the effect of decision order on purchase quantity decisions abstract consumers often resolve trade offs in a particular order for example when making flavor and size decisions consumers might first decide which flavors to choose and then decide which sizes of those flavors to choose this research examines the effect of decision order on purchase quantity decisions the authors build on prior work on decision difficulty and conflict to show that consumers choose more overall and more variety when they consider a less replaceable attribute in an earlier rather than a later stage in the purchase decision for example consumers choose a greater quantity when flavor or brand decisions precede rather than follow size decisions the authors find that the degree of attribute replaceability also moderates the effect of decision order on quantity chosen furthermore marketers can influence the amount chosen by altering the organization of the shelf display finally the authors find that when consumers explicitly consider the possibility of deferring their dec

risk preferences at different time periods an experimental investigation intertemporal decision making under risk involves two dimensions time preferences and risk preferences this paper focuses on the impact of time on risk preferences independent of the intertemporal trade off of outcomes i e time preferences it reports the results of an experimental study that examines how delayed resolution and payment of risky options influence individual choice we used a simple experimental design based on the comparison of two outcome monetary lotteries with the same delay raw data clearly reveal that subjects become more risk tolerant for delayed lotteries assuming a prospect theory like model under risk we analyze the impact of time on utility and decision weights independent of time preferences we show that the subjective treatment of outcomes i e utility is not significantly affected by time in fact the impact of time is completely absorbed by the probability weighting function the effect of time on risk preferences was found to generate probabilistic optimism resulting in a higher risk tolerance for delayed lotteries this paper was accepted by teck ho decision analysis

keeping your gains close but your money closer the prepayment effect in riskless choices abstract although research on loss aversion now spans more than three decades researchers are still debating whether or in which cases the finding holds true for money we contribute to this debate by exploring how prepayment affects financial decisions in one set of experiments we show that when faced with a tradeoff between post and prepayment participants overvalue prepaid money and sometimes even prefer it over objectively higher gains importantly this effect was more pronounced when prepayment was more distant from its pure representation in dollars and cents experiment 1a as well as when potential losses were directly linked to specific options experiment 1b as far as the processes involved our results suggest that prepayment leads to increased personal commitment to prepaid options experiment 1c in a second set of experiments we show that even when the tradeoff element is eliminated participants are more motivated and engaged in a task that is prepaid rather than post paid experiments 2a and 2b based on our findings we discuss how firms can use prepayment mechanisms to get more out of their agents and how individuals can be motivated to better utilize their money

let me dream on anticipatory emotions and preference for timing in lotteries we analyze one of the explanations why people participate in lotteries our hypothesis stipulates that part of the value that a unit of money buys in lotteries is consumed before the actual resolution in the form of emotions such as hope in other words a person holding a lottery ticket may prefer a delayed resolution of risk due to positive anticipatory emotions this conjecture is tested in an experiment with real lottery tickets we show that our theoretical considerations may contribute to explaining empirical puzzles associated with lottery participation timing of resolution and the spreading of lots over drawings more specifically we find that a substantial minority of participants prefer delayed resolution that anticipated thrill is the main variable explaining this choice and that emotions actually experienced during the waiting period are indeed predominantly positive and correlated with predictions finally we find that a great majority prefers to spread chances that is to obtain one ticket for each of two drawings rather than two for the same drawing

the effects of effort and intrinsic motivation on risky choice people often need to trade off between the probability and magnitude of the rewards that they could earn for investing effort the present paper proposes that the conjunction of two simple assumptions relating effort induced reward expectations to prospect theory s value function provides a parsimonious theory that predicts that the nature of the required effort will have a systematic effect on such trade offs using the case of frequency or loyalty programs a series of five studies involving both real and hypothetical choices demonstrated that a the presence as opposed to absence of effort requirements enhances the preference for sure small rewards over large uncertain rewards b the preference for reward certainty is attenuated when the effort activity is intrinsically motivating and c continuously increasing the effort level leads to an inverted u effect on the preference for sure small over largeuncertain rewards the studies also employ process measures and examine the mechanisms underlying the impact of the effort stream on the trade off between the certainty and magnitude of rewards the final section discusses the theoretical implications of this research as well as the practical implications with respect to frequency programs and other types of incentive systems

