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

estimating the effect of hierarchies on information use theory suggests that greater hierarchical distance between a subordinate and his boss makes it more di cult to share abstract and subjective information in decision making a novel data set put together from credit dossiers of large corporate loan applicants enables us to observe the information collected by loan o cers and also how it is used by the ultimate loan approving o cer we flnd that greater hierarchical geographical distance between the information collecting agent and the loan approving o cer leads to less reliance on subjective information and more on objective information by exploiting non linearities in the assignment rules that determine an applicant s hierarchical distance and using information collecting agent flxed efiects we show that our result cannot be driven by endogenous assignment of applicants we also flnd that higher frequency of interactions between the information collecting agent and loan approving o cer both over time and through geographical proximity helps mitigate the efiects of hierarchical distance on information use our results show that hierarchical distance in uences information use and highlights the importance of human touch in communication

correlates of narrow bracketing we examine whether different phenomena of narrow bracketing can be traced back to some common characteristic and whether and how different phenomena are related we find that making dominated lottery choices or ignoring the endowment when making risky choices are related phenomena and are both associated with low levels of cognitive reflection in contrast the phenomena of setting narrow goals or narrow mental budgets seem not to reflect choice errors due to low cognitive reflection but are tools to overcome self control problems buying small scale insurance is associated with having narrow mental budgets suggesting that people buy such insurance to insure themselves against the consequences of their own self control strategy

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

on the complexity of strategy switching dynamics abstract a new approach has been proposed to analyze the strategy switching dynamics in a discrete model or a non cooperative game with the following characteristics i the agents are motivated by absolute payoffs rather than relative ones ii the payoffs vary as the composition of the population changes iii the agents are boundedly rational in the sense that they can only predict the outcomes of their own actions rich dynamic phenomena are exhibited for such discrete dynamic models or games the approach is then applied to explore the relative profitability of price taking behavior in a quantity competing heterogeneous oligopoly

credit cards and inflation abstract the introduction and widespread use of credit cards increases trading efficiency but by also increasing the velocity of money it causes inflation in the absence of monetary intervention if the monetary authority attempts to restore pre credit card price levels by reducing the money supply it might have to sacrifice the efficiency gains when there is default on credit cards there is even more inflation and less efficiency gains the monetary authority might then have to accept less than pre credit card efficiency in order to restore pre credit card price levels or else it will have to accept inflation if it is unwilling to cut efficiency below pre credit card levels this could be a source of stagflation

the perception and efficiency of labour supply choices by pigeons hunter and davison 1982 observed how pigeons supplied labor by pecking on discs connected to devices allowing access to food both the devices and the forces needed to depress the discs were varied widely this paper models the pigeons choice problems as a neo classical type of labor allocation problem it estimates the paths containing the least effortful allocations of pecks for given total rates of access to food and compares the subjects actual choices for proximity to the efficient choices the estimated efficiency levels are high supporting the neo classical model also shown is that the neo classical model predicts that the subjects behavior should be consistent with the melioration model of choice an alternative model of choice advocated by some psychologists copyright 1992 by royal economic society

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

slow down insensitivity to rate of consumption leads to avoidable satiation consumers often choose how quickly to consume things they enjoy the research presented here demonstrates that they tend to consume too rapidly growing tired of initially well liked stimuli such as a favorite snack experiments 1 and 4 or an enjoyable video game experiments 2 and 3 more quickly than they would if they slowed consumption the results also demonstrate that such overly rapid consumption results from a failure to appreciate that longer breaks between consumption episodes slow satiation the results present a paradox participants who choose their own rate of consumption experience less pleasure than those who have a slower rate of consumption chosen for them

entrepreneurship social mobility and income redistribution in south india development economists have been preoccupied with the problem of increasing the size of the gnp pie to the relative neglect of its distribution despite the recent disenchantment with the viewpoint that all classes share in the benefits of industrial growth empirical data on the distribution of income business opportunity and economic power are in short supply many of the studies on entrepreneurship and economic development when they are not apologetics for ruthless capitalist exploitation as paul baran suggests extol the achievements of the capitalist entrepreneur without examining class origins and monopoly advantage joseph schumpeter sees entrepreneurs irrespective of class origin as heroic figures with the dream and will to found a private kingdom to conquer adversity to achieve success for its own sake and to experience the joy of creation for gustav papanek 1967 the private entrepreneur who is frugal diligent far sighted remarkably able and willing to take political risks is in large part responsible for the success of pakistan in achieving rapid industrialization

