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

monotone stochastic choice models the case of risk and time preferences suppose that when evaluating two alternatives x and y by means of a parametric utility function low values of the parameter indicate a preference for x and high values indicate a preference for y

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

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

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

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

dynamics of a rural land market experiencing farmland conversion to acreages the case of saunders county nebraska this study analyzes an urban influenced real estate market that is experiencing land use transitions evaluating a three year period of unimproved real estate sales in saunders county nebraska has identified components that contribute to farmland values applying these components illustrates that buyers having special motivations often pay premiums to obtain agricultural land a model based on farmland productivity determines a crossover point where it becomes economically justifiable to convert farmland into acreage tracts illustrating productivity levels where concerns over development hold merit areas experiencing farmland development will obtain valuable information for land use and planning decisions from applying this research

demand for rent to own contracts a behavioral economic explanation abstract rental purchase contracts for consumer durables often described as renting to own typically require total payments two to four times greater than retail prices under such conditions why do lower income consumers ever select this option within several low income samples we consider liquidity constraints time preferences and risk attitudes as possible explanations for this demand use of these services appears to be a risk averse response to the income and expense shocks faced by low income households and a financial management tool to address myopic time preferences

possession and discounting behavior abstract subjects chose when they could first use financial rewards between choices 2 months apart we manipulated the early reward date and whether participants took immediate possession quasi hyperbolic discounting is rejected in favor of hyperbolic discounting without but not with possession

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

agricultural land values and the value of rights to future land development we investigate the inuence of fu ture land development on current agricultural land values from a theoretical model of land markets we derive a reduced form expression for agricultural land values in terms of observable variables this result dictates the speci cation of our econometric model and we nd strong sup port for the model in an application to new york state the estimated model together with a spa tial interpolation algorithm is used to generate a surface of estimated development rights values for orange county this approach overcomes several problems that arise with the use of stan dard appraisal methods to value conservation easements jel q24

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

is there one unifying concept of utility an experimental comparison of utility under risk and utility over time the nature of utility is controversial whereas decision theory commonly assumes that utility is context specific applied and empirical decision analysis typically assumes one unifying concept of utility applicable to all decision problems this controversy has hardly been addressed empirically because of the absence of methods to measure utility outside the context of risk we introduce a method to measure utility over time and compare utility under risk and utility over time we distinguish between gains and losses and also measure loss aversion in two experiments we found that utility under risk and utility over time differed and were uncorrelated utility under risk was more curved than utility over time subjects were loss averse both for risk and for time but loss aversion was more pronounced for risk loss aversion over risk and time were uncorrelated this suggests that loss aversion although important in both decision contexts is volatile and subject to framing

a simple explanation of some key time preference anomalies individual time discounting behaviour experimentally exhibits important anomalies that are inconsistent with the standard discounted utility model these include the time preference reversal characteristic of hyperbolic discounting the magnitude effect and the extreme sign effect i propose a simple explanation of discounting that accounts for these three anomalies simultaneously within the context of the expected utility model with uncertainty risk aversion and preference for precautionary saving experimentalement le comportement individuel dans l escompte du temps revele des anomalies importantes qui cadrent mal avec le modele standard de l utilite anticipee ce sont par exemple le renversement de la preference temporelle qui caracterise le processus d escompte hyperbolique ou l effet de magnitude ou l effet de signe extr me on propose une explication simple du comportement d escompte qui explique simultanement ces trois anomalies dans le cadre du modele d utilite anticipee en presence d incertitude d aversion au risque et de preference pour l epargne de precaution

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

hyperbolic discounting and the phillips curve using a standard dynamic general equilibrium model we show that the interaction of staggered nominal contracts with hyperbolic discounting leads to inflation having significant long run effects on real variables

smoking cessation a model of planned vs actual behavior for time inconsistent consumers we offer a simple model of intertemporal choice to characterize how planned versus actual behaviors evolve for time inconsistent smokers our results suggest that smokers participation and cessation decisions are governed by the interplay between three effects the cessation effect leads smokers to advance their plans to quit smoking whereas the procrastination effect leads them to consecutively revise their planned quitting age upwards consequently the duration of smoking is effectively governed by which one of these two effects is dominant finally for certain consumer segments a threshold effect causes an all or nothing type of extreme smoking behavior based on certain critical values of present biased preferences our results provide some preliminary evidence that both marketing efforts by tobacco firms and public policy initiatives can have a significant influence on smoking behavior in particular we find that reductions in the age at which individuals start smoking may not only vastly extend their duration of smoking but also convert potential never smokers into lifetime smokers finally we estimate a hazard model using survey data from over 800 smokers to provide evidence in support of our theoretical model

