vouchers public school response and the role of incentives evidence from florida i introduction the concern over public school performance in the last two decades has pushed public school reform to the forefront of policy debate in the united states school accountability and school choice and especially vouchers are among the most hotly debated instruments of public school reform understanding the behavior and response of public schools facing these initiatives is key to an effective policy design this paper takes an important step forward in that direction by analyzing public school behavior under the florida voucher program the florida voucher program known as the opportunity scholarship program is unique in that it embeds a voucher program within a school accountability system moreover the federal no child left behind nclb act is similar to and largely modeled after the florida program which makes the latter all the more interesting and relevant much of the literature studying the effect of voucher programs on public schools has looked at the effect on student and mean school scores in contrast this study tries to go inside the black box to investigate some of the ways in which schools facing the voucher program behaved in the first 3 years after the program 1 exploiting the institutional details of the florida program during this period it analyzes the incentives built into the system and investigates public school behavior and response facing these incentives the florida voucher program written into law in june 1999 made all students of a school eligible for vouchers to move to private or higher performing public schools if the school got two f grades in a period of 4 years thus the program can be looked upon as a threat of voucher program schools getting an f grade for the first time were directly threatened by vouchers but vouchers were implemented only if they got another f grade in the next 3 years vouchers were always associated with a loss in revenue and also media publicity and visibility moreover the f grade being the lowest performing grade was likely associated with shame and stigma therefore the threatened schools had a strong incentive to try to avoid the second f 2 this paper studies some alternative ways in which the threatened schools responded facing the incentives built into the system under the 1999 florida grading criteria certain percentages of a school s students had to score above some specified cutoffs on the score scale for it to escape the second f therefore the threatened schools had an incentive to focus more on students expected to score just below these high stakes cutoffs rather than equally on all students did this take place in practice second to escape an f grade the schools needed to pass the minimum criteria in only one of the three subject areas of reading math and writing did this induce the threatened schools to concentrate more on one subject rather than equally on all if so which subject area did the schools choose to concentrate on one alternative would be to concentrate on the subject area closest to the cutoff 3 but subject areas differ in the extent of difficulties so it is not immediately obvious that it is easiest to pass the cutoff in the subject area closest to the cutoff rather schools are likely to weigh the extent of difficulties of the different subjects and their distances from the cutoffs and choose the subject that is least costly to pass the cutoff in addition to analyzing the above questions this study also tries to look at a broader picture if the threatened schools concentrated on students expected to score just below the high stakes cutoffs did their improvements come at the expense of higher performing ones using highly disaggregated school level florida data from 1993 through 2002 and a difference in differences analysis as well as a regression discontinuity rd analysis i investigate the above issues the schools that received the first f grade in 1999 were directly threatened and hence constitute my treated group of schools

the adoption of reduced tillage the role of human capital and other variables this paper presents a model of adoption behavior and explains differences econometrically in farmers decisions to adopt reduced tillage practices and in the efficiency of farmers adoption decisions the empirical results obtained from microdata show that the probability of adopting reduced tillage in corn enterprises differs widely across farms and depends on soil characteristics cropping systems and size of farming operation the results also show that farmers schooling enhances the efficiency of the adoption decision

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

non transitive choice event splitting effects or framing effects recent studies have examined possible causes of the robust empirical failure of the transitivity axiom of expected utility theory by pitting regret aversion against alternative explanations such as event splitting effects these tests show that cycles replicate when the latter are controlled but are sensitive to changes in problem representation the control for event splitting effects however does not rule out their contribution to cyclical choices in some circumstances an experiment is reported which investigates this possibility cyclical choices are observed that cannot be due to event splitting effects but appear attributable to within event and between act evaluations of decision problems plus framing effects

the effect of charter competition on unionized district revenues and resource allocation abstract this study examines the impact of competition due to charter school entry on the level of revenues and the composition of expenditures within traditional public school districts tpsds i leverage a policy change affecting the location and timing of charter entry to account for endogenous charter competition tpsds respond to competition by allocating resources away from instructional and other expenditures toward new capital construction using teacher contracts i show that collectively bargained salaries are largely unresponsive to competition and that declines in instructional spending are primarily due to decreases in the number of employed teachers competition depresses appraised housing valuations in turn causing tpsds to lose property tax revenues resulting in a decline in overall spending

randomization devices and the elicitation of ambiguity averse preferences abstract in random incentive mechanisms agents choose from multiple problems and a randomization device selects a single problem to determine payment agents are assumed to act as if they faced each problem on its own while this approach is valid when agents are expected utility maximizers ambiguity averse agents may use the randomization device to hedge and thereby contaminate the data

learning about a new technology pineapple in ghana this paper investigates the role of social learning in the diffusion of a new agri cultural technology in ghana we use unique data on farmers communication patterns to define each individual s information neighborhood conditional on many potentially confounding variables we find evidence that farmers adjust their inputs to align with those of their information neighbors who were surpris ingly successful in previous periods the relationship of these input adjustments to experience further indicates the presence of social learning in addition applying the same method to input choices for another crop of known technol ogy correctly indicates an absence of social learning effects jel d83 013 033 q16

life cycle consumption and hyperbolic discount functions abstract studies of animal and human behavior suggest that discount functions are approximately hyperbolic ainslie picoeconomics 1992 hyperbolic models explain a wide range of empirical anomalies including 1 missing precautionary savings effects 2 incongruence between the elasticity of intertemporal substitution and the inverse of the coefficient of relative risk aversion 3 consumption discontinuities at retirement 4 variation in patience over the life cycle 5 consumer self reports of undersaving 6 disproportionate retirement accumulation in illiquid assets 7 asset specific marginal propensities to consume and 8 declining national savings rates in developed countries hyperbolic models also provide a new framework for analyzing the welfare gains that come from pro saving policies like social security and tax deferred retirement accounts

