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

expense neglect in forecasting personal finances abstractthis article examines how consumers forecast their future spare money or financial slack although consumers generally think that both their income and expenses will rise in the future they underweight the extent to which their expected expenses will cut into their spare money a phenomenon the authors term expense neglect the authors test and rule out several possible explanations for this phenomenon and conclude that expense neglect is due in part to insufficient attention toward expectations about future expenses relative to future income tightwad consumers who are chronically attuned to costs show less severe expense neglect than spendthrifts who are less attuned to costs the authors further find that expectations regarding changes in income and not changes in expenses predict responses to the michigan index of consumer sentiment a leading macroeconomic indicator finally the authors conduct a meta analysis of their entire file drawer 27 studies 8 418 participants and fi

how hyperbolic discounting preference affects chinese consumers consumption choice between conventional and electric vehicles abstract this paper presents a theoretical model and addresses several issues related to life cycle cost analysis to illustrate how time inconsistent preferences affect consumer choice the particular case study selects involved consumer choice between a vehicle with high initial acquisition cost but low ownership cost e g an electric vehicle ev and one with a low initial acquisition cost but high ownership cost e g a conventional internal combustion engine vehicle icev to test our theoretical analysis we conduct an empirical study on how time discounting rates affect consumer choice between icevs and evs with different initial cost ratios from the survey results we find that individuals with higher present bias showed irrational purchase behavior even when controlling for wealth level specifically people making some stronger bias to present decisions chose higher total cost icevs with lower initial cost but higher ownership cost over lower total cost evs with higher initial cost and lower ownership cost however people s long term discount is not correlated with irrational vehicle purchase behavior furthermore we study the present bias and long term discount rate in one scenario and found present bias to be correlated with irrational behavior

the determinants of equilibrium unemployment in britain a lot of energy is currently being expended in trying to understand what has been happening to unemployment in britain and the rest of the developed world in this paper we look at this question in the british context by trying to confront some possible explanations with the data since the data we use are quarterly over rather a short period we are setting the explanations a very hard test most explanations tend to be rather casual and the theories underpinning them ill developed thus for example the so called real wage argument is based on the idea that real wages affect labour demand and that the equilibrium real wage bears some relatively stable relationship to output per head but how stable is not clear thus whether or not we can expect a well defined stable ceteris paribus dynamic relationship between real product wages as a proportion of output per head and unemployment is equally unclear so if such a relationship does not show up in a quarterly regression model this may not be that serious for the theory nevertheless we must look for the relationship for how else are we ever to discriminate between a plethora of conflicting views the primary emphasis in this paper is on the secular factors affecting unemployment rather than the cyclical variables consequently we shall not be concerned with developing a coherent theory of cyclical fluctuations and in the empirical work we shall control for the cycle simply by making use of those exogenous or predetermined variables which other work in this field suggests are important 2 the remainder of the paper is set out as follows the next section is concerned with specifying a model which generates a definition of equilibrium unemployment the outline of this model is a pair of equations determining the flows into and out of unemployment and these are specified in section ii which looks closely at the possible variables involved section iii then deals with the results and presents some general conclusions

to know and to care how awareness and valuation of the future jointly shape consumer spending reducing spending in the present requires the combination of being both motivated to provide for one s future self valuing the future and actively considering long term implications of one s choices awareness of the future feeling more connected to the future self thinking that the important psychological properties that define your current self are preserved in the person you will be in the future helps motivate consumers to make far sighted choices by changing their valuation of future outcomes e g discount factors however this change only reduces spending when opportunity costs are considered correspondingly cues that highlight opportunity costs reduce spending primarily when people discount the future less or are more connected to their future selves implications for the efficacy of behavioral interventions and for research on time discounting are discussed

