substitutability and the welfare effects of endowment increases abstract mas colell has conjectured that if all commodities are normal goods for a certain consumer and if the aggregate excess demand function of the other consumers satisfies the condition of gross substitutability then an increase in his initial endowments will lead to a new equilibrium allocation which will be preferred by him this excludes the immiserizing growth paradox it is shown that a sufficient condition is that commodities be also net substitutes for the consumer that has been singled out

time preferences and mortgage choice abstractmortgage decisions have important consequences for consumers lenders and the state of the economy more generally mortgage decisions are also prototypical of consumer financial choices that involve a stream of expenditures and consumption occurring across time the authors use heterogeneity in time preferences for both immediate present bias and long term outcomes to explain a sequence of mortgage decisions including mortgage choice and the decision to abandon a mortgage the authors employ an analytic model and a survey of mortgaged households augmented by zip code level house price and foreclosure data the model suggests and data confirm that consumers with greater present bias and long term discounting tend to choose mortgages that minimize up front costs however greater present bias decreases homeowners willingness to abandon a mortgage locking them into the contract long term patience increases mortgage abandonment this reversal across mortgage decisions is difficult for alternati

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

an experiment on time preference and misprediction in unpleasant tasks we experimentally investigate the time inconsistent taste for immediate gratification and future preference misprediction across 7 weeks 100 participants choose the number of unpleasant transcription tasks given various wages to complete immediately and at different future dates participants preferred 10 12 fewer tasks in the present compared to any future date leading to an estimated of 0 83 comparing predictions with actual immediate work choices provides evidence against substantial sophistication with estimates implying that participants understand no more than 24 of their present bias finally we find evidence of projection bias participants wished to complete 4 12 fewer tasks when decisions were elicited right after completing tasks rather than before

gross substitutes and immiserizing growth abstract in a pure exchange economy immiserizing growth occurs when an increase in the endowment of one trader results in a new equilibrium where that trader has lower utility this paper demonstrates that such perverse behavior is ruled out when excess demands satisfy a particular gross substitute condition

linking loss aversion and present bias with overspending behavior of tourists insights from a lab in the field experiment abstract building upon prospect theory and hyperbolic time discounting models we explore how behavioral factors influence the probability of overspending among outbound leisure travelers we construct our data in two steps first we collect demographics and travel related variables from a random sample of 314 singaporean tourists across different age groups and income levels second we conduct a field experiment to measure their risk and time preferences specifically loss aversion and present bias we then explore the link between the measured preferences to overspending behavior the findings reveal an interesting link between loss aversion present bias and traveling expenditure patterns outbound tourists with high loss aversion and high present bias are more likely to overspend finally our study also highlights the role of group identity in de biasing specifically individuals are more likely to behave according to standard economic models when making decisions in groups

demand deposit contracts and bank runs with present biased preferences abstract this paper extends the diamond dybvig model of bank runs by incorporating hyperbolic discounting the main question is how consumers myopic decisions affect the possibility of a bank run and the bank s optimal contract under hyperbolic discounting consumers deposit preferences differ from their withdrawal preferences therefore the bank needs to consider two separate preferences when designing the optimal banking contract making it more difficult to design a run safe banking contract this difference in preferences could increase the possibility of a bank run in equilibrium although the bank can design a run proof contract the ex ante welfare through banking services will be lower under hyperbolic discounting due to its tighter incentive compatibility constraint