consumer preference for a no choice option the traditional focus in the decision making literature has been on understanding how consumers choose among a given set of alternatives the notion that preference uncertainty may lead to choice deferral when no single alternative has a decisive advantage is tested in seven studies building on recent research the article shows that the decision to defer choice is influenced by the absolute difference in attractiveness among the alternatives provided and is not consistent with trade off difficulty or the theory of search these findings are then extended to show that choice deferral can also be modified for the same alternatives by manipulations that make them appear more similar in attractiveness or that decrease the need to differentiate among them the results are consistent with the notion that preference uncertainty results in a hesitation to commit to any single action since small differences in attractiveness among the alternatives are potentially reversible consistent with this premise the effect of attractiveness difference on choice deferral decreased significantly when subjects were first allowed to practice making monetary trade offs among the available alternatives

motivated health risk denial and preventative health care investments abstract people deny health risks invest too little in disease prevention and are highly sensitive to the price of preventative health care especially in developing countries moreover private sector r d spending on developing country diseases is almost non existent to explain these empirical observations i propose a model of motivated belief formation in which an agent s decision to engage in health risk denial balances the psychological benefits of reduced anxiety with the physical cost of underprevention i use the model to study firms price setting behavior and incentive to innovate i also show that tax funded prevention subsidies are welfare enhancing

the effect of explicit reference points on consumer choice and online bidding behavior sellers often explicitly suggest to buyers that they compare one option to other reference options building on the notion that loss aversion is more pronounced when comparisons are explicit rather than implicit we propose that the mere fact that consumers are explicitly told to make particular comparisons induces more risk averse cautious choice and bidding behavior this proposition was supported in a field experiment involving real online auctions in which comparisons among listings either were done spontaneously by bidders or were encouraged using an explicit instruction to compare the focal auction with adjacent listings results showed that explicit reference points 1 diminished the influence of adjacent auction prices on the focal auction s price 2 led participants to submit fewer lower and later bids 3 increased the incidence of sniping 4 decreased bidding frenzy and 5 decreased the tendency to bid on multiple items simultaneously the impact of explicit comparisons on risk averse behavior was further tested in a very different context using a laboratory choice experiment in that study explicit instructions to compare option sets increased the tendency to choose the compromise low risk and all average alternatives we discuss the theoretical and practical implications of this research

reward programs and tacit collusion reward programs a promotional tool to develop customer loyalty offer incentives to consumers on the basis of cumulative purchases of a given product or service from a firm reward programs have become increasingly common in many industries the best known examples include frequent flier programs offered by airlines frequent guest programs offered by hotels and frequent shopper programs offered by supermarkets despite the widespread business practice of reward programs research efforts on reward programs particularly in marketing have been scarce our paper takes an important step towards understanding the design of reward programs and its implications on pricing strategies we study a market that consists of two segments heavy and light user segments the key distinction between the two segments is that the heavy user segment purchases in each period and thus is a candidate for the reward programs in contrast the light user segment exits the market after one purchase and is not in a position to exploit reward programs an important feature of our model is that we allow for different price sensitivity between heavy user and light user segments our model closely examines the type of rewards a reward worth a dollar to the consumer might have different cost implications for the offering firm depending on the type of reward for example cash rewards have higher unit reward cost inefficient reward for the firm than a free product of the firm such as an airline ticket or long distance minutes efficient reward specifically we examine an interesting puzzle observed in the marketplace several firms offer a cash reward or a product not made by the firm such as jackets electronic items etc these firms could offer their own product as rewards and significantly lower their cost we examine whether there is any reason for such a seemingly suboptimal practice our analysis shows that reward programs weaken price competition by offering the incentives for repeat purchases reward programs increase a firm s cost to attract competing firms current customers because firms gain less from undercutting their prices equilibrium prices go up moreover as consumers become unwilling to switch because of potential rewards the firm with a larger market share in the heavy user segment charges higher prices therefore a low price in the first period which leads to a larger market share in the heavy user segment will always be followed by a high price in the second period in our model consumers are rational and can correctly anticipate firms incentive to offer lower prices initially to enroll them into the reward programs our paper offers an explanation as to why the type and amount of reward may vary across the programs we identify two determining factors for the selection of rewards size and relative price sensitivity of the heavy user segment we find that in a market with a small heavy user segment that is also much more price sensitive than the light user segment it is optimal for firms to offer the most inefficient rewards the intuition is based on the firms incentive to exploit the price insensitive light user segment by offering inefficient rewards firms are able to commit to weaker competition and therefore higher prices when the heavy user segment is large or not very price sensitive when compared to the light user segment competing firms should adopt the most efficient rewards to maximize their profit this may well be the case in a number of real world situations in which efficient rewards are quite prevalent we also find that optimal reward amount has a negative relationship with unit reward cost because both firms use rewards to attract the heavy users they tend to offer more when they adopt the more efficient rewards finally our paper identifies the relationship between market characteristics and theimpact of reward programs on firms profits and consumers benefits we find that firms gain from the adoption of reward programs as long as light users are not too price sensitive when light users are very price sensitive firms engage in intense price competition thus benefiting little from the loyalty of heavy users created through rewards because reward programs increase market prices light users who do not get the reward earn strictly lower benefit in contrast heavy users often stand to gain more from the reward program in most cases firms and the heavy users are better off at the expense of light users