does the preference reversal phenomenon necessarily contradict the independence axiom one of the most puzzling paradoxes in decision theory is the preference reversal phenomenon this phenomenon seems to contradict the transitivity axiom for a long time one of the cornerstones of utility theory this paradox is established whenever a decision maker prefers lottery x to lottery y but is willing to put a lower selling price on x than on y such experiments first reported by harold lindman 1971 and sarah lichtenstein and paul slovic 1971 were repeated by david grether and charles plott 1979 werner pommerehne et al 1982 and robert reilly 1982 although the later researchers improved the mechanism through which the selling price emerges they all found systematic reversals a new approach to this problem was developed by charles holt 1986 and edi karni and zvi safra 1987 from two different starting points these authors showed that the preference reversal phenomenon does not necessarily prove a violation of the transitivity axiom as it may contradict the independence axiom this implies that people do not maximize expected utility but in that case the preference reversal phenomenon becomes just another evidence against expected utility theory but not against the transitivity axiom these results have their own disadvantages although the independence axiom is not as fundamental as transitivity it is nevertheless very appealing on normative grounds of course the preference reversal phenomenon necessarily contradicts at least one of the assumptions of expected utility theory but empirical evidence shows that despite its normative appeal violations of the reduction of compound lotteries axiom may happen see for example joshua ronen 1971 and doug snowball and clif brown 1979 in this paper i therefore suggest a decision mechanism for the preference reversals lotteries which is transitive and satisfies the independence axiom but not the reduction axiom

gentrification and failing schools the unintended consequences of school choice under nclb we examine the housing market and residential mobility changes that occur soon after a title 1 school fails to achieve adequate yearly progress ayp in charlotte north carolina students within attendance zones of failing schools are given priority in lotteries for oversubscribed schools potentially increasing the attractiveness of living in a failing school attendance zone we find that housing prices home buyer income and the probability of attending a nonassigned school increase in the highest quality neighborhoods within failing school attendance zones our results are driven largely by the behavior of new residents

discount rates and credit markets theory and evidence from rural india three models of credit markets 1 the permanent income model 2 upward sloping credit supply to individual borrowers and 3 constrained credit due to imperfect enforcement are tested using credit market data and an experimental study of individuals discount rates in south india the permanent income model is rejected by both the discount rate and the credit market data the discount rate data are consistent with either of the other two models while the credit market data are consistent with a combination of these two models other explanations are found to be insufficient to explain the results of this study

preference reversals and the independence axiom of all of the paradoxical patterns of behavior reported in laboratory experiments one of the most perplexing for decision theorists is the preference reversal phenomenon a subject in a preference reversal experiment is typically given a choice between a lottery with a high probability of winning a modest amount of money a p bet and a lottery with a low probability of winning a large amount of money a bet the lowest amount of money for which the subject would willingly sell either of these lotteries is also elicited the most common reversal is for a subject to choose the p bet over the bet but to put a higher selling price on the bet preference reversals were first reported by harold lindman 1971 and sarah lichtenstein and paul slovic 1971 in discussing the psychologists discovery of such reversals david grether and charles plott remark the inconsistency is deeper than mere lack of transitivity or even stochastic transitivity it suggests that no optimization principles of any sort lie behind even the simplest of human choices 1979 p 623 this paper offers a simple alternative explanation of documented preference reversals an explanation that does not require the abandonment of the transitivity assumption

social networks and technology adoption in northern mozambique despite their potentially strong impact on poverty agricultural innovations are often adopted slowly using a unique household dataset on sunflower adoption in mozambique we analyse whether and how individual adoption decisions depend upon the choices of others in the same social networks since farmers anticipate that they will share information with others we expect farmers to be more likely to adopt when they know many other adopters dynamic considerations however suggest that farmers who know many adopters might strategically delay adoption to free ride on the information gathered by others we present empirical evidence that shows that the relationship between the probability of adoption and the number of known adopters is shaped as an inverse u in line with information sharing the network effect is stronger for farmers who report discussing agriculture with others the data contains information which is needed to ameliorate the identification issues that commonly arise in this context in particular social networks are precisely identified and in addition we can control for village heterogeneity and endogenous group formation

incentives and responses under no child left behind credible threats and the role of competition abstract nclb mandated the institution of adequate yearly progress ayp objectives and schools are assigned an ayp pass fail based on performance in these objectives ayp fail status is associated with negative publicity and often sanctions using data from wisconsin and alternate regression discontinuity designs i study the incentives and responses of schools that failed ayp once math induced ayp failures showed strong improvements in math while reading induced ayp failures showed marked improvements in reading consistent with incentives these schools showed no positive effect in other high stakes objectives in contrast test participation failures showed no effect in either high stakes reading or math while they showed some evidence of positive though not statistically significant effects in test participation improvements in reading are associated with parallel effects in low stakes language arts possibly due to spillover effects while there is no evidence of effects in low stakes science or social studies nor is there evidence of effects on graduation rates performance in low stakes grades suffered and so did performance in weaker subgroups in spite of their inclusion in ayp computations there is evidence of focus on marginal students around high stakes cutoffs in subject areas ayp failed schools improved in but this did not come at the expense of ends credibility of threat mattered ayp failed schools that faced more competition responded considerably more strongly in the objectives they had incentives in

