an experiment on time preference and misprediction in unpleasant tasks we experimentally investigate the time inconsistent taste for immediate gratification and future preference misprediction across 7 weeks 100 participants choose the number of unpleasant transcription tasks given various wages to complete immediately and at different future dates participants preferred 10 12 fewer tasks in the present compared to any future date leading to an estimated of 0 83 comparing predictions with actual immediate work choices provides evidence against substantial sophistication with estimates implying that participants understand no more than 24 of their present bias finally we find evidence of projection bias participants wished to complete 4 12 fewer tasks when decisions were elicited right after completing tasks rather than before

wealth accumulation over the life cycle and precautionary savings this article constructs and simulates a life cycle model of wealth accumulation and estimates the parameters of the utility function the rate of time preference and the coefficient of risk aversion by matching the simulated median wealth profiles with those observed in the panel study of income dynamics and in the survey of consumer finances the estimates imply a low degree of patience and a high degree of risk aversion the results are used to study the importance of precautionary savings in explaining wealth accumulation they imply that wealth accumulation is driven mostly by precautionary motives at the beginning of the life cycle whereas savings for retirement purposes become significant only closer to retirement

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

market access for sale abstract this paper focuses on the links between foreign lobbying and preferential market access granted by the united states government to exporters in the rest of the americas we first develop a simple framework based on grossman and helpman grossman g helpman e 1994 protection for sale american economic review 84 4 833 850 to explain how lobbying by foreign firms affects their preferential access to the united states market we then estimate the model using data on tariff preferences and lobby contributions for the 34 countries in the region empirical results suggest that foreign lobbying is an important force behind preferential market access to the united states the structural estimates indicate that the weight given to foreign lobby contributions in the united states government objective function is five times higher than the weight granted to tariff revenue forgone due to preferences thus our results indicate that market access is up for sale and foreign lobbies are buying it

elasticities of substitution in caribbean tourism abstract this paper constructs a three level ces model and estimates the effect of real exchange rates on competition for tourism earnings elasticities of substitution are estimated first intra caribbean then among regional aggregates a worldwide and a u s market are both estimated u s tourists substitute relatively more interregionally but less intra caribbean significant effects of political violence are also captured development policy options are examined including the role of parallel tourism exchange rates and caribbean collusion

inferring discount rates from time preference experiments abstract we observe that identification of the discount rate from experimental data requires an assumption about the consumption period the length of time over which a payment will be turned into utility providing consumption we show that the optimal consumption period is substantially longer than assumed in previous studies when the consumption period is allowed to take on more reasonable values the discount rates implied by experimental choices are unreasonably large and relatively insensitive to assumptions about utility curvature

risk taking for others under accountability we let subjects take risky decisions that affect themselves and a passive recipient adding a requirement to justify their choices significantly reduces loss aversion this indicates that such an accountability mechanism may be effective at debiasing loss aversion in agency relations

present bias quasi hyperbolic discounting and fixed costs in this paper we elicit preferences for money time pairs via experimental techniques we estimate a general specification of discounting that nests exponential and hyperbolic discounting as well as various forms of present bias including quasi hyperbolic discounting our experimental data do not appear peculiar in any dimension in particular we find clear evidence for present bias as most of the previous literature however no evidence for quasi hyperbolic discounting is found and the data strongly favor instead a specification with a small present bias in the form of a fixed cost of the order of 4 on average across subjects with such a fixed cost the curvature of discounting is imprecisely estimated and exponential discounting is hardly rejected in this specification the present bias tends to vanish for economically relevant monetary rewards

what are the headwaters of formal savings experimental evidence from sri lanka the world s poor are seeing a rapid expansion in access to formal savings accounts what is the source of savings when households are connected to a formal account we combine a high frequency panel survey spanning two and a half years with an experiment in which a sri lankan bank used mobile point of service pos terminals to collect deposits directly from households each week we find that the headwaters of formal savings lie in sacrificed leisure time households work more and improved savings options generate an increase in labour effort in both self employment and in the wage market the results suggest that the labour allocation channel is an important mechanism linking savings opportunities to income