deferring versus expediting consumption the effect of outcome concreteness on sensitivity to time horizon abstract this work examines consumers preferences for consumption timing specifically the authors examine how temporal framing deferring versus expediting of a decision moderates the sensitivity of consumers pattern of discounting to changes in time horizon the results from three experiments show greater decline in consumers discount rates with time horizon i e greater present bias when they defer than when they expedite consumption these results are robust to using monetary and nonmonetary outcomes as well as to different time horizons months days the authors further demonstrate that the different levels of mental representations concreteness triggered by the two decision frames moderate this difference in sensitivity

measuring discounting without measuring utility we introduce a new method to measure the temporal discounting of money unlike preceding methods our method requires neither knowledge nor measurement of utility it is easier to implement clearer to subjects and requires fewer measurements than existing methods

the material experiential asymmetry in discounting when experiential purchases lead to more impatience consumers routinely make decisions about the timing of their consumption making tradeoffs between consuming now or later most of the literature examining impatience considers monetary outcomes i e delaying dollars implicitly assuming that how the money is spent does not systematically alter impatience levels and patterns the authors propose an impatience asymmetry for material and experiential purchases based on utility duration five studies provide evidence that consumers are more impatient toward experiential purchases compared to material purchases and that this increased impatience is driven by whether the value is extracted over a shorter utility duration often associated with experiential purchases or a longer utility duration often associated with material purchases thus when an experience is consumed over a longer period of time the results show that impatience can be diminished additional results show that the effect holds in both delay and expedite frames and suggest that the results cannot be explained by differences in scheduling time sensitivity affect ownership future time perspective or future connectedness

budgetary policy and unemployment dynamics in an olg model with collective bargaining we consider a dynamic general equilibrium model with capital accumulation and collective wage bargaining and investigate how unemployment responds to structural shocks under two stylised budgetary policies under balanced budgets tax adjustments lead to higher unemployment on impact but enable a quick recovery of employment by contrast unbalanced budgets mitigate unemployment effects on impact but dynamics are more persistent due to weaker capital accumulation and future fiscal consolidations these results are consistent with empirical evidence on a positive cross country relationship between government borrowing and unemployment persistence this paper starts out from the well known fact that many european countries have suffered from persistently high unemployment over the past two decades there is a large literature which attempts to explain this development as resulting from a combination of structural shocks and mechanisms which make the effects of any such shifts more persistent one prominent branch of this literature stresses that adverse structural shocks tend to induce a slowdown in capital accumulation which reinforces the employment losses and adds to unemployment persistence bean 1989 benassy 1997 blanchard 1997 burda 1988 caballero and hammour 1998 daveri and tabellini 2000 similarly these studies point out that when the shock is over the recovery of employment depends critically on the speed with which investments in capital respond to the new situation the purpose of this paper is to reconsider this capital shortage hypothesis by linking it explicitly to the stance of fiscal policy to see the importance of fiscal policy in this context consider a government which faces an adverse structural shock such as a drop in employment due to a wage setting shock and decides whether it should keep its budget balanced or not this decision will affect the overall structure of assets in the economy i e the mix between capital and government bonds and this mix will in turn be an important determinant of the speed with which the economy can create employment once the shock is over in particular according to the capital shortage hypothesis the recovery in terms of employment is likely to take longer under a policy which temporarily accepts structural budget deficits particularly when crowding out effects have been substantial

temptation and commitment in the laboratory temptation and self control in intertemporal choice environments are receiving increasing attention in the theoretical economics literature nevertheless there remains a scarcity of empirical evidence from controlled environments informing behavior under repeated temptations this is unfortunate in light of the fact that in many natural environments the same temptation must be repeatedly resisted this paper fills that gap by reporting data from a novel laboratory study of economic decisions under repeat temptations subjects are repeatedly offered an option with instantaneous benefit that also entails a substantial reduction to overall earnings we show that this option is tempting in the sense that a substantial fraction of our subjects incur pecuniary costs to eliminate the choice and thus commit to not choosing the tempting alternative we compare the timing and price elasticity of these commitment decisions to predictions from existing theoretical models of decision under temptation our data are broadly consistent with theory with the notable exception that commitment often occurs with delay rather than at the first opportunity moreover the timing of commitment is significantly impacted by the cost of the commitment device the patterns we report have direct implications for economic theory and are a first step toward designing mechanisms that promote prudent economic decisions under temptation