buying a dream alternative models of demand for lotto existing lotto demand models utilize effective price computed as the face value of a ticket minus the expected value of prize money per ticket as their primary explanatory variable by contrast this article proposes a key role for consumption benefit or fun in the demand for gambling in general and lotto demand in particular it develops an alternative model of lotto demand that focuses on the maximum possible prize when this is tested against the traditional model using data from the u k national lottery we find that jackpot considerations exert an influence over and above that of variations in effective price

taking stock a critical assessment of recent research on inventories empirical and theoretical aspects of inventory behavior became hot topics in the 1950s and early 1960s no one seemed to notice the tension that was developing between the emerging macroeconomic and microeconomic views of inventories macroeconomists routinely thought of inventories as a destabilizing factor yet the prevailing micro theory viewed inventories as a stabilizing factor it was a fascinating question that was barely explored instead somewhat inexplicably interest in inventories dried up as if inventories were of minor economic significance and little intrinsic interest by the early 1980s then economists once again knew something they had known in the 1950s that inventory investment is of first order importance in business cycles but they were also beginning to realize that the standard production smoothing buffer stock model of inventories was in deep trouble this paper focuses on developments since that realization

more or less a model and empirical evidence on preferences for under and overpayment in trade in transactions abstract trade in transactions typically involve an exchange of an old used version for a new or newer version of the product when consumers trade in their used model for a new model the firm faces the choice of paying the consumer a relatively low price for the used model and charging a commensurately low price for the new model or paying a relatively high price for the used model and charging a commensurately high price for the new model the extant literature suggests that consumers always prefer to be overpaid in trade in transactions because they disproportionately value the gain associated with the revenues from the sale of the used version of the product the authors draw from the prospect theory value function to develop a simple analytical model that identifies a condition under which this preference for overpayment is reversed their model predicts that even when faced with economically equivalent price formats consumers prefer to be overpaid when the ratio of the price of their used product

identifying the macroeconomic effect of loan supply shocks the inability to clearly distinguish the effects of shocks to loan supply from those to loan demand has made it difficult to quantify the economic importance of the credit channel in the transmission mechanism of monetary policy this study provides an innovative approach to identifying loan supply shocks three different results confirm that loan supply shocks have been successfully isolated from shifts in loan demand our measure is particularly important for explaining inventory movements the component of gdp most dependent on bank lending the effect is present even during periods with strong loan demand and the effect remains even when the unpredictable part of the loan supply shock is isolated this identification enables us to show that loan supply shocks have had economically important effects on the u s economy

constructive consumer choice processes consumer decision making has been a focal interest in consumer research and consideration of current marketplace trends e g technological change an information explosion indicates that this topic will continue to be critically important we argue that consumer choice is inherently constructive due to limited processing capacity consumers often do not have well defined existing preferences but construct them using a variety of strategies contingent on task demands after describing constructive choice consumer decision tasks and decision strategies we provide an integrative framework for understanding constructive choice review evidence for constructive consumer choice in light of that framework and identify knowledge gaps that suggest opportunities for additional research

