intergenerational equity and sustainability abstract this paper explores the limitations of conventional economic analysis of intergenerational problems and examines some of the alternatives suggested in the literature it is argued that proper consideration of future generations has at least three requirements first when future costs and benefits are considered it should be taken into account that they are to be enjoyed by different generations second the sustainability requirement should be adopted this represents an equity commitment to the future and implies the recognition that future generations have the right to nondeteriorated ecological and economic capacity the paper studies the ways in which the recognition of these rights might be incorporated into economic evaluation and management third an appropriate institutional network to enforce the recognition of these rights in decision making processes should be constituted its design and necessary functions are also analyzed

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

another reconciliation between economists and forestry experts olg arguments foresters often claim that the goal of good forest policy is to have a sustained forest yield or even a maximum sustainable yield they also claim that people wish to save a few extra trees for their children this bequest motive is not modelled in the standard approach to the optimal rotation problem in this paper we present a standard version of an overlapping generation model augmented with a simple tree technology we show in particular that the market equilibrium can be dynamically inefficient and that a bequest motive in terms of trees can correct for the overaccumulation of capital that causes the inefficiency the bequest motive also enables us to account for a harvesting intensity varying with age young people typically cut more than elderly people in spite of a perfect capital market

cultural differences in consumer impatience abstract in this article the authors examine cross cultural variations in how people discount the future specifically they predict that people from western cultures are relatively less patient and therefore discount the future to a greater degree than do people from eastern cultures and thus westerners value immediate consumption relatively more furthermore on the basis of regulatory focus theory the authors predict that when easterners are faced with the threat of a delay in receiving a product i e a prevention loss they are more impatient whereas when westerners are faced with the threat of not being able to enjoy a product early i e a promotion loss their impatience increases this enhanced impatience manifests in preference for expedited consumption of a product purchased online in two studies in both studies the authors used a priming methodology on bicultural singaporean participants the results support the predictions in the second study they also found evidence in support

focusing and framing of risky alternatives abstract this paper develops a theory of focusing and framing in an intertemporal context with risky choices we provide a selection criterion between existing theories of focusing by allowing a decision maker to choose her frame such that her attention is either drawn to salient events associated with an option or to the expected utilities an option yields in different time periods our key assumption is that a decision maker can choose her frame in a self serving manner we predict that the selected frame induces overoptimistic actions in the sense that subjects underrate downside risk but overrate upside risk and accordingly reveal overoptimistic choices hence our theory can explain phenomena such as excessive harmful consumption smoking unhealthy diet and risky investments entrepreneurship lotteries gambling in one coherent framework notably overoptimistic actions are not universal but have plausible limits we characterize under which situations overoptimistic actions are most likely to occur and under which circumstances choices should be rational or even pessimistic

the political economy of environmental taxes with an aging population this paper develops a two period overlapping generations model with environmental externalities and uncertain lifetimes and studies how two sources of population aging greater longevity and a lower rate of population growth affect the politically determined environmental tax and the quality of the environment it is shown that greater longevity and a lower rate of population growth have entirely different effects on these factors greater longevity has no effect on the environmental tax and has a non positive effect on the environmental quality whereas a lower rate of population growth has a negative effect on the tax and has a positive effect on the quality in addition the political decision making on the tax leads to an inefficient allocation of capital and environmental quality

anticipation of future variety reduces satiation from current experiences abstractsatiation frequently occurs from repeated consumption of the same items over time however results from five experiments show that when people anticipate consuming something different in the future they satiate at a slower rate in the present the authors find the effect in both food and nonfood consumption settings using different approaches to measure satiation this effect is cognitive specifically anticipating variety in future consumption generates positive thoughts about that future experience the authors find two boundary conditions the future consumption outcome must be 1 in a related product category and 2 at least as attractive as the present consumption outcome the authors rule out potential alternative explanations such as mere exposure to variety the possibility that the future experience is more attractive rather than just different than the current one and perceptions of scarcity associated with the item consumed in the present