the international transmission of financial shocks the case of japan one of the more dramatic financial events of the late 1980s and early 1990s was the surge in japanese stock prices that was immediately followed by a very sharp decline of more than 50 percent while the unprecedented fluctuations in japanese stock prices were domestic financial shocks the unique institutional characteristics of the japanese economy produce a framework that is particularly suited to the transmission of such shocks to other countries through the behavior of the japanese banking system the large size of japanese bank lending operations in the united states enables us to use u s banking data to investigate the extent to which this domestic japanese financial shock was transmitted to the united states as well as to identify a supply shock to u s bank lending that is independent of u s loan demand we find that binding risk based capital requirements associated with the decline in the japanese stock market resulted in a decline in commercial lending by japanese banks in the united states that was both economically and statistically significant this finding has added importance given the severe real estate loan problems currently faced by japanese banks how japanese bank regulators decide to resolve these problems will have significant implications for credit availability in the united states as well as in other countries with a significant japanese bank presence

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

dualism and macroeconomic volatility this paper develops a simple macroeconomic model that shows that combining capital market imperfections together with unequal access to investment opportunities across individuals can generate endogenous and permanent euctuations in aggregate gdp investment and interest rates reducing inequality of access may be a necessary condition for macroeconomic stabilization moreover countercyclical escal policies have a role to play in our model savings are underutilized in slumps because of the limited debt capacity of potential investors therefore the government should issue public debt during recessions in order to absorb those idle savings and enance investment subsidies or tax cuts for investors the most important single fact about saving and investment activities is that in our industrial society they are generally done by different people and for different reasons for years there might tend to be too little investment leading to deeation losses excess capacity and unemployment for other years there might tend to be too much investment leading to periods of chronic ineation unless prudent and proper public policies in the escal and monetary eelds are followed paul a samuelson economics 8th edition 1970 pp 196 198

the fewer the better number of goals and savings behavior abstract this article examines the effect of the number of goals on consumers savings behavior drawing from research on implementation intention the authors show that under certain conditions presenting a single savings goal leads to greater savings intention and actual savings than presenting multiple savings goals multiple goals typically evoke trade offs among competing goals and thus increase the likelihood that people will remain in a deliberative mind set and defer actions in contrast the authors propose and demonstrate that a single goal evokes a stronger implementation intention which in turn has a greater effect on behavior change they also show that the advantage of a single goal over multiple goals on saving is attenuated when saving is easier to implement or when the multiple savings goals are integrated rather than competing among themselves theoretical and practical implications are discussed

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

is the 2007 u s sub prime financial crisis so different an international historical comparison the first major financial crisis of the twentyfirst century involves esoteric instruments unaware regulators and skittish investors it also follows a well trodden path laid down by centuries of financial folly is the special prob lem of sub prime mortgages really different our examination of the longer historical record which is part of a larger effort on cur rency and debt crises finds stunning qualitative and quantitative parallels across a number of standard financial crisis indicators to name a few the run up in us equity and housing prices that graciela l kaminsky and reinhart 1999 find to be the best leading indicators of crisis in countries experiencing large capital inflows closely tracks the average of the previous 18 post world war ii banking crises in industrial countries so too does the inverted v shape of real growth in the years prior to the crisis despite widespread concern about the effects on national debt of the tax cuts of the early 2000s the run up in us public debt is actually some what below the average of other crisis episodes in contrast the pattern of us current account deficits is markedly worse at this juncture the book is still open on how the current dislocations in the united states will play out the precedent found in the aftermath of other episodes suggests that the strains can be quite severe depending especially on the initial degree of trauma to the financial system and to some extent the policy response the average drop in real per capita output growth is over 2 percent and it typically takes two years to return to trend for the five most catastrophic cases which include episodes in finland japan

liquidity and risk management firms and financial institutions are best viewed as ongoing entities whose project completion may require renewed injections of liquidity this paper proposes a contract theoretic framework integrating three dimensions of corporate financing and prudential regulation a liquidity management b risk management and c capital structure it concludes with a preliminary assessment of recent regulatory approaches to the treatment of market risk

how basic are behavioral biases evidence from capuchin monkey trading behavior behavioral economics has demonstrated systematic decision making biases in both lab and field data do these biases extend across contexts cultures or even species we investigate this question by introducing fiat currency and trade to a colony of capuchin monkeys and recovering their preferences over a range of goods and gambles we show that capuchins react rationally to both price and wealth shocks but display several hallmark biases when faced with gambles including reference dependence and loss aversion given our capuchins inexperience with money and trade these results suggest that loss aversion extends beyond humans and may be innate rather than learned