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

job search and hyperbolic discounting structural estimation and policy evaluation this paper estimates the structural parameters of a job search model with hyperbolic discounting and endogenous search effort it estimates quantitatively the degree of hyperbolic discounting and assesses its implications for the impact of various policy interventions aimed at reducing unemployment the model is estimated using data on unemployment spells and accepted wages from the national longitudinal survey of youth nlsy the likelihood function explicitly incorporates all the restrictions implied by the optimal dynamic programming solution to the model both observed and unobserved heterogeneity are accounted for the results point to a substantial degree of hyperbolic discounting especially for low and medium wage workers the structural estimates are also used to evaluate alternative policy interventions for the unemployed estimates based on a model with exponential discounting may lead to biased inference on the economic impact of policies jel c6 c73 d90 j64 j68

coordination and contagion individual connections and peer mechanisms in a randomized field experiment abstract this paper investigates peer effects at the level of individual connections leveraging the approach to shed light on peer mechanisms in a field experiment using college freshmen we elicited best friends and offered monetary incentives for gym visits to a treated subset we find large spillovers from treated subjects to treated best friends but none from treated subjects to control best friends we also find evidence of a mechanism subjects coordinate by visiting the gym with best friends indicating that the intervention harnesses complementarities in utility or commitment mechanisms results highlight subtle peer effects and mechanisms that often go undetected

investment under uncertainty and time inconsistent preferences abstract while standard real options models assume that agents possess a constant rate of time preference there is substantial evidence that agents are impatient about choices in the short term but are patient when choosing between long term alternatives we extend the real options framework to model the investment timing decisions of entrepreneurs with time inconsistent preferences the impact on investment timing depends on such factors as whether entrepreneurs are sophisticated or naive in their expectations regarding their future time inconsistent behavior and whether the payoff from investment occurs all at once or over time the model is extended to the case of a competitive equilibrium

time tradeoff sequences for analyzing discounting and time inconsistency this paper introduces time tradeoff tto sequences as a general tool to analyze intertemporal choice we give several applications for empirical purposes we can measure discount functions without requiring any measurement of or assumption about utility we can quantitatively measure time inconsistencies and simplify their qualitative tests tto sequences can be administered and analyzed very easily using only pencil and paper for theoretical purposes we use tto sequences to axiomatize quasi hyperbolic discount functions we demonstrate the feasibility of measuring tto sequences in an experiment in which we tested the axiomatizations our findings suggest rejections of several currently popular discount functions and call for the development of new ones it is especially desirable that such discount functions can accommodate increasing impatience

things that go bump in the mind how behavioral economics could invigorate marketing abstract in their article ho lim and camerer 2006 lead by example they identify principles from behavioral economics and rather than simply exhort their readers to pay attention they actually produce impressive demonstrations of how these principles can be applied to substantive marketing problems it is easy to argue that these ideas are important but it is more difficult to demonstrate that importance implicitly ho lim and camerer send a message of encouragement behaviorally realistic assumptions are not problems to be ignored they are opportunities formal models can capture psychologically realistic concerns together they should be the grist for the next generation of marketing mills

holding on for too long an experimental study on inertia in entrepreneurs and non entrepreneurs disinvestment choices abstract disinvestment in the sense of project termination and liquidation of assets including the cession of a venture is an important realm of entrepreneurial decision making this study presents the results of an experimental investigation modeling the choice to disinvest as a dynamic problem of optimal stopping in which the patterns of decisions are analyzed with entrepreneurs and non entrepreneurs our experimental results reject the standard net present value approach as an account of observed behavior instead most individuals seem to understand the value of waiting their choices are weakly related to the disinvestment triggers derived from a formal optimal stopping benchmark consistent with real options reasoning we also observe a pronounced psychological inertia i e most individuals hold on to a losing project for even longer than real options reasoning would predict the study provides evidence for entrepreneurs and non entrepreneurs being quite similar in their behavior

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

risk and rationalization the role of affect and cognitive dissonance for sexual risk taking this paper analyzes the mechanisms underlying excessive sexual risk taking in the presence of hiv drawing ideas from psychology on decision making processes and risk evaluation a theoretical mode

implications of hyperbolic discounting for optimal pricing and scheduling of unpleasant services that generate future benefits people tend to lack the self control to undergo an unpleasant service that would generate future benefits this paper derives a tractable quasi hyperbolic discounting model of that behavioral tendency for a queueing system in which service time is short relative to the time horizon for its benefits planning in advance people may naively overestimate their self control this paper shows how customers lack of self control and naivete affect optimal pricing and scheduling the welfare maximizing usage fee and the revenue maximizing usage fee decrease with customers lack of self control charging for subscription in addition to or instead of per use increases revenue especially when subscribers are naive if the manager can charge for subscription or per use subscription is optimal for revenue maximization whereas usage based pricing is optimal for welfare maximization if customers are heterogeneous in their self control and naivete priority scheduling can dramatically increase welfare and revenu