externalities expectations and pigouvian taxes this article derives pigouvian type corrective measures for reciprocal externalities when non nash behavior characterizes the participants these reciprocal externalities may involve various kinds of environmental pollutants such as acid rain a comparison between corrective measures for nash and non nash behavior demonstrates that positive conjectures regarding the other agent s externality generating activity have an expectation internalizing influence that usually reduces the required corrective measures negative conjectures e g free riding expectations however have an expectation externalizing effect that increases the required corrective measures the article analyzes both two person and n person externalities 13 references 3 figures 1 table

pigovian taxes which work in the small number case abstract an appropriately conceived pollution tax can achieve a pareto optimal equilibrium which is 1 stable in the presence of myopia 2 not subject to strategic manipulation even in the small number case and 3 resistant to inefficient cost shifting by the participants when transaction costs are low a considerable amount of confusion in the literature exists because different authors use different tax formulas often implicitly and different assumptions regarding conjectural behavior some of this confusion is cleared up by formally presenting various pigovian tax formulas explicitly considering whether there is cournot or stackleberg behavior and comparing the properties of the various configurations

price reaction and disagreement over public signal abstract we develop a theory of endogenous disagreement over the interpretation of public news based on the optimal expectation model proposed by brunnermeier and parker 2005 in our model each agent can form an optimal interpretation and agree to disagree with others we find that endogenous disagreement and trade may arise following public news events the model predicts that the market price overreacts to uninformative news and underreacts to informative news thus providing a unified account for the drift in price following significant news events and the excessive price volatility in response to noisy information

discounting behaviour and the magnitude effect evidence from a field experiment in denmark we evaluate the claim that individuals exhibit a magnitude effect in their discounting behaviour where higher discount rates are inferred from choices made with lower principals all else being equal if the magnitude effect is quantitatively significant it is not appropriate to use one discount rate that is independent of the scale of the project for cost benefit analysis and capital budgeting using data from a field experiment in denmark we find statistically significant evidence of a magnitude effect that is much smaller than is claimed this evidence surfaces only if one controls for unobserved individual heterogeneity in the population

the value and applicability of bargaining in an intergenerational setting abstract this paper considers the effectiveness of a variation of coasian bargaining as a policy instrument for internalizing one or multiple intergenerational externalities the variation involves appointing a contemporary party to represent the interests of the affected parties who are currently unable to represent themselves potential criticisms of such a policy are considered and addressed and precedents to such a policy are put forth to test the value of such a policy a two period model in which two externalities exist in the production consumption decisions and with representative agents is used to compare the welfare effects of four scenarios 1 agents in each period optimize their period specific utility 2 a benevolent social planner chooses allocations in both periods to maximize a social welfare function 3 the externalities are internalized using a bargaining policy and 4 the externalities are internalized using a tax and subsidy policy i find that contrary to general consensus in the literature coasian bargaining can be adapted in such a way as to make it applicable in an intergenerational framework

overconfidence and social signalling evidence from both psychology and economics indicates that individuals give statements that appear to overestimate their ability compared to that of others we test three theories that predict such relative overconfidence the first theory argues that overconfidence can be generated by bayesian updating from a common prior and truthful statements if individuals do not know their true type the second theory suggests that self image concerns asymmetrically affect the choice to receive new information about one s abilities and this asymmetry can produce overconfidence the third theory is that overconfidence is induced by the desire to send positive signals to others about one s own skill this suggests either a bias in judgement strategic lying or both we formulate this theory precisely using a large data set of relative ability judgements about two cognitive tests we reject the restrictions imposed by the bayesian model and also reject a key prediction of the self image models that individuals with optimistic beliefs will be less likely to search for further information about their skill because this information might shatter their self image we provide evidence that personality traits strongly affect relative ability judgements in a pattern that is consistent with the third theory of social signalling our results together suggest that overconfidence in statements is more likely to be induced by social concerns than by either of the other two factors copyright 2013 oxford university press