business cycle measurement with some theory a method to evaluate cyclical models not requiring knowledge of the dgp and the exact specification of the aggregate decision rules is proposed we derive robust restrictions in a class of models use some to identify structural shocks in the data and others to evaluate the class or contrast sub models the approach has good properties even in small samples and when the class of models is misspecified the method is used to sort out the relevance of a certain friction the presence of rule of thumb consumers in a standard class of models

what does a financial shock do first international evidence in this paper we attempt to evaluate the quantitative impact of financial shocks on key indicators of real activity and financial conditions we focus on financial shocks as they have received wide attention in the recent literature and in the policy debate after the global financial crisis we estimate a panel var for 21 advanced economies based on quarterly data between 1985 and 2011 where financial shocks are identified through sign restrictions we find robust evidence that financial shocks can be separately identified from other shock types and that they exert a significant influence on key macroeconomic variables such as gdp and particularly investment but it is unclear whether these shocks are demand or supply shocks from the standpoint of their macroeconomic impact the financial development and structure of a given country is found not to matter much for the intensity of the propagation of financial shocks moreover we generally find that these shocks play a role not only in crisis times but also in normal conditions finally we discuss the implications of our findings for monetary policy fabio fornari and livio stracca

international effects of a compression of euro area yield curves abstract in this paper we use a bayesian global vector autoregressive model to analyze the macroeconomic effects of a flattening of euro area yield curves our findings indicate positive effects on real activity and prices both within the euro area as well as in neighboring economies spillovers transmit through an exchange rate channel and a broad financial channel we complement our analysis by conducting a portfolio optimization exercise our results show that multi step ahead forecasts conditional on the euro area yield curve shock improve sharpe ratios relative to other investment strategies

inventories as factors of production and economic fluctuations this paper presents a theory of inventory investment by stage of processing and uses it to examine the role of inventory investment in economic fluctuations the model in which inventories are treated as factors of production is estimated for four durable goods industries three conclusions emerge from the estimation first the estimates generally satisfy the theoretical restrictions second the elasticity of inventory demand with respect to output is high indicating an important accelerator effect finally the estimates suggest that shifts in the demand for inventories are an important source of economic fluctuations copyright 1989 by american economic association

an historical decomposition of the great depression to determine the role of money abstract the innovation accounting technique of historical decomposition seems ideally suited as a vehicle for a re examination of money s role during the depression its application using u s monthly data for 1919 to 1941 reveals that innovations in money exerted a considerable influence on prices and output after october 1929 although the depth of the depression and the extent of the subsequent recovery cannot be attributed solely to monetary factors an important albeit occasionally diminished monetary effect is also identified even when a passive contemporaneous response by money to price and output fluctuations is assumed not to contribute to the effect

how do us credit supply shocks propagate internationally a gvar approach abstract we study how us credit supply shocks are transmitted to other economies we use the recently developed gvar approach to model financial variables jointly with macroeconomic variables in 33 countries for the period 1983 2009 we experiment with inter country links based on bilateral trade portfolio investment foreign direct investment and banking exposures capturing both bilateral trade and financial exposures in a gvar fits the data better than using trade weights only we use sign restrictions on the short run impulse responses in the us model to identify the credit supply shocks we find that negative credit supply shocks have strong negative effects on us and foreign gdp credit and equity markets in several countries respond clearly to the shocks exchange rate responses are consistent with a flight to quality to the us dollar the credit supply shocks explain about a fifth of one year ahead output forecast error variance in the us and about a tenth in the euro area and the uk but considerably less elsewhere

drawing conclusions from structural vector autoregressions identified on the basis of sign restrictions abstract this paper discusses the problems associated with using information about the signs of certain magnitudes as a basis for drawing structural conclusions in vector autoregressions we also review available tools to solve these problems for illustration we use dahlhaus and vasishtha s 2019 study of the effects of a u s monetary contraction on capital flows to emerging markets we explain why sign restrictions alone are not enough to allow us to answer the question and suggest alternative approaches that could be used