tax policy and present biased preferences paternalism under international capital mobility this paper deals with tax policy responses to quasi hyperbolic discounting earlier research on optimal paternalism typically abstracts from capital mobility if capital is mobile between countries it may no longer be possible for national governments to control domestic savings via capital taxation as in a closed economy in this paper we take a broad perspective on public policy responses to self control problems by showing how these responses vary i between closed and open economies ii between small open and large open economies and iii depending on whether or not both source based and residence based capital taxes can be used

sin licenses revisited abstract we analyze personalized regulation in the form of sin licenses to correct the distortion in the consumption of a harmful good when consumers suffer from varying degrees of self control problems we take into account preference uncertainty which generates a trade off between flexibility and commitment provided by sin licenses we also account for the possibility that consumers may trade the sin good in a secondary market which partially erodes the commitment power of sin licenses we show that if sophisticated consumers are allowed to choose any general individualized pricing scheme for sin goods they will choose a system of sin licenses nevertheless sin licenses do not implement the social optimum in our general setting we derive a simple criterion for assessing whether switching to a system of sin licenses improves welfare over linear sin taxes

what are the headwaters of formal savings experimental evidence from sri lanka the world s poor are seeing a rapid expansion in access to formal savings accounts what is the source of savings when households are connected to a formal account we combine a high frequency panel survey spanning two and a half years with an experiment in which a sri lankan bank used mobile point of service pos terminals to collect deposits directly from households each week we find that the headwaters of formal savings lie in sacrificed leisure time households work more and improved savings options generate an increase in labour effort in both self employment and in the wage market the results suggest that the labour allocation channel is an important mechanism linking savings opportunities to income

repeated moral hazard with a time inconsistent agent abstract i consider a repeated principal agent model with moral hazard in which the agent has preferences which are widely used to capture time inconsistency i analyze the case where the agent is sophisticated in the sense that he is fully aware of his inconsistent discounting i characterize the optimal wage scheme for such an agent and compare it to time consistent benchmarks the marginal cost of rewarding the agent for high output today exceeds the marginal benefit of delaying these rewards until tomorrow in this sense the principal does not smooth the agent s rewards over time when facing a sophisticated agent it is optimal for the principal to reward the good performance more and punish the bad performance more in the early period relative to the optimal wage scheme for a time consistent agent

a dual self model of impulse control we propose that a simple dual self model gives a unified explanation for several empirical regularities including the apparent time inconsistency that has motivated models of quasi hyperbolic discounting and rabin s paradox of risk aversion in the large and small the model also implies that self control costs imply excess delay as in the o donoghue and rabin models of quasi hyperbolic utility and it explains experimental evidence that increased cognitive load makes temptations harder to resist the base version of our model is consistent with the gul pesendorfer axioms but we argue that these axioms must be relaxed to account for the effect of cognitive load

an experimental test of the effect of negative social norms on energy efficient investments abstract energy efficiency is an important economic and environmental concern and likewise the correction of current wasteful energy practices we document widespread tire pressure neglect three quarters of drivers waste gas driving on underinflated tires negative descriptive social norms are one potential cause but have not been tested in high neglect environments where those norms are widespread this confounds the mechanism are these norms signals of private value to consumers or do they imply standards for social judgment from others we conducted a field experiment at gas stations in chicago our intervention included treatments with information about tire pressure neglect promotions in the form of price reductions from 0 50 to free a descriptive norm of behavior and help in the form of air pump assistance the treatments are designed to provide the ability to consider four potential underlying drivers information monetary cost social norms and social pressure treatments that only included information were ineffective despite average fuel savings of 10 51 but small promotions had substantial impacts when the air pump price was free the social norm discouraged inflation however when the research assistant offered help inflation rates were buoyed by the social norm these results highlight the importance of incentives over mere information treatments and offer a new perspective on how information and monetary levers can influence decision making in the presence of negative social norms