sustainability in natural resource management abstract sustainability is the objective that many disciplines indicate as being essential to the resolution of environmental degradation although there is no agreement about what this term exactly means this study defines environmental problems as externalities most of these occurring between different generations we analyze the reasons why traditional solutions for externalities do not work in the intergenerational context our conclusions are on the one hand that traditional methods for evaluating the costs and benefits affecting different generations should be improved secondly an intergenerational redistribution of natural resource property rights is essential to guarantee equality of opportunities for all generations and therefore to ensure sustainability adequate redistribution of property rights will depend on the type of resource as well as on other factors such as the rate of return on its exploitation and the current generations propensity to consume in all cases however sustainability is sufficiently guaranteed by conceding property rights as a whole to the future

an overlapping generations model with exhaustible resources and stock pollution this paper analyzes the nexus between resource exhaustion and pollution externality using an overlapping generations framework where each generation lives only for a finite period for a finite horizon model with production where there are many agents per generation the pareto inefficiency arises due to lack of intragenerational coordination and is propagated across generations the tax rates necessary for correcting this externality are characterized we also derive a modified hotelling rule according to which the equilibrium resource price rises slower than the rate of interest in order to account for the damages due to the pollution stock generated by the resource used for the case where the externality induced damage acts on production rather than the utility function pareto inefficiency is shown to persist even when there is intragenerational coordination

environmental valuation under sustainable development environmentalism has evolved since the 1960 s from a concern with the preservation of wilderness in the american experience to a concern over pollution of human habitat throughout the industrialized world northern anxiety spread to the loss of tropical rainforests and biodiversity in the south where environmentalism evolved further in an encounter with indigenous interpretations conditions and priorities by the late 1980 s climate change emerged as a central issue in a now global discourse on the relationship between environment and development the principle of sustainable development that current needs are to be met as fully as possible while ensuring that the life opportunities of future generations are undiminished relative to present is now widely accepted this paper illustrates that incorporating environmental values per se in decision making will not bring about sustainability unless each generation is committed to transferring to the next sufficient natural resources and capital assets to make development sustainable 11 refs 3 figs

investor attention overconfidence and category learning abstract motivated by psychological evidence that attention is a scarce cognitive resource we model investors attention allocation in learning and study the effects of this on asset price dynamics we show that limited investor attention leads to category learning behavior i e investors tend to process more market and sector wide information than firm specific information this endogenous structure of information when combined with investor overconfidence generates important features observed in return comovement that are otherwise difficult to explain with standard rational expectations models our model also demonstrates new cross sectional implications for return predictability

forestry and the bequest motive abstract with an overlapping generations model for trees and humans it is shown that in a small open timber producing economy both in a setting where the economy is planned in order to maximize an intertemporal social welfare function and in a decentralized market economy long term forest investments should be evaluated by their net present value this is so provided that the existing generation has some if even very small concern for the well being of the next generation a review of empirical studies among nonindustrial private forest owners in the u s and in sweden gives support to the suggestion that this mechanism based on a tinge of altruism may be more important in promoting long term silvicultural investments than the incentives given by existing land markets

the earnings announcement premium around the globe abstract u s stocks have been shown to earn higher returns during earnings announcement months than during non announcement months we document that this earnings announcement premium exists across the globe moreover it is not isolated to a few countries of the 20 countries with enough data to conduct a within country analysis nine exhibit a significantly positive premium a cross country analysis finds that the premium is strongest in countries with the greatest increase in idiosyncratic volatility around the time of their firms earnings announcements suggesting that uncertainty over the earnings information to be disclosed is a primary driver of the global announcement premium

affective decision making a theory of optimism bias abstract optimism bias is inconsistent with the independence of decision weights and payoffs found in models of choice under risk and uncertainty such as expected utility theory subjective expected utility and prospect theory we therefore propose an alternative model of risky and uncertain choice where decision weights affective or perceived risk are endogenous affective decision making adm is a strategic model of choice under risk and uncertainty where we posit two cognitive processes the rational and the emotional process the two processes interact in a simultaneous move intrapersonal potential game and observed choice is the result of a pure strategy nash equilibrium in this game we show that regular adm potential games have an odd number of locally unique pure strategy nash equilibria and demonstrate this finding for affective decision making in insurance markets we prove that adm potential games are refutable by axiomatizing the adm potential maximizers