term premiums in bond returns abstract this paper examines expected returns on u s treasury bills and on u s government bond portfolios expected bill returns are estimated from forward rates and from sample average returns both estimation methods indicate that expected returns on bills tend to peak at eight or nine months and never increase monotonically out to twelve months reliable inferences are limited to treasury bills and thus to maturities up to a year the variability of longer term bond returns preempts precise conclusions about their expected returns

discounting environmental health risks new evidence and policy implications abstract when environmental policy benefits accrue over a long time horizon the valuation problem becomes more complex some analysts support the use of financial market interest rates for discounting deferred health benefits while others argue against discounting altogether we address the discounting issue by estimating implicit discount rates for deferred health benefits exhibited by workers in their choice of job risk wage responses to variation in life years at risk provide direct estimates of the discount rate that workers apply to their future utility the estimated real discount rate equals approximately 2 consistent with financial market rates for the period

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

the fragility of time time insensitivity and valuation of the near and far future we propose that the temporal dimension is fragile in that choices are insufficiently sensitive to it and second such sensitivity as exists is exceptionally malleable unlike other dimensions such as money which are attended by default to test this we axiomatize a constant sensitivity discount function and in four studies we show that the degree of time sensitivity is inadequate relative to the compound discounting norm and strongly susceptible to manipulation time sensitivity is increased by a comparative within subject presentation experiment 1 direct instruction experiment 3 and provision of a visual cue for time duration experiment 4 time sensitivity is decreased using a time pressure manipulation experiment 2 in each study the sensitivity manipulation has an opposite effect on near future and far future valuations increased sensitivity decreases discounting in the near future and increases discounting in the far future in contrast such sensitivity manipulations have little effect on the money dimension

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

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

opportunity cost consideration normatively consumers should incorporate opportunity costs into every decision they make yet behavioral research suggests that consumers consider them rarely if at all this research addresses when consumers consider opportunity costs who considers opportunity costs which opportunity costs spontaneously spring to mind and what the consequences of considering opportunity costs are perceived constraints cue consumers to consider opportunity costs and consumers high in propensity to plan consider opportunity costs even when not cued by immediate constraints the specific alternatives retrieved and the likelihood of retrieval are functions of category structures in memory for a given resource some uses are more typical of the category of possible uses and so are more likely to be considered as opportunity costs consumers who consider opportunity costs are less likely to buy focal options than those who do not when opportunity costs are appealing but no less likely when opportunity costs are unappe

measuring the impact of promotions on brand switching when consumers are forward looking abstract logit choice models have been used extensively to study promotion response this article examines whether brand switching elasticities derived from these models are overestimated as a result of rational consumer adjustment of purchase timing to coincide with promotion schedules and whether a dynamic structural model can address this bias using simulated data the authors first show that if the structural model is correct brand switching elasticities are overestimated by stand alone logit models a nested logit model improves the estimates but not completely second the authors estimate the models on real data the results indicate that the structural model fits better and produces sensible coefficient estimates the authors then observe the same pattern in switching elasticities as they do in the simulation third the authors predict sales assuming a 50 increase in promotion frequency the reduced form models predict much higher sales levels than does the dynamic structural model the autho

opportunity cost neglect to properly consider the opportunity costs of a purchase consumers must actively generate the alternatives that it would displace the current research suggests that consumers often fail to do so even under conditions promoting cognitive effort various cues to consider opportunity costs reduce purchase rates and increase the choice share of more affordable options sensitivity to such cues varies with chronic dispositional differences in spending attitudes we discuss the implications of these results for the marketing strategies of economy and premium brands