the political economy of sin taxes we analyse the determination of taxes on harmful goods when consumers have self control problems we show that under reasonable assumptions the socially optimal corrective tax exceeds the average distortion caused by self control problems further we analyse how individuals with self control problems would vote on taxes on the consumption of harmful goods and show that the equilibrium tax is typically below the socially optimal level when the redistributive effects of sin taxes are taken into account the difference between the social optimum and equilibrium is small at low levels of harm but becomes more pronounced when consumption is more harmful

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

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

industry effects and appropriability measures in the stock market s valuation of r d and patents this paper examines the stock market s valuation of a firm s innovative activity we estimate the market s relative valuation of firms tangible and intangible assets focusing on knowledge capital in the form of accumulated stocks of r d and patents we tried to improve upon our estimates of the stock market s valuation of knowledge capital embodied in such stocks by bringing in measures of the appropriability environment facing a firm from the yale survey on industrial research and development the responses to survey questions about the effectiveness of patents as a mechanism for protecting the returns from innovation turn out to be of some use there is evidence of an interaction between industry level measures of the effectiveness of patents and the market s valuation of a firm s past r d and patenting performance as well as its current r d moves we find no evidence however that other appropriability mechanisms differ enough across industries to leave measurable traces in our data the structure of the yale survey makes it possible to estimate the sampling error in the appropriability measures derived from it this information was used by us in an errors in variables context but with little success in the absence of r d variables our estimates imply that a two standard deviation increase in our index of patent effectiveness would raise the value of a patent held by our average firm from 0 4 million to 1 0 million when r d variables are introduced into the equations the patents variables become insignificant r d expenditures are a better measure of input to the innovative function of firms than patents are of its output but we estimate that the same experiment would induce changes in q of between 10 and 27 percent for the average firm approximately doubling the market s valuation of this kind of capital this abstract was borrowed from another version of this item

why don t present biased agents make commitments since self control problems were first analyzed by strotz 1956 researchers have frequently emphasized that dynamically inconsistent preferences such as present biased preferences engender a demand for commitment 1 here and throughout this paper i define commitment as a pure restriction on one s choice set with no confounding extrinsic benefits such as tax deferral in a savings plan or intra household strategic advantages 2 commitment is a problematic prediction since we see so little of it in the economy researchers have been able to induce some experimental participants to commit themselves e g ashraf karlan and yin 2006 but across a growing literature it is usually the case that only a minority of experimental subjects choose to tie their own hands 3 moreover subjects rarely express a willingness to pay a significant price to have their choice set reduced 4 most importantly very little commitment has arisen in the marketplace without the direct involvement of behavioral economists or their students 5 in the current paper i quantitatively explore the reasons for the missing commitment extending the present biased procrastination model in carroll et al 2009 i show how equilibrium commitment is related to i the standard deviation of the opportunity cost of time ii the cost of delay iii the degree of partial naivete and iv the direct cost of commitment my quantitative analysis implies that commitment is not a robust implication of present biased discounting once one calibrates the model commitment vanishes in many leading cases in other words the benefits of commitment as perceived by the present biased agent are frequently overwhelmed by the costs of commitment this does not imply that we should never expect to see commitment rather in some natural settings like the one studied here commitment is a hothouse flower that survives only under special parameterizations a demand for commitment is a special case rather than the general case section i explains the basic model with sophisticated beliefs and solves it under the assumption that commitment is not available section ii introduces a free commitment technology and characterizes the cases under which commitment will be chosen section iii extends that analysis under the assumption of partial naivete section iv completes the analysis by studying the case in which commitment has a direct cost i e a hassle cost or a market price for setting up a commitment contract section v concludes an associated nber working paper contains proofs