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

making the implicit explicit a look inside the implicit discount rate implicit discount rates idrs are employed in energy models to capture household investment decisions yet the factors behind the idr and their respective implications for policy making usually remain blurred and fractional the proposed comprehensive framework distinguishes three broad categories of factors underlying the idr for household adoption of energy efficient technologies eets preferences notably over time risk loss debt and the environment predictable ir rational behavior bounded rationality rational inattention behavioral biases and external barriers to energy efficiency existing empirical findings suggest that the factors underlying the idrs that differ across household characteristics and technologies should be accounted for in energy models furthermore the framework allows for a fresh look at the interplay of idrs and policies we argue that a simple observation of high idrs or observing correlations between idrs and socio economic characteristics does not provide guidance for policy making since the underlying sources cannot be identified instead we propose that some of the factors underlying the idr notably external barriers can be changed through directed policy interventions whereas other factors notably preferences and predictable ir rational behavior are innate and can only be taken into account through reactive policy interventions

agricultural profits and farm household wealth recent decades especially since 1973 have been an era of decreasing production profits that threaten the survival of many midand small sized american farms blank 2003 normally the survival of a firm depends on its profitability both in absolute and relative terms to remain viable a firm must offer returns that are both sufficient to cover the owner s financial obligations and competitive with returns from alternative investments if a firm is profitable the wealth of its owners can increase over time an unprofitable firm on the other hand reduces owners wealth yet american agriculture is full of firms that routinely earn low or negative returns on equity from production operations blank 2002 thus complicating the evaluation of the industry s economic health and prospects this suggests that macro level forecasts of american agriculture s future structure and performance require a micro level understanding of the relationship between farm profits and owner wealth this paper addresses that relationship

to be consumed with moderation abstract we study the optimal behavior of a hyperbolic discounting agent who has incomplete information about his own preferences and can only learn them through consumption we show that even if moderate current consumption and moderate future consumption always dominates abstinence the agent may optimally decide not to consume as a commitment device against inefficient learning that would lead to future excesses this provides a rationale for why smokers gamblers or compulsive buyers stick to second best personal rules of behavior such as abstinence without invoking standard habit formation arguments we also study how urges modify the strategy of the individual

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

repeated moral hazard with a time inconsistent agent abstract i consider a repeated principal agent model with moral hazard in which the agent has preferences which are widely used to capture time inconsistency i analyze the case where the agent is sophisticated in the sense that he is fully aware of his inconsistent discounting i characterize the optimal wage scheme for such an agent and compare it to time consistent benchmarks the marginal cost of rewarding the agent for high output today exceeds the marginal benefit of delaying these rewards until tomorrow in this sense the principal does not smooth the agent s rewards over time when facing a sophisticated agent it is optimal for the principal to reward the good performance more and punish the bad performance more in the early period relative to the optimal wage scheme for a time consistent agent

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

re evaluating the role of energy efficiency standards a behavioral economics approach abstract the economic models that prescribe pigovian taxation as the first best means of reducing energy related externalities are typically based on the neoclassical model of rational consumer choice yet consumer behavior in markets for energy using durables is generally thought to be far from efficient giving rise to the concept of the energy efficiency gap this paper presents a welfare analysis of energy policies that is based on a behavioral model of temptation and self control introduced by gul and pesendorfer 23 24 we find that in the presence of temptation i pigovian taxes alone do not yield a first best outcome ii when viewed as substitutes energy efficiency standards can dominate pigovian taxes and iii a policy combining standards with a pigovian tax can yield higher social welfare than a pigovian tax alone implying that the two instruments should be viewed as complements rather than substitutes

the effects of suburbanization on agriculture this article conceptualizes the effects of suburban population density and land speculation on agricultural production choices prices and profits a dual profit function model and a system of reduced form price equations are used to estimate these effects for new jersey results show that vegetable production is the only subsector to benefit from suburbanization while livestock is the most adversely affected suburbanization reduces responsiveness to agricultural prices and discourages capital and land use the overall impact on profits is positive when capital gains on land are included policy implications for farmland preservation and right to farm legislation are discussed

