy studied in this paper has heterogeneous citizens voters and two public goods one roads chosen directly by an elected policy maker and the other pollution stochastically dependent on the amount of roads both a one country and a two country version of the model are analyzed the latter displays externalities across the countries which create incentives for free riding and strategic delegation the welfare effects of providing the policy maker with information about the relationship between roads and pollution are investigated and it is shown that more information hurts some sometimes even all citizens in particular the opportunity not to create an institution for information gathering can serve as a commitment device for a country although with the unfortunate effect of making the overall outcome even worse implications for the welfare effects of informational lobbying are also discussed

procrastination and obedience in this lecture i shall focus on situations involving repeated decisions with time inconsistent behavior although each choice may be close to maximizing and therefore result in only small losses the cumulative effect of a series of repeated errors may be quite large thus in my examples decision makers are quite close to the intelligent well informed individuals usually assumed in economic analysis but cumulatively they make seriously wrong decisions that do not occur in standard textbook economics this lecture discusses and illustrates several pathological modes of individual and group behavior procrastination in decision making undue obedience to authority membership of seemingly normal individuals in deviant cult groups and escalation of commitment to courses of action that are clearly unwise in each case individuals choose a series of current actions without fully appreciating how those actions will affect future perceptions and behavior the standard assumption of rational forwardlooking utility maximizing is violated the nonindependence of errors in decision making in the series of decisions can be explained with the concept from cognitive psychology of undue salience or vividness for example present benefits and costs may have undue salience relative to future costs

belief in a just world and redistributive politics international surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate at the same time social ethnographies and experiments by psychologists demonstrate individuals recurrent struggle with cognitive dissonance as they seek to maintain and pass on to their children a view of the world where effort ultimately pays off and everyone gets their just deserts this paper offers a model that helps explain i why most people feel such a need to believe in a just world ii why this need and therefore the prevalence of the belief varies considerably across countries iii the implications of this phenomenon for international differences in political ideology levels of redistribution labor supply aggregate income and popular perceptions of the poor the model shows in particular how complementarities arise endogenously between individuals desired beliefs or ideological choices resulting in two equilibria a first american equilibrium is characterized by a high prevalence of just world beliefs among the population and relatively laissez faire policies the other european equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state more generally the paper develops a theory of collective beliefs and motivated cognitions including those concerning money consumption and happiness as well as religion

hyperbolic discounting and secondary markets does the existence of secondary markets for durable goods affect price and allocation on primary markets we study competitive equilibria for durable goods where the possibility of future trade on secondary markets does not affect consumer behaviour in the primary market provided consumers are exponential discounters if consumers are hyperbolic discounters however secondary markets are no longer neutral as they allow consumers to postpone their purchasing decisions in this case the equilibrium price in the primary market is decreasing in the number of periods in which the good can be traded hence primary producers have an incentive to close down secondary markets if secondary markets never close hyperbolic discounters may use collusive intrapersonal strategies which lead to a pareto improvement for all incarnations of the same consumer we characterise the set of all stationary equilibrium prices and show that the competitive equilibrium allocation may be inefficient

a theory of haste abstract we consider a hyperbolic discounting agent at each period he can undertake an irreversible consumption decision that yields an uncertain current benefit and a delayed cost if he decides to defer consumption for the future some information exogenously flows in we show that the agent may rationally decide to consume with negative expected net present value npv only to prevent himself from consuming in the future which could be profitable from a future perspective but highly detrimental from the current viewpoint comparative statics reveal that the value of information is u shaped

strategic ignorance and the robustness of social preferences participants in dictator games frequently avoid learning whether their choice to maximize their own earnings will help or hurt the recipient and then choose selfishly exploiting the moral wiggle room provided by their ignorance however this is found in an environment in which the dictator must actively learn the true payoffs so inaction means ignorance does this effect persist when one must actively choose either to be ignorant or to be informed or when one must actively choose to remain ignorant in fact whereas 45 of dictators remain ignorant when one must click to become informed this drops to 25 when one must click in either case and to 3 when one must click to remain ignorant although the exploitation of moral wiggle room is not merely an artifact it is much like social behavior itself subject to environmental and psychological factors that may reinforce or undermine its impact data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 1989 this paper was accepted by uri gneezy behavioral economics