rain emotions and voting for the status quo abstract do emotions affect the decision between change and the status quo we exploit exogenous variation in emotions caused by rain and analyze data on more than 870 000 municipal vote outcomes in switzerland to address this question the empirical tests are based on administrative ballot outcomes and individual postvote survey data we find that rain decreases the share of votes for political change our robustness checks suggest that this finding is not driven by changes in the composition of the electorate and changes in information acquisition in addition we provide evidence that rain might have altered the outcome of several high stake votes we discuss the psychological mechanism and document that rain reduces the willingness to take risks a pattern that is consistent with the observed reduction in the support for change

the welfare economics of default options in 401 k plans default contribution rates for 401 k pension plans powerfully influence choices potential causes include opt out costs procrastination inattention and psychological anchoring using realistically parameterized models we show how the optimal default the magnitude of the welfare effects and the degree of normative ambiguity depend on the behavioral model the scope of the choice domain deemed welfare relevant the use of penalties for passive choice and other 401 k plan features while results are theory specific our analysis provides reasonably robust justifications for setting the default either at the highest contribution rate matched by the employer or contrary to common wisdom at zero jel d14 d91 j26 j32

exploring the trade off between immediate gratification and delayed network externalities in the consumption of information goods abstract our motivation for this paper originates from recent advances in consumption and payment technologies available for mobile commerce ubiquitous computing is enabling consumers worldwide to reach digital content and services whenever and wherever they request it this capability further fuels impatience in consumption of such information goods we model such consumer behavior using a hyperbolic discounting approach a subset of these products especially software also inherit delayed network externalities as part of their consumption characteristics this builds a tension between decision to consume now or to expedite consumption we build a stylized model to assess the impact of immediate gratification on the profit maximizing behavior of a monopolist firm which produces an information good with network externalities we find that serving impatient consumers is always profitable for a monopolist for lower levels of network externalities the monopolist can increase first period and decrease second period prices in equilibrium as network externalities effect increases prices converge to the traditional market with exponential discounters levels

modeling the psychology of consumer and firm behavior with behavioral economics abstract marketing is an applied science that tries to explain and influence how firms and consumers behave in markets marketing models are usually applications of standard economic theories which rely on strong assumptions of rationality of consumers and firms behavioral economics explores the implications of the limits of rationality with the goal of making economic theories more plausible by explaining and predicting behavior more accurately while maintaining formal power this article reviews six behavioral economics models that are useful to marketing three models generalize standard preference structures to allow for sensitivity to reference points and loss aversion social preferences toward outcomes of others and preference for instant gratification the other three models generalize the concept of game theoretic equilibrium allowing decision makers to make mistakes encounter limits on the depth of strategic thinking and equilibrate by learning from feedback the authors also discuss a sp

inferior products and profitable deception we analyse conditions facilitating profitable deception in a simple model of a competitive retail market firms selling homogenous products set anticipated prices that consumers understand and additional prices that naive consumers ignore unless revealed to them by a firm where we assume that there is a binding floor on the anticipated prices our main results establish that bad products those with lower social surplus than an alternative tend to be more reliably profitable than good products specifically 1 in a market with a single socially valuable product and sufficiently many firms a deceptive equilibrium in which firms hide additional prices does not exist and firms make zero profits but perversely 2 if the product is socially wasteful then a profitable deceptive equilibrium always exists furthermore 3 in a market with multiple products since a superior product both diverts sophisticated consumers and renders an inferior product socially wasteful in comparison it guarantees that firms can profitably sell the inferior product by deceiving consumers we apply our framework to the mutual fund and credit card markets arguing that it explains a number of empirical findings regarding these industries

choice and procrastination author s o donoghue ted rabin matthew abstract recent models of procrastination due to self control problems assume that a procrastinator considers just one option and is unaware of her self control problems we develop a model where a person chooses from a menu of options and is partially aware of her self control problems this menu model replicates earlier results and generates new ones a person might forego completing an attractive option because she plans to complete a more attractive but never to be completed option hence providing a non procrastinator additional options can induce procrastination and a person may procrastinate worse pursuing important goals than unimportant ones