consumer valuation of modularly upgradeable products although product modularity is often advocated as a design strategy in the operations management literature little is known about how consumers respond to modular products in this research we undertake several experiments to explore consumer response to modularly upgradeable products in settings featuring technological change we consider both the initial product choice between a modularly upgradeable product and an integral one and the subsequent upgrade decision replacement of a module versus full product replacement first we show that consumers tend to discount the cost savings associated with modular upgrades excessively insufficiently when the time between the initial purchase and the upgrade is short long this suggests that modular upgradability as a product feature has higher profit potential for slowly rather than rapidly improving products second we observe a preference reversal between the initial purchase and the point of upgrade at the point of initial purchase people foresee making a full product replacement in the future yet when faced with the actual upgrade decision they are more likely to revert to modular upgrades finally we discuss and test several pricing and product design strategies that the firm can use to respond to these cognitive biases this paper was accepted by kamalini ramdas entrepreneurship and innovation

an economic model of soil conservation by introducing soil depth and soil loss into a simple model of agricultural production this paper seeks to determine when the private path of erosion differs from the socially optimal path considering the depletion of soil only and abstracting from the environmental disruption caused by erosion the paper argues that under most institutional arrangements the social and private rates of erosion are the same the paper concludes that public policy should be directed toward reducing erosion only when it leads to significant pollution externalities

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

testing crime and punishment abstract the recent passage of the no child left behind act of 2001 solidified a national trend toward increased student testing for the purpose of evaluating public schools this new environment for schools provides strong incentives for schools to alter the ways in which they deliver educational services this paper investigates whether schools may employ discipline for misbehavior as a tool to bolster aggregate test performance to do so this paper utilizes an extraordinary data set constructed from the school district administrative records of a subset of the school districts in florida during the 4 years surrounding the introduction of a high stakes testing regime it compares the suspensions of students involved in each of the 41 803 incidents in which two students were suspended and where prior test scores for both students are observed while schools always tend to assign harsher punishments to low performing students than to high performing students throughout the year this gap grows substantially during the testing window moreover this testing window related gap is only observed for students in testing grades in summary schools apparently act on the incentive to re shape the testing pool through selective discipline in response to accountability pressures

a comparison of the discounted utility model and hyperbolic discounting models in the case of social and private intertemporal preferences for health whilst there is substantial evidence that hyperbolic discounting models describe intertemporal preferences for monetary outcomes better than the discounted utility du model there is only very limited evidence in the context of health outcomes this study elicits private and social intertemporal preferences for non fatal changes in health specific functional forms of the du model and three hyperbolic models are fitted the results show that the stationarity axiom is violated and that the hyperbolic models fit the data better than the du model intertemporal preferences for private and social decisions are found to be very similar

selection into auctions for risky and ambiguous prospects we study experimentally the selection into first price sealed bid auctions for a risky or an ambiguous prospect most subjects chose to submit a bid for the risky prospect leading to thinner markets for the ambiguous prospect transaction prices for both prospects were equal although subjects expected the ambiguous markets to be smaller evidence of a positive correlation between risk and ambiguity aversion suggests that the ambiguous markets were populated by relatively risk tolerant bidders a control experiment with selection in a simple choice task shows that subjects correctly anticipate the effects of selection on market size and risk attitudes jel c91 d44 d81

incentive aligned conjoint analysis abstract because most conjoint studies are conducted in hypothetical situations with no consumption consequences for the participants the extent to which the studies are able to uncover true consumer preference structures is questionable experimental economics literature with its emphasis on incentive alignment and hypothetical bias suggests that more realistic incentive aligned studies result in stronger out of sample predictive performance of actual purchase behaviors and provide better estimates of consumer preference structures than do hypothetical studies to test this hypothesis the authors design an experiment with conventional hypothetical conditions and parallel incentive aligned counterparts using chinese dinner specials as the context the authors conduct a field experiment in a chinese restaurant during dinnertime the results provide strong evidence in favor of incentive aligned choice conjoint analysis in that incentive aligned choice conjoint outperforms hypothetical choice conjo

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

market experience eliminates some anomalies and creates new ones we report two experiments which investigate whether experience of decision making in repeated markets purges behaviour of preference reversals we investigate two behavioural mechanisms that may be shaping bids in repeated auctions a tendency to adjust bids towards previously observed market prices and a tendency to reduce bids following bad market outcomes we find little support for the former but strong support for the latter also whilst just enough market exposure eliminates the typical preference reversal phenomenon continued exposure fosters the mirror image anomaly therefore although market experience shapes behaviour in our experiments it does not generally promote consistency with standard preference theory

actions versus prospects the effect of problem representation on regret suppose that you must choose between lotteries s safer and r riskier shown in the top half of figure 1 there are 100 possible states of the world and the consequence of s and r are indicated for each state the states of the world with the consequence win 8 000 are separate from the states with the consequence win 20 000 you may find s less appealing knowing that if you choose it and one of the states 71 100 occurs you would have received 20 000 had you picked r suppose that you must choose between lotteries s and r shown in the bottom half of figure 1 though the prospects probability distribution of consequences of s and r are identical to those of s and r the states of the world with positive payoffs overlap you may find s more appealing knowing that if you choose it and one of the states 1 30 occurs you would have received 20 000 had you picked r but s pays an 8 000 consolation prize a series of papers by graham loomes 1988a b 1989 and chris starmer and robert sugden 1989 provides evidence that in evaluating identical prospects the juxtaposition of consequences against different states of the world has a systematic effect on choice under uncertainty as predicted by regret theory david e bell 1982 peter c fishburn 1982 loomes and sugden 1982 1987a regret effects violate expected utility theory and all other prospect based theories of choice all of the laboratory evidence of regret or juxtaposition effects however has been generated under the problem representation in figure 1 the matrix of state contingent consequences while loomes 1988b p 468 argues that evidence of regret effects indicates that prospect based theories may all be failing to capture an important element in decision making under uncertainty this paper suggests that the experimental evidence of regret effects observed so far is specific to the matrix problem representation nearly 400 subjects completed versions of two questionnaires in which choice problems were presented in different formats the juxtaposition of consequences sways choices but only under the matrix presentation the first questionnaire indicates that regret effects are not observed when statecontingent consequences are described by ticket numbers rather than a matrix the second questionnaire indicates that if the matrix format is changed slightly to a simple proportional format subjects apparently compare prospects and ignore the juxtaposition of consequences regret theory predicts that choice depends on the juxtaposition of consequences but regret effects should be invariant to different representations of state contingent consequences