structural unempolyment in australia this paper examines whether structural unemployment increased in australia over the last two decades a simple regression model has been considered for testing the hypothesis of increase in unemployment of several segment of the labour force over time six dimensions of the labour force namely age sex region duration of unemployment occupation and industry have been taken into account analysis of the regression results reveals that the structural unemployment problem is substantial with respect to age sex duration of unemployment occupation and industry regarding region the evidence for structural symptom is not very strong

value functions for infinite period planning cost benefit and risk analysis studies that model tradeoffs between the present and the distant future by means of present value discounting have been criticized for according the future and thus future generations far too little importance this paper presents an alternative means of modeling tradeoffs between different periods that accords the future far more importance than present value discounting and that is no more difficult to apply the paper also presents a means of modeling the preference issue of concern for equity or stability between different periods

a generalizable scale of propensity to plan the long and the short of planning for time and for money planning has pronounced effects on consumer behavior and intertemporal choice we develop a six item scale measuring individual differences in propensity to plan that can be adapted to different domains and used to compare planning across domains and time horizons adaptations tailored to planning time and money in the short run and long run each show strong evidence of reliability and validity we find that propensity to plan is moderately domain specific scale measures and actual planning measures show that for time people plan much more for the short run than the long run for money short and long run planning differ less time and money adaptations of our scale exhibit sharp differences in nomological correlates short run and long run adaptations differ less domain specific adaptations predict frequency of actual planning in their respective domains a very long run money adaptation predicts fico credit scores low planners thus face materially higher cost of credit

are wages habit forming evidence from micro data although utility functions play a central role in economics the axiom that utility depends only on the absolute levels of its arguments is rarely tested this paper uses panel data on 2000 british employees who remain with the same employer and who are not promoted from one wave to the next it is shown that one important measure of well being overall job satisfaction is strongly positively correlated with the change in the worker s pay between waves but is unrelated to the current level of pay empirical tests suggest that a reference dependent satisfaction function where individual well being depends on current pay relative to past pay is more consistent with these regression results than are productivity or agency explanations of increasing wage profiles some evidence is presented of greater job satisfaction effects of pay rises for lower paid less well educated and younger workers these results provide some micro evidence consistent with the theory widespread in social science of habituation individuals may become used to any given level of consumption or income as such they tie in with the finding that a country s well being as measured by the average happiness of its citizens is only weakly correlated with its per capita gnp

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

intertemporal preferences and labor supply in this paper the authors examine whether nonseparable preference structures ar e important in characterizing life cycle labor supply using longitud inal data on prime age males from the panel study of income dynamics they estimate a model of life cycle leisure and consumption under un certainty in which intertemporal preferences are allowed to be nonsep arable in leisure the model tests several alternative specifications considered in the literature they investigate the robustness of the ir findings to certain forms of population heterogeneity and types of model misspecification across alternative specifications the autho rs find that the standard assumption of intertemporally separable pre ferences for leisure is not consistent with the data copyright 1988 by the econometric society

self command in practice in policy and in a theory of rational choice an increasingly familiar occurrence for obstetricians is being asked by patients to withhold anesthesia during delivery the physician often proposes that a facemask be put beside the patient who may inhale nitrous oxide as she needs it but some determined patients ask that no such opportunity be provided if gas is available they will use it and they want not to be able to the request is interesting for decision theory and raises questions of ethics policy and physician responsibility even if the woman is merely making a mistake if she simply does not know how painful labor will be and how glad she will be even in retrospect if the pain is relieved but some women who make this request have had earlier deliveries during which they demanded anesthesia and received it they are acquainted with the pain they anticipate asking for relief and they want it withheld when they do they expect to regret afterwards any recourse to anesthesia this particular instance of attempted selfdenial has features that are special but many that are common the woman is so far as we know in good health physically and mentally she anticipates a transient period when her usual values and preferences will be suspended or inaccessible she has reasons for wanting to frustrate her own wishes at the critical time she needs cooperation she may ratify her choice afterward by expressing herself grateful that no anesthesia was offered even when requested there are ethical dilemmas and legal issues and there is conflict if say the husband disagrees with the physician in the delivery room about what his wife really wants

imperfect competition capital shortages and unemployment persistence we construct a model integrating the traditions of imperfect competition macroeconomics and real business cycles for this we study a dynamic economy with optimizing households firms and trade unions subject to stochastic shocks we can derive closed form solutions for the behaviour of all agents it is found that the combination of capital shortages and imperfect competition in labor markets can give rise to unemployment and that this unemployment is quite persistent even when the underlying shocks are not