futile attempts at self control we investigate costly yet futile attempts at self control when consumption of a harmful product has a binary breakdown no breakdown nature and individuals tend to underestimate their need for self control considering time inconsistent preferences as well as temptation disutility we show that becoming more sophisticated can decrease welfare and investigate what kind of mistaken beliefs lead to low welfare with time inconsistent preferences being close to perfectly understanding one s preferences but assigning zero probability to true preferences induces the worst outcome jel d03 d11 d91

patenting by manufacturing firms in india its production and impact this paper attempts to simultaneously study the production and impact of patenting in a less developed country using panel firm level data for the period 1975 79 for india the authors results suggest that despite the limited protection of intellectual property rights in india patenting is associated with a significant increase in total factor productivity growth at the firm level after controlling for unobserved fixed firm effects r d manpower appears to be the only input that significantly influences the probability of patenting copyright 1989 by blackwell publishing ltd

technology production and technology purchase in indian industry an econometric analysis an econometric analysis of the decisions of indian firms to invest in their own r d and to purchase technology through licensing agreements is undertaken these decisions are treated as being jointly determined by characteristics of indian industries indian prices and the supply of purchasable foreign technology the study finds that industrial structure firm size and public and private ownership influence the mix of own r d and technology purchase the pool of purchasable foreign technology indices both increased adaptive r d and technology purchase by indian firms copyright 1989 by mit press

judging experimental evidence on dynamic inconsistency abstract this article briefly summarizes and judges recent experimental developments exploring the predictions of dynamically inconsistent models an opinion is provided as to how the literature ma

the endowment effect and intertemporal choice a laboratory investigation we present a laboratory investigation of intertemporal choice i e elicited discount rates allowing for the influence of the endowment effect consistent with the previous literature we hypothesize that the endowment effect in an intertemporal choice setting results in substantially higher discount rates relative to when individuals treat the resources in question as found money our results support this hypothesis and our experimental design provides a new protocol for conducting choice experiments wherein the endowment effect is an important determinant of behaviour l effet de dotation et le choix inter temporel une analyse en laboratoire on presente une analyse en laboratoire de choix inter temporels i e de taux d escompte permettant a l effet de dotation de jouer selon les conventions dans la litterature specialisee on fait l hypothese que l effet de dotation dans un contexte de choix inter temporel resulte en des taux d escompte substantiellement plus eleves que quand les individus traitent les ressources comme de la monnaie trouvee les resultats supportent l hypothese et le design de l experience fournit un protocole pour mener des experiences de choix ou l effet de dotation est un determinant important du comportement

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

choosing for others abstractexperiments conducted in the us and france were used to study how individuals make trade offs between health and taste for themselves and others when someone receives a choice made for them that differs from their preference they experience a welfare loss at least in the short term we measure the empirical magnitude of this loss and suggest it play a role in assessing the desirability of paternalistic policies motivated by behavioural economics we show that the welfare loss changes with the provision of new information and the impact of this information differs for the two countries

goal setting and energy conservation abstract this paper develops a theoretical model of consumer demand for an energy conservation program that involves non binding self set goals we present evidence from a northern illinois goal setting program aimed at reducing residential electricity consumption which is difficult to reconcile with standard preferences and is broadly consistent with a model of present biased consumers with reference dependent preferences we find that the need for commitment is correlated with program adoption higher pre adoption consumption and lower responsiveness to goals consumers choosing realistic goals persistently save substantially more achieving savings of nearly 11 than those choosing very low or unrealistically high goals