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

the intergenerational case of missing markets and missing voters a simple game formulation is used to examine the possibility of linking generations when a future generation will confront a risk that can be alleviated by an earlier generation s investment an insurance market will function provided that the overlapping generations are sufficiently near in time and share risks without propinquity or shared risks there is a need for intervention to overcome the problems of missing markets and missing voters this intervention should take the form of minimum environmental standards based on a notion of sustainability that is constitutionally enforced

addiction and cue triggered decision processes we propose a model of addiction based on three premises 1 use among addicts is frequently a mistake 2 experience sensitizes an individual to environmental cues that trigger mistaken usage 3 addicts understand and manage their susceptibilities we argue that these premises find support in evidence from psychology neuroscience and clinical practice the model is tractable and generates a plausible mapping between behavior and the characteristics of the user substance and environment it accounts for a number of important patterns associated with addiction gives rise to a clear welfare standard and has novel implications for policy

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

life cycle individual thrift and the wealth of nations this paper provides a review of the theory of the determinants of individual and national thrift that has come to be known as the life cycle hypothesis lch of saving applications to some current policy issues are also discussed part i deals with the state of the art on the eve of the formulation of the lch some 30 years ago part ii sets forth the theoretical foundations of the model in its original formulation and later amendment calling attention to various implications distinctive to it and sometimes counter intuitive it also includes a review of a number of crucial empirical tests both at the individual and the aggregate level part iii reviews some applications of lch to current policy issues though only in sketchy fashion as space constraints prevent fuller discussion this abstract was borrowed from another version of this item

optimal beliefs in the long run an overlapping generations perspective abstract people have the natural tendency to be optimistic and believe that good outcomes in the future are more likely but also want to avoid overestimation that could result in bad decision making brunnermeier brunnermeier and parker 2005 and brunnermeier et al 2007 established an optimal beliefs framework that balances these two incentives this paper follows and extends the optimal beliefs framework to consider optimal beliefs in the long run in an overlapping generations sense assuming no short selling results show that in almost all cases there does not exist a stable and interior long term optimal belief

repeated games with general discounting we introduce a general class of time discounting which includes time inconsistent ones into repeated games with perfect monitoring a strategy prole is called an agent

neuroeconomics why economics needs brains neuroeconomics uses knowledge about brain mechanisms to inform economic theory it opens up the black box of the brain much as organizational economics opened up the theory of the firm neuroscientists use many tools including brain imaging behavior of patients with brain damage animal behavior and recording single neuron activity the key insight for economics is that the brain is composed of multiple systems which interact controlled systems executive function interrupt automatic ones brain evidence complicates standard assumptions about basic preference to include homeostasis and other kinds of state dependence and shows emotional activation in ambiguous choice and strategic interaction

theories of the mind economics has traditionally relied on revealed preferences and occasionally on verbal reports to understand the desires of people another source of information has been developed in recent years the direct observation of choice processes this mechanism possible thanks to the improvements in the designs and techniques to measure brain activity is explored in the bur geoning field of experimental neuroeconom ics see paul w glimcher and aldo rustichini 2004 and colin camerer george loewenstein and drazen prelec 2005 for recent surveys in this article we argue that the evidence on brain activity can also be used to build theo retical models that help us understand choices and predict behaviors we label this research neuroeconomic theory in section i we describe the procedure discuss some advan tages over traditional methodologies and estab lish some facts that motivate our approach in section ii we illustrate the methodology with two brain based models of decision making i what is neuroeconomic theory neuroeconomic theory is an interdisciplin ary line of investigation that combines research from neuroscience neurobiology and econom ics experimental neuroscience and neurobiology provide detailed evidence of the functionality interconnectivity and physiological constraints of the brain systems involved in decision making microeconomic theory supplies the toolkit to build simple optimization models that incorporate these network interactions and well defined con straints into the mechanisms of choice