social benefit expenditures and stagflation evidence from the united states abstractstagflation refers to the terrible economic malaise associated with declining growth hyperinflation and high unemployment unlike previous cost push explanations such as an overheated labour market and oil prices this article suggests that social benefit expenditures are a potential cause of stagflation we investigate the impact of social benefit expenditures on stagflation in the u s over the 1950 2014 period by employing an autoregressive distributed lag ardl bounds testing approach to cointegration which was developed by pesaran shin and smith the influence of social benefit expenditures on economic growth and inflation and unemployment rates is estimated the empirical results from the u s suggest that economic growth responds negatively to social benefit expenditures while inflation and unemployment rates are both positively associated with social benefit expenditures thus government led rigid welfare could contribute to stagflation in the u s instead of increasing people s hap

maximisation and melioration as alternative forms of firm behavior abstract results from experimental psychology suggest that individuals reliably fail to optimize in cases where pay offs to a binary choice depend on the way similar choices have been distributed over a period of time the paper compares this observed form of behavior melioration with maximisation for illustration time distributed choice is introduced via the expedient of commodity durability and binary choice via market segmentation in a duopoly context it is seen that meliorating firms together or unilaterally may earn more profits than maximizing firms some implications are drawn concerning the question of firm natural selection

the source of optimality in action it is well known that the nature of the information set and the axioms of rational choice are critical in determining the type of ranking on which agents are held to act in economic theory this paper argues that the concept of the optimising agent is also sensitive to the conception of the relation between a ranking of options facing an agent and concrete action what is termed the realisation process three conceptions of the realisation process are examined which are seen to lead to three quite distinct views on the role of agency the enabling conditions under which the concept of the optimising agent may be legitimately applied and the resulting domain of application of optimisation

melioration a theory of distributed choice in this paper we develop a theory of individual choice called melioration which implies that choices distributed over a period of time may be reliably and predictably suboptimal in terms of the person s own preferences consider some typical examples of distributed choices the expenditure rate on various non durables frequency of athletic exercise rate of work in free lance type occupations allocation of leisure time rate of savings or dissavings expenditures on lottery tickets and other forms of gambling when people express dissatisfaction about their choices their discontent seems clustered around these sorts of distributed choices for example complaints that one is working too hard or not hard enough exercising too little or too much wasting time overeating overspending and so on are commonplace the next two sections of the paper spell out the basic theory we are proposing the following section then applies the theory to pathological consumption patterns and shows that one should find a general underinvestment in those activities that exhibit increasing average returns to rate of consumption and an overinvestment in activities that have an addiction like interaction between value and rate the final section compares the theory with other approaches to suboptimal choice

naive reinforcement learning with endogenous aspirations this article considers a simple model of reinforcement learning all behavior change derives from the reinforcing or deterring effect of instantaneous payoff experiences payoff experiences are reinforcing or deterring depending on whether the payoff exceeds an aspiration level or falls short of it over time the aspiration level is adjusted toward the actually experienced payoffs this article shows that aspiration level adjustments may improve the decision maker s long run performance by preventing him or her from feeling dissatisfied with even the best available strategies however such movements also lead to persistent deviations from expected payoff maximization by creating probability matching effects

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

do lenders favor politically connected firms rent provision in an emerging financial market corruption by the politically connected is often blamed for economic ills particularly in less developed economies using a loan level data set of more than 90 000 rms that represents the universe of corporate lending in pakistan between 1996 and 2002 we investigate rents to politically connected rms in banking classifying a rm as political if its director participates in an election we examine the extent nature and economic costs of political rent provision we nd that political rms borrow 45 percent more and have 50 percent higher default rates such preferential treatment occurs exclusively in government banks private banks provide no

addiction as a market failure using rational addiction results to justify tobacco regulation abstract tobacco regulation efforts have been criticized by some academic economists for failing to provide adequate welfare analytic justification this paper attempts to address these criticisms unlike previous research that has discussed second hand smoke and health care financing externalities this paper develops the logic for identifying the much larger market failures attributable to the failure of smokers to fully internalize the costs of their addictive behavior the focus is on teen addiction as a form of intrapersonal externality and observed adult consumption behavior consistent with partial myopia the importance of peer effects in the consideration of welfare impacts is also emphasized