the effect of forced choice on choice abstract whereas most academic and industry studies of consumer preferences and decision making involve forced choice i e participants are told to choose one of the presented product or service alternatives buyers usually also have the option not to select any alternative an implicit assumption in the experimental practice of forcing choice is that the no choice option draws proportionately from the various available alternatives such that the qualitative conclusions are unaffected however the authors propose that the no choice option competes most directly with alternatives that buyers tend to select when they are uncertain about their preferences building on this general proposition the authors show that the introduction of the no choice option strengthens the attraction effect weakens the compromise effect and decreases the relative share of an option that is average on all dimensions they also examine the mechanisms underlying the impact of having the option not to choose and the condi

identifying the global transmission of the 2007 2009 financial crisis in a gvar model abstract the paper analyses and compares the role that the tightening in liquidity conditions and the collapse in risk appetite played for the global transmission of the financial crisis dealing with identification and the large dimensionality of the empirical exercise with a global var approach the findings highlight the diversity of the transmission process while liquidity shocks have had a more severe impact on advanced economies it was mainly the decline in risk appetite that affected emerging market economies the tightening of financial conditions was a key transmission channel for advanced economies whereas for emerging markets it was mainly the real side of the economy that suffered moreover there are some striking differences also within types of economies with europe being more adversely affected by the fall in risk appetite than other advanced economies

housing cycles and macroeconomic fluctuations a global perspective abstract this paper investigates the international spillovers of housing demand shocks on real economic activity the global economy is modeled using a global var with a novel house price data set for both advanced and emerging economies the impulse responses to an identified u s housing demand shock confirm the existence of strong international spillovers to advanced economies in contrast the response of some major emerging economies is not significantly different from zero moreover the analysis of synchronized housing demand shocks speaks in favor of the recent evidence of increased resilience of emerging economies to shocks originating in advanced economies and it also suggests that a close monitoring of housing cycles in advanced economies as well as in emerging economies should be of interest for policy makers

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

suspense dynamic incentives in sports contests in a dynamic model of sports competition if spectators care only about contestants efforts incentive schemes depending linearly on the final score difference dominate rank order schemes based only on who wins if spectators also care about suspense defined as valuing more contestants efforts when the game is closer rank order schemes can dominate linear score difference schemes and this will be the case when the demand for suspense is sufficiently high under additional assumptions we show that the optimal rank order scheme dominates a broad class of incentive schemes sport contestants can earn substantial financial prizes total prize money at wimble don topped 10 million for the first time in 2005 the professional golf association has distributed approximately 250 million in prize money across 48 events in the pga tour even in less professional sports prize money plays an important role nearly 21 million in prize money was awarded in international track and field competitions in 2004 interestingly prize money is typically allocated on the basis of who wins and who loses more informative measures of performance such as score differences rarely matter even though they are readily available when there are several contestants in a sporting event rewards depend on who wins the most games round robin tourna ment or on the sequence of games won elimination tournament total scores and other performance measures matter only in terms of determining who the winner is not how much the winner gets although for superstar athletes prize money pales in comparison with income from sponsorship deals only about 6 million of tiger woods income of close to 90 million in 2004 was prize money sponsorship money can depend on factors such as charisma and star power other than athletic perform ance so prize money is still the main provider of incentives for efforts in a given sports event likewise in recent years contracts for players in some team sports are loaded with incentive clauses that often take on a strong piece rate flavour e g salaries for batters depending on the batting average in baseball but financial incentives for team efforts remain largely independent of relative performance measures such as score differences why do win lose rank order incentives dominate in the design of financial incentives in sports especially in individual sports the literature on optimal design of rank order tournaments that began with lazear and rosen 1981 explains how tournaments provide incentives for efforts however the literature has not shed much light on when rank order incentive schemes are preferred to schemes based on other relative performance measures particularly when the agents are risk neutral prendergast 1999 pp 36 7 reviews several reasons for using tournaments but it remains unclear why prizes in sporting events depend only on rank order of scores and not on scores themselves holmstrom 1982 casts doubt this article was originally titled suspense it was first presented at the memorial conference for sherwin

the motivating uncertainty effect uncertainty increases resource investment in the process of reward pursuit can a reward of an uncertain magnitude be more motivating than a reward of a certain magnitude this research documents the motivating uncertainty effect and specifies when this effect occurs people invest more effort time and money to qualify for an uncertain reward e g a 50 chance at 2 and a 50 chance at 1 than a certain reward of a higher expected value e g a 100 chance at 2 this effect arises only when people focus on the process of pursuing a reward not when they focus on the outcome the reward itself when the focus is on the process of reward pursuit uncertainty generates positive experience such as excitement and hence increases motivation four studies involving real rewards lend support to the motivating uncertainty effect this research carries theoretical implications for research on risk preference and motivation and practical implications for how to devise cost efficient consumer incentive systems