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

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

optimal capital structure and investment decisions under time inconsistent preferences based on a continuous time model of quasi hyperbolic discounting this paper provides an analytically tractable framework of entrepreneurial firms capital structure and investment decisions under time inconsistent preferences inefficiency in both investment and default is caused due to time inconsistency if we view the time consistent benchmark as efficient compared to the standard trade off theory in corporate finance we clarify that debt financing under time inconsistent preferences brings a new trade off between the alleviation effect on investment inefficiency and the aggravation effect on default inefficiency the impact of time inconsistent preferences depends on the entrepreneurs belief regarding their future time inconsistent behavior i e sophisticated or naive concretely we find that naive entrepreneurs always choose higher leverages while sophisticated ones are more likely to choose lower leverages compared to the time consistent benchmark therefore time inconsistency can explain the observed leverage puzzle i e why firms choose different leverages even with similar fundamentals moreover we demonstrate that time inconsistent preferences delay investment and hasten default due to the interaction among the three effects option value effect payoff value effect and leverage effect in particular naive entrepreneurs invest later and default earlier than sophisticated ones leading to a shorter operating period these results support the empirical findings in entrepreneurial finance

understanding farmland price changes this paper develops a structural model of land prices which includes the multidimensional effects of inflation on capital erosion savings return erosion and real debt reduction as well as the effect of changes in the opportunity cost of capital the results show that inflation and changes in the real returns on capital are major explanatory factors in farmland price swings in addition to returns to farming additionally the effects of credit market constraints and expectations schemes are considered explicitly in the analytical model

consumption and portfolio rules for time inconsistent investors abstract this paper extends the classical consumption and portfolio rules model in continuous time merton r c 1969 lifetime portfolio selection under uncertainty the continuous time case review of economics and statistics 51 247 257 merton r c 1971 optimum consumption and portfolio rules in a continuous time model journal of economic theory 3 373 413 to the framework of decision makers with time inconsistent preferences the model is solved for different utility functions for both naive and sophisticated agents and the results are compared in order to solve the problem for sophisticated agents we derive a modified hjb hamilton jacobi bellman equation it is illustrated how for crra functions within the family of hara functions logarithmic and power utilities the optimal portfolio rule does not depend on the discount rate but this is not the case for a general utility function such as the exponential cara utility function

discounting the distant future an experimental investigation we use a laboratory experiment to elicit discount rates over a 20 year time horizon using government savings bonds as a payment vehicle when using a constant exponential discount rate function we find an implied average discount rate of 4 9 which is much lower than has been found in previous experimental studies that used time horizons of days or months however we also find strong support for non constant declining discount rates for longer time horizons with an extrapolated implied annual discount rate approaching 0 5 in 100 years there is heterogeneity in discount rates and risk preferences in that people with more optimistic beliefs about technological progress have higher discount rates these findings contribute to the debate over the appropriate discount rate to use in comparing the long term benefits of climate change mitigation to the more immediate costs

endogenous time preferences of forest goods and community based forest management abstract in the economic analysis of cbfm people s discount rates are assumed exogenous and same for all goods we examined the validity of this assumption by eliciting the discount rates of households for grass timber fuelwood and money and analyzed the impacts of various personal and economic factors on households discount rates we found that time preferences are endogenous and good specific a good proportion of households have infinite discount rates for forest goods the mean values of monthly discount rates for households that indicated finite discount rates are 0 67 for timber 6 83 for fuelwood 55 49 for grass and 3 47 for money the availability of alternative sources and current consumption of the forest goods are two main determinants of a household s discount rates the study provides many useful insights for the design and implementation of cbfm programs the concept of mental accounting should be used for economic analyses of cbfm programs different management strategies should be adopted for different forest goods and alternative sources should be provided to meet the current needs of the households