an empirical study on intertemporal decision making under risk this study compares time preference in the cases of certainty and risk we analyze both matching and choice behavior we find that violations of the stationarity axiom are restricted to matching behavior both for certainty and risk we also compare the discounting of certain and risky outcomes as well as the discounting of gains and losses in matching tasks certain outcomes are discounted more than risky ones we could not confirm these results in a choice task gains and losses are not found to be discounted at different rates

an endowment effect for risk experimental tests of stochastic reference points recent models of reference dependent preferences indicate that expectations may play a prominent role in the presence of behavioral anomalies a subset of such expectations based models predicts an endowment effect for risk that risk attitudes differ when reference points change from certain to stochastic in two purposefully simple risk preference experiments eliminating often discussed confounds i demonstrate both between and within subjects such an endowment effect for risk these results provide needed separation between expectations based reference dependent models allow for evaluation of recent theoretical extensions and may help to close a long standing debate in decision science on inconsistency between utility elicitation methodologies

accountability incentives and behavior the impact of high stakes testing in the chicago public schools the recent federal education bill no child left behind requires states to test students in grades 3 to 8 each year and to judge school performance on the basis of these test scores while intended to maximize student learning there is little empirical evidence about the effectiveness of such policies this study examines the impact of an accountability policy implemented in the chicago public schools in 1996 1997 using a panel of student level administrative data i find that math and reading achievement increased sharply following the introduction of the accountability policy in comparison to both prior achievement trends in the district and to changes experienced by other large urban districts in the mid west however for younger students the policy did not increase performance on a state administered low stakes exam an item level analysis suggests that the observed achievement gains were driven by increases in test specific skills and student effort i also find that teachers responded strategically to the incentives along a variety of dimensions by increasing special education placements preemptively retaining students and substituting away from low stakes subjects like science and social studies

learning by doing and learning from others human capital and technical change in agriculture household level panel data from a nationally representative sample of rural indian households describing the adoption and profitability of high yielding seed varieties hyvs associated with the green revolution are used to test the implications of a model incorporating learning by doing and learning spillovers the estimates indicate that i imperfect knowledge about the management of the new seeds was a significant barrier to adoption ii this barrier diminished as farmer experience with the new technologies increased iii own experience and neighbors experience with hyvs significantly increased hyv profitability and iv farmers do not fully incorporate the village returns to learning in making adoption decisions

frames of mind in intertemporal choice recent research has demonstrated that choices between gambles are systematically influenced by the way they are expressed kahneman and tversky s prospect theory kahneman d a tversky 1979 prospect theory an analysis of decision under risk econometrica472 363 391 explains many of these framing effects as shifts in the point of reference from which prospects are evaluated this paper demonstrates the applicability of the reference point concept to intertemporal choice three experiments demonstrate that when people choose between immediate and delayed consumption the reference point used to evaluate alternatives can significantly influence choice the first study elicited relative preference for immediate and delayed consumption using three methods each of which differently framed choices between alternatives offering identical end state consumption the conventional discounted utility model predicts that the three methods of elicitation should yield similar estimates of time preference but preferences were found to differ in accordance with a reference point model the second and third studies extend and replicate the results from the first the third using real rather than hypothetical choices

decision making over time and under uncertainty a common approach this paper considers a number of parallels between risky and intertemporal choice we begin by demonstrating a one to one correspondence between the behavioral violations of the respective normative theories for the two domains i e expected utility and discounted utility models we argue that such violations or preference reversals are broadly consistent with three propositions about the weight that an attribute receives in both types of multiattribute choice specifically it appears that 1 if we add a constant to all values of an attribute then that attribute becomes less important 2 if we proportionately increase all values of an attribute or if we change the sign of an attribute from positive to negative then that attribute becomes more important the generality of these propositions as well as the constraints they would impose on separable representations of multiattribute preferences is discussed

the common consequence effect testing a unified explanation of recent mixed evidence abstract the common consequence effect is perhaps the most investigated violation of expected utility theory and yet no single generalised expected utility model convincingly organises the experimental data this paper reports a test of a modified version of expected cardinality specific utility theory with boundary effects neilson w s 1992 economics letters 39 275 278 which can explain some recent mixed evidence without recourse to subjective probability weighting models the results do not convincingly support the boundary effect hypothesis and neither support the more usual probability weighting arguments but do indicate instability in preferences largely consistent with event splitting effects

review the economics of soil health abstract soil health plays an important role in agricultural productivity food quality environmental resiliency and ecosystem sustainability consequently there is great interest from policymakers for evidence based research on the benefits and costs of investing in healthy soils in this article i endeavor to build a common understanding between economists soil scientists and policymakers about how to pursue research on the economics of soil health first i summarize the current understanding of soil health as a holistic and multidimensional concept beyond that of mere soil fertility second i argue that optimal control models are particularly well suited to capture the underlying economics of soil management finally i outline relevant implications of such an approach for setting soil health policy