the supply of information by a concerned expert how much information should a policy maker pass on to a currently ill informed citizen in this paper we address this classic question of crawford and sobel 1983 in a setting in which beliefs impact utility as in kreps and porteus 1978 we show that this simple amendment has far reaching implications in particular our question cannot be answered using a utility function with standard revealed preference foundations revealed preference cannot tell us whether in a particular state s a decision maker prefers to believe incorrectly that the state is t or to know the truth to solve the model we go beyond the classical model in two respects relying on the psychological expected utility model of caplin and leahy 2001 to capture preferences and the psychological game model of geanakoplos pearce and stacchetti 1989 to capture strategic interactions

rationality of choices in subsidized crop insurance markets the u s crop insurance market has several features that set it apart from other insurance markets these include explicit government subsidies with an average premium subsidy rate of about 60 in recent years and the legislative requirement that premium rates be set at actuarially fair levels where the federal government sets rates and pays all costs related to insurance policy sales and services bearing these features in mind we examine the extent to which farmers crop insurance choices conform to economic theory a standard expected utility maximization framework is constructed to analyze trade offs between higher risk protection and larger subsidy payments we decompose the effect of coverage level on expected utility into insurance premium loading and subsidy transfer effects where the loading effect vanishes if rates are actuarially fair given an actuarially fair premium we infer that a rational farmer should choose either the coverage level with the highest premium subsidy or a higher coverage level evidence from a large insurance unit level dataset contradicts this theoretical inference and so suggests anomalous insurance decisions in a novel application of the mixed logit framework we show that the probability an insurance product is chosen declines as out of pocket premium expenditures increase even though higher values of these expenditures should reflect improved grower welfare premium expenditures appear to be more salient than the uncertain future benefits they support we apply our regression to the recent trend yield adjustment innovation in crop insurance

entitlements missing markets and environmental uncertainty reply abstract at one level dore and ward seem intent on immunizing received doctrine they say that i did not prove that rights violated nozick s principles of justice and that i did not prove that missing markets were the problem more telling they allege i did not prove that my story was better than the particular story favored by dore and ward that is they argue that there is an alternative approach based on the theory of public economics which is indeed operational 3 they then use the bulk of their comment to explain and defend this alternative model they hope to convince the reader that the model of public economics survives intact in the face of my alternative model to the extent that their model allows one to define the problem away it is not difficult to see why they find it so compelling more seriously dore and ward fail to make a coherent argument about the concept of rights and duties and the logic of a particular rights structure that happens to prevail they seem concerned that my article was tampering with some sacred social construct the status quo rights structure and that my article threatened the received wisdom of both public economics and paretian walrasian bliss indeed theirs seems to be a genuine fear that if economists release their grip on the certitude of received orthodoxy the floodgates will be open to all manner of bumbling regulators seeking to shift rights and wealth positions across generations my article is apparently threatening because it seems to suggest that the received wisdom may at times be misleading

differential interpretation of public signals and trade in speculative markets most models of trade in speculative markets assume that agents interpret public information identically we provide empirical evidence on the relation between the volume of trade and stock returns around public announcements and we argue that the evidence is inconsistent with this assumption we then develop a model of trade around public announcements that incorporates differential interpretations and is consistent with the observed volume return relation then we test the standard model of belief revision underlying most models of trade using stock brokerage research analysts earnings forecasts the hypthesis of identical interpretations seems inconsistent with the forecast revisions in these data

intertemporal preferences and intergenerational equity considerations in optimal resource harvesting abstract optimal resource harvesting decisions are reexamined in light of a distinction between personal discount rates reflecting individuals rate of time preference and generational discount rates reflecting considerations of equity for future generations the discount rates have partially counteracting effects upon the optimal harvesting decisions and upon the optimal distribution of benefits in any one period for instance it is the generational discount rate that determines the potential for economically optimal extinction of a renewable resource by distinguishing the two discount rates it is possible to give each generation equal consideration while still allowing for individual impatience