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

implicit prices of soil characteristics for farmland in iowa arguments have long persisted that purchasers pay too much for poor land i e less productive more erosive relative to the higher quality counterpart in other words purchasers are either irrational or poorly informed relative to the differences in land productivity between poor and good farmland similar arguments have been advanced concerning the willingness to pay rent on the part of tenant operators little empirical evidence exists to support or reject this hypothesis farmland appraisals are sometimes cited as evidence to support the contention but such empiricism may indicate more about the quality and biases of appraisers than about the behavior or efficient functioning of the farmland market resolution of this issue is extremely important to the formation of soil conservation policy designed to protect soil productivity irrational behavior on the part of land purchasers may lead one to infer that the market system is failing to recognize adequately the soil productivity consequences of soil erosion if this oversight consistently leads to excessive soil erosion from society s perspective then some form of government intervention may be necessary to protect the welfare of society assuming that such intervention is capable of correcting the market failure

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

modeling the psychology of consumer and firm behavior with behavioral economics abstract marketing is an applied science that tries to explain and influence how firms and consumers behave in markets marketing models are usually applications of standard economic theories which rely on strong assumptions of rationality of consumers and firms behavioral economics explores the implications of the limits of rationality with the goal of making economic theories more plausible by explaining and predicting behavior more accurately while maintaining formal power this article reviews six behavioral economics models that are useful to marketing three models generalize standard preference structures to allow for sensitivity to reference points and loss aversion social preferences toward outcomes of others and preference for instant gratification the other three models generalize the concept of game theoretic equilibrium allowing decision makers to make mistakes encounter limits on the depth of strategic thinking and equilibrate by learning from feedback the authors also discuss a sp

choice and procrastination author s o donoghue ted rabin matthew abstract recent models of procrastination due to self control problems assume that a procrastinator considers just one option and is unaware of her self control problems we develop a model where a person chooses from a menu of options and is partially aware of her self control problems this menu model replicates earlier results and generates new ones a person might forego completing an attractive option because she plans to complete a more attractive but never to be completed option hence providing a non procrastinator additional options can induce procrastination and a person may procrastinate worse pursuing important goals than unimportant ones

why did the number of young farm entrants decline the influence of demographic and economic factors on the number of young farm entrants is investigated after controlling for the demographic effect it is found that higher commodity prices lower real interest rates and lower land values are associated with greater entry regional effects suggest lower entry in states with better nonfarm opportunities demographic factors suggest that the shrinking pool of potential entrants will lead to further decline in farm entry the decline in farm entry has important implications for the future structure of farming in the united states

spousal control and intra household decision making an experimental study in the philippines i elicit causal effects of spousal observability and communication on financial choices of married individuals in the philippines when choices are private men put money into their personal accounts when choices are observable men commit money to consumption for their own benefit when required to communicate men put money into their wives account these strong treatment effects on men but not women appear related more to control than to gender men whose wives control household savings respond more strongly to the treat ment and women whose husbands control savings exhibit the same response changes in information and communication interact with underlying control to produce mutable gender specific outcomes

the changing roles of urban influence and agricultural productivity in farmland price determination between 2000 and 2010 inflation adjusted u s farmland values increased by over 80 this period of rapid price appreciation coincided with both the agricultural commodity price boom and the broader financial crisis this paper examines the degree to which the determinants of farmland prices changed over this period using a panel of farmland transfer declarations from 98 illinois counties hedonic price analysis demonstrates that the relative importance of urban influence decreased over this period while the relative importance of agricultural productivity increased the study carries important implications for farmers farmland owners and policy makers