optimal soil conservation and the reform of agricultural pricing policies abstract soil degradation is often blamed for the poor performance of agriculture in developing economies so too are policies which keep the prices of both outputs and inputs artificially low some economists have argued that pricing reforms will encourage soil depletion others say that such reforms will encourage soil conservation to evaluate these claims this paper develops models of the optimal control of soil erosion and soil fertility it is shown that the effect could go either way but that there are strong reasons for suspecting that pricing reforms will not affect soil conservation dramatically

the effect of language on economic behavior evidence from savings rates health behaviors and retirement assets languages dier widely in the ways they encode time i test the hypothesis that languages that grammatically associate the future and the present foster future oriented behavior this prediction arises naturally when well documented eects of language structure are merged with models of intertemporal choice empirically i nd that speakers of such languages save more retire with more wealth smoke less practice safer sex and are less obese this holds both across countries and within countries when comparing demographically similar native households the evidence does not support the most obvious forms of common causation i discuss implications for theories of intertemporal choice

food for thought the effects of school accountability plans on school nutrition abstract with the passage of the no child left behind act of 2001 school accountability is now federal law continuing the recent trend of states implementing significant accountability systems for schools this paper studies an unusual yet powerful school response to accountability systems using disaggregated school lunch menus from a random sample of school districts in virginia we find that schools threatened with accountability sanctions increase the caloric content of their lunches on testing days in an apparent attempt to boost short term student cognitive performance moreover we find that the schools that responded the most along these dimensions experienced the greatest improvements in standardized test scores

the influence of serotonin deficiency on choice deferral and the compromise effect abstractpsychological and physiological states such as mood hunger stress and sleep deprivation are known to affect decision making processes and therefore crucially influence consumer behavior a possible biological mechanism underlying the observed variability of consumer behavior is the context sensitive variation in the levels of neuromodulators in the brain in a series of four experimental studies the authors pharmaceutically reduce the levels of the neurotransmitter serotonin in the brain to diminish the availability of subjects cognitive resources in doing so they study how serotonin brain levels influence 1 subjects tendency to avoid buying and 2 consumers preference for product options positioned as a compromise in a given choice set rather than for more extreme alternatives i e the compromise effect using realistic product choice scenarios in a binding decision framework they find that a reduction of brain serotonin levels leads to choice deferral and decreases the compromise

four score and seven years from now the date delay effect in temporal discounting we describe a new anomaly in intertemporal choice the date delay effect discount rates that are imputed when time is described using calendar dates e g on october 17 are markedly lower than those revealed when future outcomes are described in terms of the corresponding delay e g in six months date descriptions not only reduce discount rates but also affect the implied shape of the discount function when inferred from intertemporal choices between options referenced by calendar dates the discount function appears markedly less hyperbolic we discuss potential psychological bases of the date delay effect its implications and other modes of temporal reference

the effect of language on economic behavior examining the causal link between future tense and time preference in the lab abstract since chen 2013 a fast growing body of literature has documented abundant supporting evidence for the linguistic savings hypothesis despite this influx of research direct causal evidence is limited in this study we take advantage of a unique linguistic feature of the chinese language speakers can freely choose whether or not to use the future tense when referring to a future event this flexibility allows us to unobtrusively manipulate the use of will in the description of the rewards in a standard time preference task to cleanly examine its effect on intertemporal decisions however our results do not lend further empirical support for the linguistic savings hypothesis

tenure security resource poverty public programs and household plot level conservation investments in the highlands of northern ethiopia land degradation poses a serious problem for the livelihoods of rural producers furthermore there is rarely enough private investment taking place to commensurate the scale of the problem this article examines the role of tenure insecurity resource poverty risk and time preferences and community led land conservation on differentiated patterns of household investment in land conservation in northern ethiopia we control for biophysical household characteristics market access conditions and village level factors investments in soil bunds and stone terraces are specifically studied so as to capture the link between these various factors and the durability of conservation investments we introduce the distinction between the determinants of the decision to invest and how much to invest in conservation regression results show that publicly led conservation programs seem to significantly stimulate private investment a host of plot level variables and household perceptions of returns on conservation investments expressed in terms of perceived improvements in land quality and increased crop yields were found to be critical to the decision to invest and intensify soil conservation the evidence on the significance of households attitudes toward risk aversion suggests the important role of risk and the household s risk bearing capacity in the decision to intensify conservation measures at the same time tenure security indicators and households resource endowments resource poverty had weaker effects in increasing willingness to invest and the level of investment made the policy implications of these results point to the importance of agricultural research and extension efforts that target technologies which reduce household risk and poverty while enabling sustainable investments in conservation measures by individual households

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

regret theory a bold alternative to the alternatives in their famous 1982 paper in this journal loomes and sugden introduced regret theory now more than 30 years later the case for the historical importance of this contribution can be made

how accountability pressure on failing schools affects student achievement abstract although an emerging body of evidence has shown that the threat of sanctions on low performing schools can raise student test scores in the short run the extent to which these test score improvements are due to schools manipulation of the accountability system has remained uncertain in this paper i provide two new strands of evidence to evaluate the relative importance of educational reforms and gaming behavior in generating test score gains by threatened schools first using a regression discontinuity design that exploits florida s system of imposing sanction threats on the basis of a cutoff level of performance i estimate medium run effects on student test scores from having attended a threatened elementary school threat induced math improvements from elementary school largely persist at least through the first 1 to 2 years of middle school while evidence for persistence of reading improvements is less consistent second i analyze the effects of sanction threats on various features of educational production and i find that sanction threats raise school spending on instructional technology curricular development and teacher training both strands of evidence are consistent with a predominant role for educational reforms in generating test score gains by threatened schools