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

endogeneity in marketing decision models there are many critical concerns including the accounting for endogeneity when one is properly estimating response functions however it is sometimes certainly not always better to leave some variables exogenous when building mathematical models intended to help decision makers the exogenous variables allow the decision maker to better adapt the mathematical model to different situations and to incorporate myriad variables and constraints outside of the model

testing the rationality of price forecasts new evidence from panel data this paper tests the rationality of individual price forecasts in a panel of professional forecasters here unlike in most previous studies rationality is not rejected the results here differ because 1 using individual forecasts avoids aggregation bias 2 comparison of forecasts to initial data avoids bias due to data revision 3 the professional forecasters have economic incentives to state their expectations accurately and 4 a new covariance matrix estimator consistent when forecast errors are correlated across individuals is used copyright 1990 by american economic association

international spillovers from euro area and us credit and demand shocks a focus on emerging europe abstract in this paper we examine the international effects of contractions in loan supply loan demand and aggregate demand in the euro area and the usa all three shocks have been at the forefront in spreading stress during the period of the global financial crisis and in particular so to countries that are strongly integrated with the euro area we find that these shocks decrease international output and total credit to a varying degree loan demand and aggregate demand shocks in the euro area trigger significant negative spillovers on output in most other regions evidence for global negative output effects of euro area loan supply shocks is fraught with considerable estimation uncertainty when these three types of shocks emanate from the usa we find significant negative spillovers on output also for loan supply shocks in general international effects on total credit are an order of magnitude larger than those on output with again more evidence that is significant for us than euro area shocks last and taking a regional stance our results indicate that economies from emerging europe are most vulnerable to all shocks considered through their strong economic integration with the euro area these economies are likewise exposed to euro area and us shocks and spillover effects are often larger than the domestic response in the country of shock origin

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

loan supply shocks during the financial crisis evidence for the euro area this paper employs a panel vector autoregressive model for the member countries of the euro area to explore the role of banks during the slump of the real economy that followed the financial crisis in particular we seek to quantify the macroeconomic effects of adverse loan supply shocks which are identified using sign restrictions we find that loan supply shocks significantly contributed to the evolution of the loan volume and real gdp growth in all member countries during the financial crisis however concerning both the timing and the magnitude of the shocks our results also indicate that the euro area was characterized by a considerable degree of cross country heterogeneity

developments in non expected utility theory the hunt for a descriptive theory of choice under risk this article reviews recent developments in the economic theory of individual decision making under risk since the 1950s it has been known that individual choices violate the standard model of expected utility in predictable ways considerable research effort has now been devoted to the project of developing a superior descriptive model following an overview of non expected utility theories which distinguishes between conventional and non conventional approaches the paper seeks to assess these alternative models in terms of empirical success using laboratory and field data and theoretical usefulness the closing sections reflect on some new directions emerging in this literature

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

need for cognitive closure risk aversion uncertainty changes and their effects on investment decisions investment decisions play a crucial role in the way consumers manage their wealth and therefore it is important to understand how consumers make these decisions this research contributes to this attempt by examining consumers investment decisions in response to new information about changes in uncertainty in financial markets the authors identify possible conditions under which consumers despite having new information about changes in market uncertainty are less likely to assimilate the new information and consequently do not make investment decisions that are in line with their risk aversion levels specifically in a series of studies the authors show that high rather than low need for cognitive closure can lead to a lack of openness to new information and therefore may dilute consumers tendency to update their investment portfolios in a way that reflects their risk preferences in addition the authors address possible ways to influence consumers assimilation of new information to help even

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