the economics of consumer knowledge while approaches to measuring the state of a consumer s knowledge are well developed much less is known about the relationship between knowledge and consumer choice and information search the purpose of this article is to explore these relationships by treating consumer knowledge as human capital which affects the full price of consumption and search activities using this framework models are presented to explain life cycle consumption patterns lifestyles brand loyalty choice of features and search behavior this economic perspective is compared and contrasted to other consumer research on these topics including recent qualitative research that examines consumption behavior

flying under the radar perverse package size effects on consumption self regulation consumers believe that small package formats of hedonic but not of utilitarian products help to regulate consumption especially when their self regulatory concerns are activated these beliefs may backfire and increase consumption of hedonic products specifically activating self regulatory concerns had no consumption effects when tempting products came in small package formats yet when tempting products came in large package formats consumers deliberated most before consumption were least likely to consume and consumed the least this illustrates how small temptations can remain undetected flying under the radar and large package formats may reduce consumption as a result of the experienced self control conflict

capital market liberalization economic growth and instability summary this paper reviews briefly the arguments for capital market liberalization and identifies their theoretical and empirical weaknesses this provides the foundations for the argument for intervention in short term capital flows the paper concludes with a brief discussion of the various ways in which such interventions may be implemented 2000 elsevier science ltd all rights reserved

money and interest in a cash in advance economy the authors analyze an aggregative general equilibrium model in which the use of money is motivated by a cash in advance constraint applied to purchases of a subset of consumption goods the system is subject to both real and monetary shocks which are economy wide and observed by all they develop methods for verifying the existence of characterizing and explicitly calculating equilibria copyright 1987 by the econometric society

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

the red and the black mental accounting of savings and debt in the standard economic account of consumer behavior the cost of a purchase takes the form of a reduction in future utility when expenditures that otherwise could have been made are forgone the reality of consumer hedonics is different when people make purchases they often experience an immediate pain of paying which can undermine the pleasure derived from consumption the ticking of the taxi meter for example reduces one s pleasure from the ride we propose a double entry mental accounting theory that describes the nature of these reciprocal interactions between the pleasure of consumption and the pain of paying and draws out their implications for consumer behavior and hedonics a central assumption of the model which we call prospective accounting is that consumption that has already been paid for can be enjoyed as if it were free and that the pain associated with payments made prior to consumption but not after is buffered by thoughts of the benefits that the payments will finance another important concept is coupling which refers to the degree to which consumption calls to mind thoughts of payment and vice versa some financing methods such as credit cards tend to weaken coupling whereas others such as cash payment produce tight coupling our model makes a variety of predictions that are at variance with economic formulations contrary to the standard prediction that people will finance purchases to minimize the present value of payments our model predicts strong debt aversion that they should prefer to prepay for consumption or to get paid for work after it is performed such pay before sequences confer hedonic benefits because consumption can be enjoyed without thinking about the need to pay for it in the future likewise when paying beforehand the pain of paying is mitigated by thoughts of future consumption benefits contrary to the economic prediction that consumers should prefer to pay at the margin for what they consume our model predicts that consumers will find it less painful to pay for and hence will prefer flat rate pricing schemes such as unlimited internet access at a fixed monthly price even if it involves paying more for the same usage other predictions concern spending patterns with cash charge or credit cards and preferences for the earmarking of purchases we test these predictions in a series of surveys and in a conjoint like analysis that pitted our double entry mental accounting model against a standard discounting formulation and another benchmark that did not incorporate hedonic interactions between consumption and payments our model provides a better fit of the data for 60 of the subjects the discounting formulation provides a better fit for only 29 of the subjects even when allowing for positive and negative discount rates the pain of paying we argue plays an important role in consumer self regulation but is hedonically costly from a hedonic perspective the ideal situation is one in which payments are tightly coupled to consumption so that paying evokes thoughts about the benefits being financed but consumption is decoupled from payments so that consumption does not evoke thoughts about payment from an efficiency perspective however it is important for consumers to be aware of what they are paying for consumption this creates a tension between hedonic efficiency and what we call decision efficiency various institutional arrangements such as financing of public parks through taxes or usage fees play into this tradeoff a producer developing a pricing structure for their product or service should be aware of these two conflicting objectives and should try to devise a structure that reconciles them