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

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

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

discounting by intervals a generalized model of intertemporal choice according to most models of intertemporal choice an agent s discount rate is a function of how far the outcomes are removed from the present and nothing else this view has been challenged by recent studies which show that discount rates tend to be higher the closer the outcomes are to one another subadditive discounting and that this can give rise to intransitive intertemporal choice we develop and test a generalized model of intertemporal choice the discounting by intervals dbi model according to which the discount rate is a function of both how far outcomes are removed from the present and how far the outcomes are removed from one another the model addresses past challenges to other models most of which it includes as special cases as well as the new challenges presented in this paper our studies show that when the interval between outcomes is very short discount rate tends to increase with interval length superadditive discounting in the discussion we place our model and evidence in a broader theoretical context

the intertemporal dynamics of consumer lock in this article examines how dynamic changes in information cost structure and time preferences affect consumers search and switching behavior over time and lead to lock in the information cost structure is conceptualized as a trade off of initial setup costs and ongoing usage costs lock in is defined as consumers decreased propensity to search and switch after an initial investment which is determined both by a preference to minimize immediate costs and by an inability to anticipate the impact of future switching costs the results of three experiments support the proposed mechanism experiment 1 shows that a small initial investment is sufficient to produce lock in experiment 2 shows that the results of a prior investment on lock in are not due to psychological commitment but to a shift in relative costs of incumbent and new options experiment 3 shows that respondents fail to anticipate how their prior investment will lock them in

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

capital accumulation and unemployment a tale of two continents in contrast to much recent work regarding the causes of european unemployment in this paper we emphasize the importance of capital accumulation but unlike the few previous studies which have examined the relationship between capital accumulation and unemployment we argue that what matters for the evolution of employment and the unemployment rate is not the absolute growth rate of a country s capital stock but its evolution relative to other countries capital stock the empirical validity of the above statement is demonstrated for almost all oecd countries using quarterly time series data for the period 1961 1995 more detailed evidence is also presented for germany japan and the united kingdom

do workers prefer increasing wage profiles we present survey data challenging the assumption implicit in analyses of labor supply that all else being equal workers prefer declining over increasing wage profiles we test several explanations for our results including that a there is something special about wages e g their association with productivity as opposed to other types of payments that induces the preference for increasing wages b utility depends not only on absolute levels of consumption but also on changes in consumption over time and c respondents who prefer increasing wage profiles are irrational and would change their behavior if the rationale for preferring declining wages were explained

on intertemporal selfishness how the perceived instability of identity underlies impatient consumption how does the anticipated connectedness between one s current and future identity help explain impatience in intertemporal preferences the less consumers are closely connected psychologically to their future selves the less willing they will be to forgo immediate benefits in order to ensure larger deferred benefits to be received by that future self when consumers measured or manipulated sense of continuity with their future selves is lower they accept smaller sooner rewards wait less in order to save money on a purchase require a larger premium to delay receiving a gift card and have lower long term discount rates

tying odysseus to the mast evidence from a commitment savings product in the philippines we designed a commitment savings product for a philippine bank and implemented it using a randomized control methodology the savings product was intended for individuals who want to commit now to restrict access to their savings and who were sophisticated enough to engage in such a mechanism we conducted a baseline survey on 1777 existing or former clients of a bank one month later we offered the commitment product to a randomly chosen subset of 710 clients 202 28 4 percent accepted the offer and opened the account in the baseline survey we asked hypothetical time discounting questions women who exhibited a lower discount rate for future relative to current trade offs and hence potentially have a preference for commitment were indeed significantly more likely to open the commitment savings account after twelve months average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group we conclude that the savings response represents a lasting change in savings and not merely a short term response to a new product