testing for regret and disappointment in choice under uncertainty much of the experimental evidence concerning violations of von neumann morgenstern expected utility theory has been collected fr om experiments designed with conventional theory in mind and does not provide direct tests of alternative models such as regret theory and disappointment theory this paper reports and discusses recent evidence produced by an exp erimentspe cifically designed to test for the impacts of regret and disappointment and to indicate their relative importance copyright 1987 by royal economic society

optimal sequential plantings of corn and soybeans under price uncertainty we examine crop choice and fertilizer applications as the solution to stochastic dynamic optimization problem for an innite stream of discounted prots the ecient decision rule depends on the stochastic evolution of commodity prices fertilizer prices and the agronomic eects of rotation versus monoculture this decision rule includes an account of real option values associated with maintaining soil quality and disposition in an environment with highly uncertain future prices and irreversible past planting decisions we parameterize a baseline model for a representative acre in iowa and compare the model s predictions and prots to relatively naive shorter horizon decision rules and a eld managed with optimal fertilizer applications conditional on corn and soybeans always being rotated we also examine the

can increasing private school participation and monetary loss in a voucher program affect public school performance evidence from milwaukee abstract the milwaukee voucher program as implemented in 1990 allowed only non sectarian private schools to participate in the program following a wisconsin supreme court ruling the program saw a major shift and entered into its second phase when religious private schools were allowed to participate for the first time in 1998 this led to more than a three fold increase in the number of private schools and almost a four fold increase in the number of choice students moreover due to some changes in funding provisions the revenue loss per student from vouchers increased in the second phase of the program this paper analyzes the impacts of increase in competition brought about by these changes on public school performance in milwaukee using data from 1987 to 2002 and a difference in differences estimation strategy in trends the paper finds that these changes have led to an improvement of the public schools in the second phase of the program as compared to the first phase the results are robust to alternative samples and specifications and survive several sensitivity checks including correcting for mean reversion the findings imply that voucher design matters and choice of parameters in a voucher program is crucial as far as impacts on public school incentives and performance are concerned

how to make a 29 increase look bigger the unit effect in option comparisons quantitative information can appear in different units e g 7 year warranty 84 month warranty this article demonstrates that attribute differences appear larger on scales with a higher number of units expressing quality information on such an expanded scale makes consumers switch to a higher quality option testifying to its practical importance expressing the energy content of snacks in kilojoules rather than kilocalories increases the choice of a healthy snack the unit effect occurs because consumers focus on the number rather than the type of units in which information is expressed numerosity effect therefore reminding consumers of alternative units in which information can be expressed eliminates the unit effect finally the unit effect moderates relative thinking consumers are more sensitive to relative attribute differences when the attribute is expressed on expanded scales the relation with anchoring and implications for temporal discounting and loyalty programs are discussed

further evidence of the impact of regret and disappointment in choice under uncertainty a preliminary experimental study of the relative impact of regret and disappointment on individual choice under uncert ainty is followed up and extended in various ways taken in conjuncti on with the earlier work the new results provide further evidence of the limitations of von neumann morgenstern expected utility theory a nd indicate the potential power of the alternative models discussed it is argued that there is sufficient weight of evidence to encourage further systematic investigation copyright 1988 by the london school of economics and political science

discounting behavior a reconsideration we re evaluate the theory experimental design and econometrics behind claims that individuals exhibit non constant discounting behavior theory points to the importance of controlling for the non linearity of the utility function of individuals since the discount rate is defined over time dated utility flows and not flows of money it also points to a menagerie of functional forms to characterize different types of non constant discounting behavior the implied experimental design calls for individuals to undertake several tasks to allow us to identify these models and to several treatments such as multiple horizons and the effect of allowing for a front end delay on earlier payments the implied econometrics calls for structural estimation of the theoretical models allowing for joint estimation of utility functions and discounting functions using data collected from a representative sample of 413 adult danes in 2009 we draw striking conclusions assuming an exponential discounting model we estimate discount rates to be 5 6 on average this is significantly lower than all previous estimates using controlled experiments we also find no evidence to support quasi hyperbolic discounting or fixed cost discounting and only modest evidence to support other specifications of non constant discounting furthermore the evidence for non constant discounting while statistically significant is not economically significant in terms of the size of the estimated discount rates we undertake extensive robustness checks on these findings including a detailed review of the previous comparable literature

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

discount rates inferred from decisions an experimental study two hundred and four students of economics and finance participated in an intertemporal choice experiment which manipulated three dimensions in a 4 4 4 factorial design scenario postponing a receipt postponing a payment expediting a receipt expediting a payment time delay 0 5 1 2 and 4 years and size of cashflow 40 200 1000 and 5000 individual discount rates were inferred from the responses and then used to test competitively four hypotheses regarding the behavior of discount rates the classical hypothesis asserting that the discount rate is uniform across scenarios time delays and sums of cashflow was flatly rejected a market segmentation approach was found lacking the results support an implicit risk hypothesis according to which delayed consequences are associated with an implicit risk value and an added compensation hypothesis which asserts that individuals require compensation for a change in their financial position

discounting time and time discounting subjective time perception and intertemporal preferences abstract consumers often make decisions about outcomes and events that occur over time this research examines consumers sensitivity to the prospective duration relevant to their decisions and the implications of such sensitivity for intertemporal trade offs especially the degree of present bias i e hyperbolic discounting the authors show that participants subjective perceptions of prospective duration are not sufficiently sensitive to changes in objective duration and are nonlinear and concave in objective time consistent with psychophysical principles more important this lack of sensitivity can explain hyperbolic discounting the results replicate standard hyperbolic discounting effects with respect to objective time but show a relatively constant rate of discounting with respect to subjective time perceptions the results are replicated between subjects experiment 1 and within subjects experiments 2 with multiple time horizons and multiple descriptors and with different measurement ord