consume now or later time inconsistency collective choice and revealed preference this paper develops a revealed preference methodology for exploring whether time inconsistencies in household choice are the product of nonstationarities at the individual level or the result of individual heterogeneity and renegotiation within the collective unit an empirical application to household level microdata highlights that an explicit recognition of the collective nature of choice allows the vast majority of household behaviour to be rationalised by theory that assumes preference stationarity at the individual level for our particular short panel data set simply permitting limited intrahousehold heterogeneity in time preferences allows the choices of 98 4 of the sample to be rationalised by a model that assumes exponential discounting at the individual level we also find that couples characterized by lower divergence in spousal discount rates are older more likely to have children and wealthier which we take as indications of experiencing higher match quality

immiserizing growth in a many commodity setting abstract mathematical economists have recently shed new light on the phenomenon of immiserizing growth independently of the trade theoretic literature on this subject the present paper aims to build a beidge between the two literatures in particular mantel s set of sufficient conditions for non immiserizing growth is extended to a trade theoretic model with a smooth production frontier and bhagwati s trade theoretic set of sufficient conditions to an n commodity framework it is shown that the condition of normality in consumption in the former substitutes for the stability condition in the latter the concept of the semi compensated substitutability condition plays an essential role in our analysis

predicting retirement savings using survey measures of exponential growth bias and present bias in a nationally representative sample we predict retirement savings using survey based elicitations of exponential growth bias egb and present bias pb we find that egb the tendency to neglect compounding and pb the tendency to value the present over the future are highly significant and economically meaningful predictors of retirement savings these relationships hold controlling for cognitive ability financial literacy and a rich set of demographic controls we address measurement error as a potential confound and explore mechanisms through which these biases may operate back of the envelope calculations suggest that eliminating egb and pb would increase retirement savings by approximately 12 percent

exploiting naivete about self control in the credit market we develop a model of the credit market where competitive lenders oer long term contracts specifying a non linear schedule of possible repayment schedules to borrowers who may dier both in their taste for immediate gratication and their prior beliefs about that taste the equilibrium contract to a borrower with given beliefs is discontinuous it features an advantageous option involving fast repayment and a penalty for deviating and repaying later these predictions seem to resemble some salient features of many credit card and mortgage contracts for fully sophisticated borrowers the discontinuity acts as a commitment device and yields fast repayment but all other borrowers even those with an arbitrarily small amount of naivete end up delaying repayment despite the penalty and receive little benet from commitment furthermore because they believe they will repay early they underestimate the cost of credit and hence borrow too much non sophisticated borrowers cross subsidize sophisticated borrowers while sophisticated borrowers discipline rms by preventing very exploitative contracts we identify natural conditions under which the above results obtain even if

who is a passive saver under opt in and auto enrollment abstract defaults have been shown to have a powerful effect on retirement saving behavior yet there is limited research on who is most affected by defaults and whether this varies based on features of the choice environment using administrative data on employer sponsored retirement accounts linked to survey data we estimate the relationship between retirement saving choices and individual characteristics long term discounting present bias financial literacy and exponential growth bias under two distinct choice environments an opt in regime and an auto enrollment regime consistent with our conceptual model we find that the determinants of following the default and contribution behavior are regime specific under the opt in regime financial literacy plays an important role in predicting total contributions active saving choices and maxing out contributions in the tax preferred account in contrast under the auto enrollment regime present bias is the most significant behavioral predictor of contribution behavior a causal interpretation of the estimates suggests that auto enrollment increases saving primarily among those with low financial literacy

patience self control and the demand for commitment evidence from a large scale field experiment patience and self control are important non cognitive skills that are associated with favorable educational economic and social outcomes this paper provides empirical evidence to inform discussions on possible educational interventions to make children more forward looking or less present biased by putting forward a way to identify self control problems in children and exploring the role of commitment devices in mitigating such problems we report results from an experiment that measures planned allocations the demand for a commitment device and actual choices in the context of chocolate consumption over two days the experiment is conducted as part of a large field study on children s preferences which allows us to correlate behavior with variables related to the subjects socio economic background and educational environment as well as preference parameters elicited through other tasks and surveys we find a large demand for commitment among children in addition we identify important correlations between patience commitment demand and time inconsistency as well as student specific personality traits and outcomes such as school success