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

psychological expected utility theory and anticipatory feelings we extend expected utility theory to situations in which agents experience feelings of anticipation prior to the resolution of uncertainty we show how these anticipatory feelings may result in time inconsistency we provide an example from portfolio theory to illustrate the potential impact of anticipation on asset prices

procrastination of enjoyable experiences abstract the tendency to procrastinate applies not only to aversive tasks but also to positive experiences with immediate benefits the authors propose that models of time discounting can explain this behavior and they test these predictions with field data and experiments a multicity study shows that people with unlimited time windows delay visiting desirable landmarks however procrastination is reduced when the window of opportunity is constrained similarly people procrastinate in redeeming gift certificates and gift cards with long deadlines more than those with short deadlines resulting in overall lower redemption rates these results run counter to participants predictions and typical models of impulsive behavior

optimal choice and beliefs with ex ante savoring and ex post disappointment we propose a new decision criterion under risk in which individuals extract both utility from anticipatory feelings ex ante and disutility from disappointment ex post the decision maker chooses his degree of optimism given that more optimism raises both the utility of ex ante feelings and the risk of disappointment ex post we characterize the optimal beliefs and the preferences under risk generated by this mental process and apply this criterion to a simple portfolio choice insurance problem we show that these preferences are compatible with first degree and second degree stochastic dominance and yield a preference for early resolution of uncertainty furthermore they are consistent with observed violations of the independence axiom such as the preference reversal in the allais paradox and predict that the decision maker takes on less risk compared to an expected utility maximizer our decision criterion can thus help explain the equity premium puzzle and the preference for low deductibles in insurance contracts

limits and cycles of environmental policy the olg model analyzes emissions of an accumulative pollutant in a laissez faire economy and an economy regulated through a government controlled license market the government either takes the price on the license market as given or sells the licenses demanded at the cournot price the first type of regulation is called a liberal environmental policy and the second type a monopolistic environmental policy the forward looking temporary and the stationary equilibria as well as the pollution boundaries of the mechanisms are studied if people can choose between laissez faire and regulation or between the liberal and the monopolistic environmental policy regime then in general no steady state exists instead endogenous policy cycles can alternate between laissez faire and regulation or between liberal and monopolistic regulation

positive time preference the case for positive time preference is absolutely compelling unless there is an infinite time horizon with the expectation of unending technological advance combined with what we call drastically diminishing marginal utility this finding holds both in the positive and normative senses a corollary is that savings are interest elastic

anticipation and the valuation of delayed consumption this paper presents a model of intertemporal choice that incorporates savoring and dread i e utility from anticipat ion of delayed consumption the model explains why an individual with positive time preference may delay desirable outcomes or get unpleas ant outcomes over with quickly contrary to the prediction of convent ional formulations of intertemporal choice implications of savoring and dread for savings behavior empirical estimation of discount rate s and public policy efforts to combat myopic behavior are explored the model provides an explanation for common violations of the indepe ndence axiom as applied to intertemporal choice copyright 1987 by royal economic society

information and the coase theorem abstract some economists think the coase theorem implies a lot about the proper scope of government intervention in the economy and about the welfare consequences of laissez faire others see it as a mere tautology that if people negotiate efficiently then every outcome will be efficient the coase theorem is important only if we believe that efficient negotiation is likely of course we can attribute inefficiencies to bargaining imperfection but it may not be useful to do so such attitudes sometimes seem to depend more on ideology than on reason this article gives one economist s reasoned view it discusses the coase theorem as a decentralization result and why decentralization results are interesting it considers mechanism design for revealing private information and describes the problems of centralization should the coase theorem should be viewed as a second best result property rights are more efficient than some reasonable alternative does the coase theorem recommend an institution or make

toward an understanding of dynamic moral decision making model free and model based learning in business settings decision makers facing moral issues often experience the challenges of continuous changes this dynamic process has been less examined in previous literature on moral decision making we borrow theories on learning strategies and computational models from decision neuroscience to explain the updating and learning mechanisms underlying moral decision processes specifically we present two main learning strategies model free learning wherein the values of choices are updated in a trial and error fashion sustaining the formation of habits and model based learning wherein the brain updates more general cognitive maps and associations thus sustaining flexible and state dependent behaviors we then summarize studies explaining the neuro computational processes of both learning strategies the calculation of prediction errors and valuation we conclude by emphasizing how the incorporation of dynamic aspects in moral decision making could open new avenues for understanding moral behaviors in a changing world