optimal sin taxes abstract we investigate sin taxes on unhealthy items such as fatty foods that people may by their own reckoning consume too much of we employ a standard optimal taxation framework but replace the standard assumption that all consumers have 100 self control with an assumption that some consumers may have some degree of self control problems we show that imposing taxes on unhealthy items and returning the proceeds to consumers can generally improve total social surplus because such taxes counteract over consumption by consumers with self control problems while at the same time they naturally redistribute income to consumers with no self control problems who consume less such taxes can even create pareto improvements finally we demonstrate with some simple numerical examples that even if the population exhibits relatively few self control problems optimal taxes can still be large

positive externalities of domestic biogas initiatives implications for financing domestic biogas programs are often justified on the basis of the private benefits and costs accruing to the individual households in terms of providing a superior cooking fuel improved indoor air quality and saving of time spent on collecting firewood this paper contends however that the economic surpluses from domestic biogas programs are realized beyond such narrowly defined project boundaries the paper maintains that economic value addition from the consumptive use of the biogas for cooking and the non consumptive and indirect value derived from the biogas plant providing feedstock for other processes and other such benefits as greenhouse gas mitigation positive externalities need to be accounted for the process approach adopted by this paper would enable an integrated view of the value chain and consequently a mechanism to reallocate costs and to distribute such surpluses

the effects of rwanda s biogas program on energy expenditure and fuel use summary dependence on biomass to meet domestic energy needs raises several socio environmental concerns in contrast cattle manure which may be used to generate biogas is considered a cleaner and cheaper energy source despite several initiatives toyears of education promote biogas systematic analyses of its effects are limited this paper uses data from rwanda to examine the effects of participating in a biogas program on energy related expenditures and consumption of traditional fuels we find evidence of substantial reductions in firewood use and large savings however the attractiveness of the program is hampered by a long payback period and low rates of return

the value of information when preferences are dynamically inconsistent the paper reviews the main findings on individual decision making under time inconsistent preferences incomplete information and different learning environments first when agents choose whether to learn or not avoiding costless information can be their optimal strategy strategic ignorance predicts a systematic bias in the agents perceived payoff second when information flows exogenously as in the literature on investment under uncertainty agents may undertake irreversible investments anticipating expected losses such decisions are taken only as a commitment device against the acquisition of future information undesirable from the current perspective furthermore several equilibria coexist the agent will succeed in avoiding investments with losses or not depending on the degree of trust on his future behavior third under learning through consumption abstention can be part of an equilibrium strategy in activities where moderate consumption if feasible would yield a higher payoff c 2000 elsevier science b v all rights reserved

learning self control this article examines how a decision maker who is only partially aware of his temptations learns about them over time in facing temptations individuals use their experience to forecast future self control problems and choose the appropriate level of commitment i demonstrate that rational learning can be perpetually partial and need not result in full sophistication the main result of this article characterizes necessary and sufficient conditions for learning to converge to full sophistication i apply this result to a consumption savings environment in which a decision maker is tempted by present bias and establish a learning theoretic justification for assuming sophistication in this setting an individual who finds himself continuously repudiating his past plans may learn to distrust his future behavior and may do something about it strotz 1955

optimal experimentation in a changing environment this paper studies optimal experimentation by a monopolist who faces an unknown demand curve subject to random changes and who maximizes profits over an infinite horizon in continuous time we show that there are two qualitatively very different regimes determined by the discount rate and the intensities of demand curve switching and the dependence of the optimal policy on these parameters is discontinuous one regime is characterized by extreme experimentation and good tracking of the prevailing demand curve the other by moderate experimentation and poor tracking moreover in the latter regime the agent eventually becomes trapped into taking actions in a strict subset of the feasible set

self fulfilling mistakes characterisation and welfare this paper incorporates self fullling mistakes into an otherwise classical decision making framework a behavioural agent makes a mistake when he fails to internalize all the consequences of his actions on himself we show that sen s axioms and fully characterize choice data consistent with behavioral agents these two axioms are weaker than sen s axioms and that fully characterize rational agents we oer a welfare benchmark that can be applied to existing behavioural economics models and show the conditions under which our welfare ranking can be used to infer welfare dominated i e mistaken choices using choice data alone

the economics of faith using an apocalyptic prophecy to elicit religious beliefs in the field abstract we model religious faith as a demand for beliefs following the logic of the pascalian wager we show how standard experimental interventions linking financial consequences to falsifiable religious statements can elicit and characterize beliefs we implemented this approach with members of a group that expected the end of the world to occur on may 21 2011 by varying monetary prizes payable before and after may 21st to our knowledge this is the first incentivized elicitation of religious beliefs ever conducted the results suggest that the members held extreme sincere beliefs that were unresponsive to experimental manipulations in price