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

the migration of young adults from non metropolitan counties this article examines young adult migration from non metropolitan counties to either different non metropolitan counties or to metropolitan areas the results show that expected gains in initial earnings provide young entrants to the labor force with a marked incentive to migrate from their non metropolitan counties of origin initial earnings gains stem in part from higher returns to schooling in both metropolitan areas and other non metropolitan counties the propensity to migrate is also sensitive to the costs of migration which in turn are correlated with paternal education and the local presence of extended family copyright 2001 oxford university press

effects of payment mechanism on spending behavior the role of rehearsal and immediacy of payments past expenses have been shown to influence future spending behavior by depleting available budgets however a prerequisite for this relationship is the accurate recall of past payments and the experiencing of the full aversive impact associated with them this article shows that the use of different payment mechanisms influences both these factors and hence moderates the effects of past payments on future spending specifically past payments strongly reduce purchase intention when the payment mechanism requires the consumer to write down the amount paid rehearsal and when the consumer s wealth is depleted immediately rather than with a delay immediacy two experiments show support for the proposed theoretical framework

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

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

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

skewness as an explanation of gambling in cumulative prospect theory skewness of return has been suggested as a reason why agents might choose to gamble ceteris paribus in cumulative prospect theory cpt we investigate the relationship between moments of return in two models where agents choices over uncertain outcomes are determined as in cpt we illustrate via examples that in cpt theory as with expected utility theory propositions that agents have a preference for skewness may be invalid

models of quality adjusted life years when health varies over time survey and analysis quality adjusted life year qaly models are widely used for economic evaluation in the health care sector in the first part of the paper we establish an overview of qaly models where health varies over time and provide a theo retical analysis of model identification and parameter estimation from time trade off tto and standard gamble sg scores we investigate deterministic and probabilistic models and consider five different families of discounting functions in all the second part of the paper discusses four issues recurrently debated in the literature this discussion includes questioning the sg method as the gold standard for estimation of the health state index re examining the role of the constant proportional trade off condition revisiting the problem of double dis counting of qalys and suggesting that it is not a matter of choosing between tto and sg procedures as the combination of these two can be used to disen tangle risk aversion from discounting we find that caution must be taken when drawing conclusions from models with chronic health states to situations where health varies over time one notable difference is that in the former case risk aversion may be indistinguishable from discounting models of quality adjusted life years qalys are widely used as health related quality of life measures for economic evaluation in the health care sector in its simplest form the qaly approach assumes that the utility of a profile of health states over time may be estimated by adding the values of the constituent health states in the health profile in more sophisticated models health events occurring in the future may be discounted or risk adjusted

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

loss aversion and the term structure of interest rates this article studies how the loss averse behaviour affects the term structure of real interest rates since the pro cyclical conditional expected marginal rate of substitution implied from the us consumption data is consistent with the proposition of loss aversion we incorporate the loss averse behaviour of prospect theory into the consumption based asset pricing model motivated by the similarity between habit formation and the prospect theory utility habit formation is exploited to determine endogenously the reference point of this behavioural finance utility the highly curved characteristic of the term structure of real interest rates can thus be captured by the additional consideration of loss aversion this model also fits the downward sloping volatility of the real yield curve in the data of us treasury inflation protection securities tips moreover depending on the effective risk attitude of the representative agent with the loss averse behaviour of prospect theory our model is capable of

decreasing impatience and the magnitude effect jointly contradict exponential discounting abstract the experimental literature on time preference finds that the manner in which subjects discount money as opposed to utility exhibits properties known as decreasing impatience and the magnitude effect while these findings are often referred to as anomalies for the exponential discounting model several authors have demonstrated that each of these qualitative findings can be explained by the curvature of utility and thus are not anomalies we prove that under basic regularity conditions the two findings jointly imply the existence of preference reversals and thus jointly contradict the exponential discounting model

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

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

the effect of farmland preservation programs on farmland prices government agencies in urbanizing areas are increasingly utilizing purchase and transfer of development rights programs to preserve farmland and protect local farm economies this article tests the effect of development restrictions imposed by permanent easement sales on farmland sales prices using maryland data we correct for selectivity bias due to the voluntary nature of these programs in estimating hedonic sales equations although preserved parcels actual land values are lower the effect of the restrictions is not statistically significant these findings may encourage additional participation in preservation programs or justify reductions in the easement prices paid by agencies copyright 2001 oxford university press

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

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

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