deconstructing the law of effect abstract do the consequences of past behavior alter future policy as the law of effect assumes or are behavioral policies based on behaviorally produced information about the state of the world but not themselves subject to change in the first case stable policies are equilibria discovered by trial and error so adjustments to abrupt changes in the environment must proceed slowly in the second adjustments can be as abrupt as the environmental changes matching behavior is the robust tendency of subjects to match the relative time and effort they invest in different foraging options to the relative incomes derived from them measurement of the time course of adjustments to step changes in the reward scheduling environment show that adjustments can be as abrupt as the changes that drive them and can occur with the minimum possible latency broader implications for theories about the role of experience in behavior are discussed

cumulative utility consumer theory this paper makes some preliminary steps towards a dynamic theory of consumer choices restricted to the case of repeated small decisions the authors assume that the consumer chooses among products rather than among bundles and that she bases her decision on a cumulative satisfaction index the instantaneous utility of a product is closely related to the relative frequency with which it is consumed the aggregation of choices among products implicitly defines a choice of a bundle the authors propose to incorporate a product s price directly into its utility and show that it is consistent with balancing the consumer s budget copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

designing choice sets for stated preference methods the effects of complexity on choice consistency abstract we vary the complexity of choice sets used in stated preference methods to evaluate the impact on choice consistency we define five measures of complexity that capture either the amount of information or the correlational structure of information in a choice set using these measures as randomly assigned treatments in a large experiment we analyze the consistency of respondents choices using a heteroskedastic multinomial logit model we find that i all of our measures of choice set complexity affect choice consistency ii changes in the correlational structure of information have the largest impact on choice consistency and iii choice complexity significantly distorts welfare estimates our results confirm economists initial worry that moving from contingent valuation to conjoint methods will increase complexity induced choice inconsistency however our analysis also shows that these negative impacts may be mitigated if precautions are taken at the design and estimation stages of stated preference methods

corporate structure liquidity and investment evidence from japanese industrial groups this paper presents evidence suggesting that information and incentive problems in the capital market affect investment we come to this conclusion by examining two sets of japanese firms the first set has close financial ties to large japanese banks that serve as their primary source of external finance and are likely to be well informed about the firm the second set of firms has weaker links to a main bank and presumably faces greater problems raising capital investment is more sensitive to liquidity for the second set of firms than for the first set the analysis also highlights the role of financial intermediaries in the investment process

information the dual economy and development we examine the interactions between different institutional arrangements in a general equilibrium model of a modernizing economy there is a modern sector where productivity is high but information asymmetries are large and a traditional sector where productivity is low but information asymmetries are small consequently agency costs in the modern sector make consumption lending difficult while such lending is readily done in the traditional sector the resulting trade off between credit availability and productivity implies that not everyone will move to the modern sector in fact the laissez faire level of modernization may fail to maximize net social surplus this situation may also hold in the long run in a dynamic version of the model a trickle down effect links the process of modernization with reduction in modern sector agency costs this effect may be too weak and the economy may get stuck in a trap and never fully modernize the two sector structure also yields a natural theoretical testing ground for the kuznets inverted u hypothesis we show that even within the sectoral shifting class of models this phenomenon is not robust to small changes in model specification

lending by example direct and indirect effects of foreign banks in emerging markets using a novel dataset that allows us to trace the bank relationships of a sample of mostly unlisted firms we explore which borrowers are able to benefit from foreign bank presence in emerging markets our results suggest that the limits to financial integration are less tight than the static picture of firm bank relationships implies even though foreign banks are more likely to engage large and foreign owned firms after an acquisition a bank is 20 less likely to terminate a relationship with a firm if the acquirer is foreign rather than domestic most importantly within a credit market firms appear to have the same access to financial loans and ability to invest whether they borrow from a foreign bank or not while foreign banks benefit all firms by indirectly enhancing credit access

rational choice under an imperfect ability to choose we consider an individual who lacks the information processing capacity required for a direct comparison of all feasible allocations instead of finding at once a best allocation the individual myopically adjusts his current allocation toward higher utility the individual makes adjustment errors inversely proportional to his ability to choose we compare the stationary state of this process with the standard model we see how an imperfect ability to choose modifies both positive and normative predictions of the standard model and how the standard model can be obtained from our more general one as the special case corresponding to perfect ability jel d 11