doubts and dogmatism in conflict behavior we consider a conflict under incomplete information where two opponents fight to impose their preferred policy before the conflict one opponent the agent trusts the information received by his principal under some conditions the principal induces hawkish attitudes in the agent the agent never doubts the optimality of his preferred policy conflicts are violent and bad decisions are sometimes made under other conditions the agent believes that his opponent may be right even when all evidence indicates that the policy preferred by the opponent is certainly suboptimal in this case the agent adopts dovish attitudes and conflicts are less violent

decreasing impatience a criterion for non stationary time preference and hyperbolic discounting despite recent interest in hyperbolic discounting there has been little discussion of exactly what property of time preferences is instantiated by hyperbolic or quasi hyperbolic functional forms the paper revives an earlier proposal in prelec 1989 that the key property is prattarrow convexity of the log of the discount function which corresponds to decreasing impatience di at the level of preferences di provides a natural criterion for assessing the severity of departure from stationarity in that greater di is equivalent to more choices of dominated options in two stage decision problems as well as greater convexity of the log of the discount function inefficient choices may arise as intentional precommitments or as unintended reversals of preference by naive agents

the brain as a hierarchical organization based on recent neuroscience evidence we model the brain as a dual system organization subject to three conflicts asymmetric information temporal hori zon and incentive salience under the first and second conflicts we show that the uninformed system imposes a positive link between consumption and labor at every period furthermore decreasing impatience endogenously emerges as a consequence of these two conflicts under the first and third conflicts it becomes optimal to set a consumption cap finally we discuss the behavioral implications of these rules for choice bracketing and expense tracking and for consumption over the life cycle jel dil d74 d82 d87 d91

resource allocation in the brain when an individual performs several tasks simultaneously processing resources must be allocated to dierent brain systems to produce energy for neurons to re following the evidence from neuroscience we model the brain as an organization in which a coordinator allocates limited resources to the brain systems responsible for the dierent tasks systems are privately informed about the amount of resources necessary to perform their task and compete to obtain the resources the coordinator arbitrates the demands while satisfying the resource constraint we show that the optimal mechanism is to impose to each system with privately known needs a cap in resources that depends negatively on the amount of resources requested by the other system this allocation can be implemented using a biologically plausible mechanism finally we provide some implications of our theory i performance can be awless for suciently simple tasks ii the dynamic allocation rule exhibits inertia current allocations are increasing in past needs and iii dierent cognitive tasks are performed by dierent systems only if the tasks are suciently important

self regulation through goal setting goals are an important motivator but little is known about why and how people set them we address this issue in a model based on two stylized facts first goals serve as reference points for performance second present biased preferences create self control problems we show the power and limits of self regulation through goals goals increase an individual s motivation but only up to a certain point furthermore they are painful self disciplining devices thus greater self control problems may result in tougher goals but for a severe present bias goals either lack a motivating force or are too painful to be accepted

is it socially efficient to impose job search requirements on unemployed benefit claimants with hyperbolic preferences dellavigna and paserman 2005 and paserman 2008 have shown that imposing job search requirements on sophisticated unemployed benefit claimants with hyperbolic time preferences is pareto improving in that it raises welfare for the unemployed by limiting harmful procrastination and for employees since the enhanced search boosts the job finding rate thereby reducing the contributions required for the funding of benefits this paper demonstrates that the range of pareto improvements is much reduced if the analysis takes into account the fact that benefit claimants may not comply with the requirements especially if the monitoring technology displays imperfections induced by caseworker discretion or measurement error

self confidence and personal motivation the maintenance and enhancement of self esteem has always been identified as a fundamental human impulse philosophers writers educators and of course psychologists have all emphasized the crucial role played by self image in motivation affect and social interactions the aim of this chapter is to bring these concerns into the realm of economic analysis and show that this has important implications for how agents process information and make decisions conversely the tools of economic modelling can help shed light on a number of apparently irrational behaviours documented by psychologists

efficiency and equilibrium when preferences are time inconsistent abstract we consider an exchange economy with time inconsistent consumers whose preferences are additively separable if consumers have identical discount factors then allocations that are pareto efficient at the initial date are also renegotiation proof in an economy with a sequence of markets competitive equilibria are pareto efficient in this sense and for generic endowments only if preferences are locally homothetic