confidence enhanced performance there is ample evidence that emotions affect performance positive emotions can improve performance while negative ones may diminish it for example the fears induced by the possibility of failure or of negative evaluations have physiological consequences shaking loss of concentration that may impair performance in sports on stage or at school there is also ample evidence that individuals have distorted recollection of past events and distorted attributions of the causes of successes of failures recollection of good events or successes is typically easier than recollection of bad ones or failures successes tend to be attributed to intrinsic aptitudes or own effort while failures are attributed to bad luck in addition these attributions are often reversed when judging the performance of others the objective of this paper is to incorporate the first phenomenon above into an otherwise standard decision theoretic model and show that in a world where performance depends on emotions biases in information processing enhance welfare

an overlapping generations model of growth and the environment this article analyzes the potential conflict between economic growth and the maintenance of environmental quality in an overlapping generations model short lived individuals make decisions which have long lasting effects on both factor productivity and the environment the model provides a theoretical explanation of observed correlations between environmental quality and income whereby economic growth is associated first with declines then improvements in environmental quality it suggests circumstances in which multiple pareto ranked steady state equilibria may arise and in which sustained growth of both capital and environmental quality may occur overmaintenance of the environment analogous to dynamically inefficient overaccumulation of capital may emerge copyright 1994 by royal economic society

when choosing makes a good thing better temporal variations in the valuation of hedonic consumption abstract this research investigates how the valuation of delayed consumption of hedonic products such as concerts and chocolate varies with the passage of time between choice and consumption the authors find that when consumers make their own choices they exhibit increases in evaluations of delayed consumption but only if the interval between choice and consumption is relatively short the effect attenuates over longer periods resulting in an inverted u shaped relationship between evaluations and time in contrast when somebody else chooses the same option for the consumer evaluations decrease with the passage of time these effects depend on the extent of intrinsic motivation toward the object of consumption and occur only for consummatory consumption that is of inherent interest moreover anticipatory increases in evaluations before consumption have ironic negative effects on postconsumption evaluations the authors discuss implications and directions for further research

intergenerational resource rights efficiency and social optimality the discipline of economics is generally defined as the science of the allocation of scarce resources between competing social objectives given an initial distribution of resources between economic agents how would they behave so as to improve their welfare according to the pareto criterion the agents would exchange commodities until the opportunities for fruitful exchange were fully exhausted and no agent could be made better off without rendering at least one other agent worse off pareto efficiency is a powerful concept in microeconomic analysis provided that the initial distribution of property rights is equitable allocative efficiency gives rise to the best of all possible worlds acknowledging that the assumptions of perfect competition are often violated firms are monopolistic information is incomplete and externalities exist economists have argued for the modification of institutions so that economic reality will conform more closely to the assumptions of the model that yields such gratifying results but microeconomic theory has always maintained that allocative efficiency is in itself insufficient to maximize social welfare bator 1957 a social welfare function is required to discriminate a social optimum among the array of efficient allocations that correspond to alternative assignments of property rights though economists have posited alternative functional forms for the sake of pursuing conceptual arguments welfare functions have remained elusive constructs for well known theoretical and practical reasons consequently a sharp line of demarcation has been drawn between questions of efficiency the province of economics and equity the principal focus of ethical and political discourse in resource economics however the line demarcating efficiency and equity is often crossed the term optimal depletion appears regularly where only efficient depletion is meant while political debates about resource exploitation over time are laden with questions of the proper distribution of our natural patrimony between generations resource economists have predominantly espoused particular use rules that guarantee efficiency but overlook potential improvements in social welfare achievable through the reassignment of property rights across generations we document the evolution and current status of the misuse of the term optimal depletion in section ii we develop a simple two generation three period general equilibrium model in section iii to illustrate how alternative distributions of resource rights between generations relate to alternative pareto efficient solutions in section iv we demonstrate how different social welfare functions affect the optimal solution and associated assignment of resource rights between generations

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