determining consumers discount rates with field studies abstract because utility profits state transitions and discount rates are confounded in dynamic models discount rates are typically fixed for the purpose of identification the authors propose a strategy of identifying discount rates the identification rests on imputing the utility profits using decisions made in a context in which the future is inconsequential the objective function is concave and the decision space is continuous they then use these utilities profits to identify discount rates in contexts in which dynamics become material the authors exemplify this strategy using a field study in which cell phone users transitioned from a linear to a three part tariff pricing plan they find that the estimated discount rate corresponds to a weekly discount factor 90 lower than the value typically assumed in empirical research 995 when using a standard 995 discount factor they find that the price coefficient is underestimated by 16 moreover the predicted intertemporal substitution pat

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

evolution and human nature from an economic perspective on individual decision making human beings have three key characteristics preferences beliefs and rationality beliefs are the probabilities with which people think various outcomes will occur conditional on information that might be available preferences are the rankings over the set of gambles that are based on such beliefs over the outcomes rationality is the extent to which people succeed in choosing optimal actions in the light of their beliefs and preferences and the extent to which their beliefs are appropriately modified by their information economists typically impose only rather weak assumptions on preferences for example preferences are taken to be transitive and sometimes less explicitly exogenous and unchanging stronger assumptions are typically imposed on preferences in specific contexts however for example preferences over time might be represented by an additively separable function with constant rate of discount despite widespread recognition that this case is a special one further attitudes to risk are often represented by the expected utility theorem which rests on assumptions that are strong if also appealing the assumptions made on rationality in particular are usually very strong that is rationality in economic models usually entails the exact optimization of preferences and modification of beliefs in accordance with bayes theorem the economist s basic picture of preferences beliefs and rationality has been subject to challenges from a growing number of empirical anomalies the proposed explanations of these anomalies involve relaxing the assumptions that economists make on these preferences beliefs or rationality for example preferences

sustainability constraints versus optimality versus intertemporal concern and axioms versus data sustainable sustained or survivable development are defined here as distinct sustainability constraints on intertemporal distribution in a context which ignores uncertainty environmental and intratemporal concerns such constraints are neither self contradictory nor redundant for they can conflict with maximizing the present value of utility optimality nor inferior since the axioms underlying optimality are ethically arbitrary and refuted by empirical psychological data axiomatic arguments may clarify but cannot resolve debates about intertemporal concerns data suggest that sustainability constraints are not respected and that intertemporal welfare functions containing a preference for sustained improvement may better reflect what bodies politic mean by sustainability

the value of nothing asymmetric attention to opportunity costs drives intertemporal decision making this paper proposes a novel account of impatience people pay more attention to the opportunity costs of choosing larger later rewards than to the opportunity costs of choosing smaller sooner ones eight studies show that when the opportunity costs of choosing smaller sooner rewards are subtly highlighted people become more patient whereas when the opportunity costs of choosing larger later rewards are highlighted this has no effect this pattern is robust to variations in the choice task to the participant population and to whether the choices are incentivized or hypothetical we argue that people are naturally aware of the opportunity costs of delayed rewards but pay less attention to those associated with smaller sooner ones we conclude by discussing implications for theory and policy data as supplemental material are available at https doi org 10 1287 mnsc 2016 2547 this paper was accepted by yuval rottenstreich judgment and decision making