uncertainty as commitment time inconsistency of no bailout policies can create incentives for banks to take excessive risks and generate endogenous crises when the government cannot commit however at the outbreak of nancial problems usually the government is uncertain about their nature and hence it may delay intervention to learn more about them we show that intervention delay leads to strategic restraint banks endogenously restrict the riskiness of their portfolio relative to their peers in order to avoid being the worst performers and bearing the cost of such delay these novel forces help to avoid endogenous crises even when the government cannot commit we analyze the eect of government policies from the perspective of this new result

contracting with self esteem concerns it is widely accepted in social psychology that the need to maintain and enhance self esteem is a fundamental human motive we incorporate this factor into an otherwise ordinary principal agent framework and examine its impact on the optimal incentive scheme and the agent s behavior especially focusing on the form of intrapersonal strategy known as self handicapping incorporating self esteem concerns into a contracting situation yields an implication that runs counter to conventional wisdom that is the standard tradeoff between risk and incentives may break down i e more uncertainty reduces agency cost and hence results in stronger incentives in the presence of self esteem concerns this is because uncertainty mitigates the need for self handicapping this result provides a possible reason for why we do not empirically observe this tradeoff in a robust manner we present an intuitive condition for this anomaly to arise and provide a set of testable implications the present framework also reveals why and how team production can be made more profitable by providing an explanation for the increasing popularity of team production finally this simple logic is applied to identify additional implications for the hidden costs of external enforcers such as evaluation and monitoring which are discussed extensively in social psychology

strategic ignorance as a self disciplining device we analyse the decision of an agent with time inconsistent preferences to consume a good that exerts an externality on future welfare the extent of the externality is initially unknown but may be learned via a costless sampling procedure we show that when the agent cannot commit to future consumption and learning decisions incomplete learning may occur on a markov perfect equilibrium path of the resulting intra personal game in such a case each agent s incarnation stops learning for some values of the posterior distribution of beliefs and acts under self restricted information this conduct is interpreted as strategic ignorance all equilibria featuring this property strictly pareto dominate the complete learning equilibrium for any posterior distribution of beliefs

arm s length relationships we show that lowering the cost of acquisition of information that a principal obtains about the performance of an agent may make it more difficult for the principal to commit to threats hence it will weaken incentives and can therefore be counterproductive this phenomenon is explored in a framework where improving the quality of information makes a commitment not to renegotiate less credible applications to the theory of the firm are briefly explored

self control and bargaining abstract this paper examines a bargaining game with alternating proposals where sophisticated quasi hyperbolic discounters negotiate over an infinite stream of payoffs in markov perfect equilibrium payoffs are almost always unique and a small advantage in self control can result in a large advantage in payoff in subgame perfect equilibrium a multiplicity of payoffs and delay can arise despite the complete information setting markov perfect equilibria are the best subgame perfect equilibria for the agent with more self control and the worst for the agent with less self control naivete can help a player by increasing their reservation value

reforms and confidence abstract we examine the choice of economic reforms when policymakers have present biased preferences and can choose to discard information maintain confidence to mitigate distortions from excess discounting the decisions of policymakers and firms are shown to be interdependent confident policymakers carry out welfare improving reforms more often which increases the probability that firms will invest in restructuring while policymakers in different countries can be equally irrational the consequences of bounded rationality are less severe in economies with beneficial initial conditions we also examine how present biased preferences influence the choice between big bang versus gradualist reform strategies our findings help explain differences in economic reform success in various countries

information and the equity premium we determine how better information aects the average equity premium in a standard representative agent exchange economy perfect information obviously eliminates the equity premium and we show that a particular kind of information about the level of future consumption always lowers the average equity premium surprisingly information must sometimes raise the average equity premium no matter what the preferences of the representative agent information purely about the volatility either of consumption or the marginal utility of consumption raises the equity premium for a wide class of preferences moreover information can raise the average equity premium by an arbitrarily large percentage while still matching important magnitudes such as average growth and the risk free rate we consider two dierent economies a two period economy with arbitrary preferences for the representative agent and an infinite horizon economy with standard additive separable ces utility with independent growth rates through time

generalized eoq formula using a new parameter coefficient of backorder attractiveness abstract this paper introduces and examines a generalized eoq formula based on the model with linear and fixed backordering costs the new square root formula is a combination of two well known classical models the basic eoq model without stockouts and the eoq model with backorders and linear backordering costs helping to combine the two is a new parameter a fractional coefficient capturing the attractiveness of backorders the coefficient is explained and discussed the paper concludes with a brief discussion of generalizations in eoq models including epq