limited availability reduces the rate of satiation in general consumers enjoy products less with repeated consumption unfortunately there are few known ways to slow such satiation the authors show that consumers satiate more slowly on a product when it is available for consumption only at limited times specifically they find that perceived limited availability made a product more enjoyable and yet this effect largely emerged only after repeated consumption the authors attribute this finding to an urge to take advantage of a rare consumption opportunity which leads people to pay less attention to the quantity consumed and subsequently to experience less satiation a series of studies establish the effect of perceived limited availability on the rate of satiation show that it influences how much people eat provide mediation evidence of the proposed theoretical account and eliminate the effect by making salient the total amount consumed the authors conclude with implications of these findings

the dynamics of the wealth distribution and the interest rate with credit rationing are uniquely determined and wealth dispersion among individuals or firms is irrelevant introducing credit rationing into the solow model modifies these conclusions multiple stationary interest rates and wealth distributions can exist because higher initial rates can be self reinforcing through higher credit rationing and lower capital accumulation the wealth accumulation process is ergodic in every steady state but wealth mobility is lower with higher steady state interest rates aggregate output is higher in steady states with lower interest rates because credit is better allocated short run interest rate or distribution shocks can be self sustaining and can have long run effects on output through the induced dynamics of the wealth distribution and credit rationing

melioration learning in games with constant and frequency dependent pay offs abstract the paper explores the implications of melioration learning an empirically significant variant of reinforcement learning for game theory we show that in games with invariable pay offs melioration learning converges to nash equilibria in a way similar to the replicator dynamics since melioration learning is known to deviate from optimizing behavior when an action s rewards decrease with increasing relative frequency of that action we also investigate an example of a game with frequency dependent pay offs interactive melioration learning is then still appropriately described by the replicator dynamics but it indeed deviates from rational choice behavior in such a game

dollars dollars everywhere nor any dime to lend credit limit constraints on financial sector absorptive capacity we exploit an unexpected inflow of liquidity in an emerging market to study how capital is intermediated to firms we find that backward looking credit limit constraints imposed by banks make it difficult for firms to borrow despite readily available bank liquidity healthy aggregate demand and a sharply falling cost of capital the resulting aggregate failure to extend and retain capital in the economy suggests that agency costs that force banks to rely on sticky balance sheet based credit limits prevent emerging economies from effectively intermediating capital

the fun and function of uncertainty uncertain incentives reinforce repetition decisions this research studies repetition decisions namely whether to repeat a behavior e g a purchase after receiving an incentive e g a discount can uncertainty drive repetition four experiments all involving real consequences for each individual participant document a counterintuitive reinforcing uncertainty effect individuals repeat a behavior more if its incentive is uncertain than if it is certain even when the certain incentive is financially better this effect is robust it holds in both lab and field settings and at both small and large magnitudes furthermore the experiments identify two theory driven boundary conditions for the reinforcing uncertainty effect the effect arises a only if the uncertainty is resolved immediately and not if the resolution of uncertainty is delayed and b only after not before one has engaged in repetitions these results support a resolution as reward account and cast doubt on other explanations such as reference dependent preferences this research reveals the hidden value of uncertain incentives and sheds light on the delicate relationship between incentive uncertainty and repetition decisions

investment cash flow sensitivities are useful a comment on kaplan and zingales arecent paper in this journal by kaplan and zingales reexamines a subset of erms from work of fazzari hubbard and petersen and criticizes the usefulness of investment cash eow sensitivities for detecting enancing constraints we show that the kaplan and zingales theoretical model fails to capture the approach employed in the literature and thus does not provide an effective critique moreover we describe why their empirical classiecation system is eawed in identifying both whether erms are constrained and the relative degree of constraints across erm groups we conclude that their results do not support their conclusions about the usefulness of investment cash eow sensitivities in a recent paper in this journal kaplan and zingales 1997 hereinafter kz argue that investment cash eow sensitivities do not provide useful evidence about the presence of enancing constraints because kz use a subset of the same erms and the same regressions as fazzari hubbard and petersen 1988 hereinafter fhp and claim page 176 that fhp can legitimately be considered the parent of all papers in this literature it is appropriate that we respond based on a simple theoretical model kz reach the provocative conclusion page 211 that the investment cash eow sensitivity criterion as a measure of enancial constraints is not well grounded in theory in section i we show that the kz model does not capture the theoretical approach employed in fhp and many subsequent studies most of the kz paper attempts to show that empirical investment cash eow sensitivities do not increase monotonically with the degree of enancing constraints within the 49 low dividend erms from the fhp sample in section ii we explain why the kz classiecation of the degree of constraints is eawed in identifying both whether or not erms are constrained absolute constraints as well as the relative degree of constraints across erms as a result we argue in section iii that there is no expected ex ante pattern for the