wages policy and unemployment in australia it is generally accepted among australian economists that high rates of growth of wages at various times over the last decade have made the achievement of full employment and lower rates of inflation more difficult fear of a further acceleration of wage growth has also been a policy constraint it is when one attempts to go further that considerable disagreement becomes evident from a labour market viewpoint there does not seem to be a consensus as to the answers to the two broad questions that should be addressed first how important are wage changes relative to other factors that depress employment and add to the inflation rate second how does government policy impinge on the process that generates wage changes to do justice to both of these in a paper as short as this one is difficult so i shall focus most of the paper on the second question the relationships between government policy and wage changes are particularly important at this time for most of the last decade successive governments have operated a national wages policy which to a large degree has been based on the indexation of wages for past price changes the latest experiment the prices and incomes accord is the centrepiece of the current government s employment and inflation policy and after almost two years of wide community and media support the key principles upon which it is based are suddenly being questioned 1 our prime endeavour therefore will be to build up sufficient understanding of the wage determination process so that some evaluation can be made as to the effectiveness of these national wage policies this turns out to be a remarkably difficult task which generates considerable concern in our mind that the data may not be sufficiently rich to serve as a basis for sound judgments it does appear however that the effect of a given level of unemployment upon wage changes has consistently weakened over the last decade why this should be so is a major unresolved puzzle i offer a loosely constructed theory that is consistent with the facts but it is by no means the only possible explanation section i provides a description of wage setting in australia and some key facts of the economy in section ii the statistical analysis of wage changes focuses on two competing theories one is the phillips curve approach and the other stresses that wage outcomes may be to a significant degree independent of the level of unemployment and may depend instead on utilization rates of labour within the firm section iii considers the efficacy of incomes policies in australia some final comments areoffered in section iv

an empirical study of long term unemployment in australia this paper has two parts the first part concentrates on modeling transitions out of unemployment using aggregated gross flow data models are estimated using monthly transition probabilities for march april 1984 this analysis produces evidence consistent with negative duration dependence but sheds no light on the role of macroeconomic factors the second part focuses on this issue a time series analysis of the proportion of long term unemployment using data for four age and sex groups provides evidence that a proportionately greater increase in long term unemployment in australia in the 1970s has been associated with reduction in job availability and the effect of certain supply shocks

reference points and effort provision a key open question for theories of reference dependent preferences is what determines the reference point one candidate is expectations what people expect could affect how they feel about what actually occurs in a real effort experiment we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision we find that effort provision is significantly different between treatments in the way predicted by models of expectation based reference dependent preferences if expectations are high subjects work longer and earn more money than if expectations are low

looming losses in future time perception abstract it is proposed that a future time interval s perceived length will be affected by whether the interval ends with a gain or loss confirming this several experiments indicate that consumers perceive intervals ending with losses as shorter than equivalent intervals ending with gains the authors explore the mechanisms underlying these effects and they identify several parallels between the current effects and loss aversion the authors further show that these changes in time perception influence consumption decisions and they consider the implications of the findings for theories of time perception and intertemporal choice

discount rates for time versus dates the sensitivity of discounting to time interval description abstract six experiments examine the impact of time interval descriptions on consumers discount rates consumers exhibit more discounting e g they demand more money to delay income when delay intervals are described by extents of time than when delay intervals are described by dates this pattern holds in various contexts including gains and losses and is robust to response mode changes findings further indicate that this effect may arise because compared with date descriptions extent descriptions enhance perceptions of interval length the author discusses other potential mechanisms and implications

dynamic targeted pricing with strategic consumers abstract we investigate in this paper whether dynamic targeted pricing based on consumer purchase history could benefit a practicing firm even when consumers are strategic in that they actively seek to avail themselves of a low price in the future such strategic behavior on the part of consumers has been shown in the literature to render such dynamic targeted pricing unprofitable even for a monopoly firm we show that dynamic targeted pricing can benefit competing firms when they actively pursue customer recognition based on consumer purchase history this is because in order to pursue customer recognition competing firms need to price high to screen out price sensitive consumers and hence price competition is moderated as a result all competing firms can become better off with targeted pricing than without even when consumers behave strategically interestingly because of this competition moderation effect the paradoxical outcome occurs where dynamic targeted pricing may not benefit a monopolist but it may benefit competing firms we also show that dynamic targeted pricing can expand the market such that social welfare unambiguously improves