non transitive preferences over gains and losses although transitivity is often regarded as an indispensable principle of rational choice under uncertainty some decision models allow nontransitive preferences one of these regret theory is consistent with a particular pattern of choice cycles when payoffs are nonnegative and the opposite pattern of cycles when payoffs are nonpositive this paper presents evidence from an experiment designed to test these implications of regret theory copyright 1992 by royal economic society

choice under uncertainty problems solved and unsolved ffifteen years ago the theory of choice under uncertainty could be considered one of the success stories of economic analysis it rested on solid axiomatic foundations it had seen important breakthroughs in the analytics of risk risk aversion and their applications to economic issues and it stood ready to provide the theoretical underpinnings for the newly emerging information revolution in economics 1 today choice under uncertainty is a field in flux the standard theory is being challenged on several grounds from both within and outside economics the nature of these challenges and of our profession s responses to them is the topic of this paper

do non expected utility choice patterns spring from hazy preferences an experimental study of choice errors individuals often have only incompletely known preferences when choosing between pair wise gambles particular presentations of the choice problem may then passively encourage the use of some choice method to clarify the preference different presentational displays can then lead to choice patterns predicted by one or other generalised expected utility theory when a preference is not or cannot be constructed choices will be arbitrary i run an experiment that uses three different presentational displays and incorporates a strength of preference indicator the experiment investigates regret theory as an example of a generalised expected utility theory as preference strength is found to vary by display regret effects event splitting effects and choice reversals are all found to be display dependent it is suggested that the evidence is best explained by assuming incomplete eu preferences which are clarified by constructive heuristics rather than some generalised expected utility model coupled with an error term

tempus fugit time pressure in risky decisions we study the effects of time pressure on risky decisions for pure gain prospects pure loss prospects and mixed prospects involving both gains and losses in two experiments we find that time pressure has no effect on risk attitudes for gains but increases risk aversion for losses for mixed prospects subjects become simultaneously more loss averse and more gain seeking under time pressure depending on the framing of the prospects the results suggest the importance of aspiration levels and thus the overall probability to break even under time pressure we discuss the implications of our findings for decision making situations that involve time pressure

time matters less when outcomes differ unimodal vs cross modal comparisons in intertemporal choice unimodal intertemporal decisions involve comparing options of the same type e g apples now versus apples later and cross modal decisions involve comparing options of different types e g a car now versus a vacation later as we show existing models of intertemporal choice do not allow time preference to depend on whether the comparisons to be made are unimodal or cross modal we test this restriction in an experiment using the delayed compensation method a new extension of the standard method of eliciting intertemporal preferences that allows for assessment of time preference for nonmonetary and discrete outcomes as well as for both cross modal and unimodal comparisons participants were much more averse to delay for unimodal than cross modal decisions we provide two potential explanations for this effect one drawing on multiattribute choice the other drawing on construal level theory data are available at https doi org 10 1287 mnsc 2016 2613 this paper was accepted by yuval rottenstreic

applying regret theory to investment choices currency hedging decisions we apply regret theory an axiomatic behavioral theory to derive closed form solutions to optimal currency hedging choices investors experience regret of not having chosen the ex post optimal hedging decision hence investors anticipate their future experience of regret and incorporate it in their objective function we derive a model of financial decision making with two components of risk traditional risk volatility and regret risk we find results that are in sharp contrast with traditional expected utility loss aversion or disappointment aversion theories we discuss the empirical implications of our model and its ability to explain observed hedging behavior

testing for prudence and skewness seeking numerous theoretical predictions such as precautionary saving or preventive behavior have been derived for prudent decision makers further prudence can be characterized as downside risk aversion and plays a key role in preference for skewness we use a simple experimental method to test for prudence and skewness preference in the laboratory and compare the two to this end we introduce a novel graphical representation of compound lotteries that is easily accessible to subjects and test it for robustness using a factorial design prudence is observed on the aggregate and individual level we find that prudence does not boil down to skewness seeking we further provide some theoretical explanations for this result this paper was accepted by peter wakker decision analysis

do accountability and voucher threats improve low performing schools abstract we study the effects of the threat of vouchers and stigma in florida on the performance of low performing schools estimates of the change in raw test scores from the first year of the reform are consistent with the early results which claimed large improvements associated with the threat of vouchers however we also find that much of this estimated effect may be due to other factors the relative gains in reading are largely explained by changing student characteristics and the gains in math though larger appear limited to the high stakes grade we also find some evidence that these improvements were due more to the stigma of receiving the low grade rather than the threat of vouchers

similarity judgments and anomalies in intertemporal choice i introduction evidence accumulated over many years reveals the inadequacies of the expected utility hypothesis as a descriptive model of choice under uncertainty over a much shorter period of time evidence has accumulated revealing systematic violations of the standard model of choice over time the discounted utility model in rubinstein 1988 azipurua et al 1993 and leland 1994 1998 choice anomalies under uncertainty occur because agents base their decisions on judgments regarding the similarity or dissimilarity of prizes and probabilities across alternatives 1 this article specifies conditions under which such a procedure implies analogous violations of the discounted utility model in intertemporal settings ii choice anomalies under uncertainty and over time axioms assumed in models of choice place restrictions on what agents can choose across different pairs of alternatives the independence axiom for example requires that for risky or riskless options l sub 1 l sub 2 and l sub 3 if l sub 1 is weakly preferred to l sub 2 then the lottery l sub 1 p l sub 3 1 p must be weakly preferred to the lottery l sub 2 p l sub 3 1 p for any p one consequence of this requirement is that preferences between simple lotteries x sub 1 p sub 1 0 1 p sub 1 and x sub 2 p sub 2 0 1 p sub 2 must be invariant to changes in the values of p sub 1 and p sub 2 which leave their ratio undisturbed in choices between s and r and between s and r for example independence requires either the choice of s and s or the choice of r and r s 3000 0 90 0 0 10 r 6000 0 45 0 0 55 s 3000 0 02 0 0 98 r 6000 0 01 0 0 99 the stationarity assumption of the discounted utility model of intertemporal choice places restrictions on how agents can choose between pairs of intertemporal prospects consider simple intertemporal prospects t sub j and t sub k shown below where t sub j offers an increment to consumption x sub j in time period t sub j and t sub k offers an increment to consumption x sub k in time period t sub k t sub j x sub j t sub j t sub k x sub k t sub k assuming for simplicity a common baseline level of consumption per period c agents deciding between these options according to the discounted utility model will choose as follows where u is a concave ratio scaled utility function delta is the one period discount factor and and denote strict preference and indifference respectively 2 1 formula not reproducible in ascii dividing through by delta sub j and rearranging terms yields the following expression 2 formula not reproducible in ascii expression 2 reveals that the only way discounting enters into the decision is through the absolute difference in the time periods as such agents given choices between t sub 1 and t sub 2 and between t sub 11 and t sub 12 shown below must either select t sub 1 and t sub 11 or t sub 2 and t sub 12 since the absolute time interval in both choices is identically 1 period t sub 1 20 1 month t sub 2 25 2 months t sub 11 20 11 months t sub 12 25 12 months neither the restrictions implied by the independence axiom nor those following from stationarity hold empirically instead regarding the independence axiom kahneman and tversky 1979 among others find that individuals choosing the safer option s over r nevertheless choose the riskier option r over s as the difference between probabilities declines their ratio held constant this phenomenon is referred to as the common ratio effect they also find that for lotteries involving losses the opposite pattern rs obtains this phenomenon is referred to as the reflection effect

the effect of future event markers on intertemporal choice is moderated by the reliance on emotions versus reason to make decisions this research examines how future event markers influence intertemporal choice and it demonstrates across five studies that the number of salient events between a smaller sooner and larger later option impacts patience the direction of the effect depends on whether the individual relies on emotion versus reason to make decisions for those who rely on emotion additional events increase patience conversely for individuals who rely on reason additional events decrease patience these effects are driven by perceptions of time as events contract perceptions of time for emotional decision makers but expand perceptions of time for rational decision makers implications arise for intertemporal choice time perception and emotional versus rational decision making

intertemporal tradeoffs for gains and losses an experimental measurement of discounted utility this article provides a parameter free measurement of utility in intertemporal choice and presents new and more robust evidence on the discounting of money outcomes intertemporal utility was concave for gains and convex for losses consistent with a hypothesis put forward by loewenstein and prelec 1992 discount rates declined over time but less so than previously observed under the assumption of linear utility for approximately 40 of our subjects constant discounting provided the best fit the remaining 60 were most consistent with harvey s 1986 power discounting our data provide little support for the popular quasi hyperbolic model which is widely used in economics today we observed an asymmetry in the discounting of gains and losses that unlike earlier findings cannot be explained by a framing effect

risk uncertainty and entrepreneurship evidence from a lab in the field experiment theory predicts that entrepreneurs have distinct attitudes toward risk and uncertainty but empirical evidence is mixed to better understand the unique behavioral characteristics of entrepreneurs and the causes of these mixed results we perform a large lab in the field experiment comparing entrepreneurs to managers a suitable comparison group and employees n 2 288 the results indicate that entrepreneurs perceive themselves as less risk averse than managers and employees in line with common wisdom however when using experimental incentivized measures the differences are subtler entrepreneurs are only found to be unique in their lower degree of loss aversion and not in their risk or ambiguity aversion this combination of results might be explained by our finding that perceived risk attitude is not only correlated to risk aversion but also to loss aversion overall we therefore suggest using a broader definition of risk that captures this unique feature of entrepreneurs their willingness to risk losses this paper was accepted by uri gneezy behavioral economics

exploring the consistency of higher order risk preferences this study measures higher order risk preferences and their consistency we explore the role of country differences the variation of stakes and the framing of lotteries we observe a robust dichotomous pattern of choice behavior in china in the usa and in germany the majority of choices are consistent with mixed risk aversion or mixed risk loving behavior we also find this pattern after a tenfold increase in the stakes finally our results reveal that this pattern is strengthened if the lotteries are displayed in compound rather than reduced form in a follow up study we explore potential explanations for this framing effect

teaching to the rating school accountability and the distribution of student achievement this paper examines whether minimum competency school accountability systems such as those created under no child left behind influence the distribution of student achievement because school ratings in these systems only incorporate students test scores via pass rates this type of system increases incentives for schools to improve the performance of students who are on the margin of passing but does not increase short run incentives for schools to improve other students performance using student level panel data from texas during the 1990 s i explicitly calculate schools short run incentives to improve various students expected performance and i find that schools do respond to these incentives students perform better than expected when their test score is particularly important for their schools accountability rating also low achieving students perform better than expected in math when many of their classmates math scores are important for the schools rating while relatively high achieving students do not perform better distributional effects appear to be related to broad changes in resources or instruction as well as narrowly tailored attempts to improve the performance of specific students

risk and preference reversals in intertemporal choice abstract this paper argues that observations of non stationary choice behavior need not necessarily imply specific properties of the individual s discount function as we show the observed preference reversals in intertemporal choice are consistent with constant discounting and can alternatively be explained by decreasing absolute risk aversion together with the individual s risk perception this risk may concern the size of the actual outcome or the endowment consumption stream to which the outcome is added both types of uncertainty naturally appear in the context of intertemporal choice we show how relative degrees of changes in risk over time can determine choices