individual preferences and the exponential growth bias abstract the exponential growth bias egb refers to individuals underestimation of the effects of exponential growth and has been shown to affect important financial decisions such as retirement savings we develop and test a novel experimental design to evaluate the magnitude of the egb based on multiple price lists our design simultaneously elicits the egb as well as subjects utility curvatures and time preferences allowing for non linear utility we structurally estimate the magnitude of the egb as about half as large as when linear utility is assumed these results shed light on the relationship between individual preferences and the egb

behavior based pricing in vertically differentiated industries we study behavior based pricing bbp in a vertically differentiated model vertical differentiation is innately asymmetric because all customers prefer the higher quality product when prices are equal this asymmetry causes bbp to have different properties than symmetric horizontally differentiated models we highlight two dimensions that affect the analysis the role of quality adjusted cost differences between the firms and the role of consumer discounting relative to firm discounting in the second period consistent with the prior literature we find that there are conditions based on market shares and quality adjusted costs under which either the low quality firm or the high quality firm but not both will reward its current customers with lower prices than it charges to new customers we then consider whether these conditions can arise in a two period equilibrium we find that if consumers sufficiently discount the future periods then firms at enough of a competitive disadvantage will reward their customers i e the low quality firm will reward its current customers if the quality adjusted cost differential between the two firms is small while the high quality firm will reward its current customers if this cost differential is large conversely we find that if consumers do not discount the future very much then the firm at a competitive disadvantage i e a low quality firm competing against a low cost high quality firm or a high quality firm that has very high costs can earn greater profits with bbp than without bbp although there are cases where both firms may benefit from bbp this paper was accepted by j miguel villas boas marketing

does aggregated returns disclosure increase portfolio risk taking many experiments have found that participants take more investment risk if they see returns less frequently see portfolio level returns rather than each individual asset s returns or see long horizon rather than one year historical return distributions in contrast we find that such information aggregation treatments do not affect total equity investment when we make the investment environment more realistic than in prior experiments previously documented aggregation effects are not robust to changes in the risky asset s return distribution or the introduction of a multi day delay between portfolio choice and return realizations

portfolio choice and risk attitudes an experiment i introduction suppose an investor is faced with a decision concerning how to allocate financial resources between a risky lottery asset with a higher expected return and an asset with a fixed and guaranteed lower return is the choice of portfolio independent of preferences outside the standard neoclassical model in experiments with financial incentives we study how portfolio choice depends on three well documented behavioral phenomena ambiguity aversion the illusion of control and myopic loss aversion we also investigate whether participants are willing to explicitly pay a small sum of money to indulge such preferences pay for more perceived control less ambiguity or more frequent opportunities to change the portfolio based on feedback about its performance while standard finance theory presumes that investors successfully identify and process information relevant to reaching optimal decisions in recent years a body of empirical evidence suggests that there are systematic departures from this behavior behavioral finance is concerned with psychological influences in financial decision making and markets investors make decisions while trying to stay afloat in a sea of uncertainty when predictability is low people may be prone to unjustified beliefs that may survive and even flourish in such an environment 1 people may resort to rules of thumb on a conscious or subconscious level to the extent that psychological influences are present it is economically important to consider which of these actually affect risk attitudes and portfolio choice a key issue is whether any such influences disappear when monetary incentives are present we pursue a systematic experimental comparison of three of the most prominent behavioral phenomena documented in the literature the illusion of control langer 1975 is concerned with greater confidence in one s predictive ability or in a favorable outcome when one has a higher degree of personal involvement even when one s involvement is not actually relevant ambiguity aversion ellsberg 1961 is the desire to avoid unclear circumstances even when this will not increase the expected utility myopic loss aversion benartzi and thaler 1995 combines loss aversion kahneman and tversky 1979 tversky and kahneman 1992 and a tendency to evaluate outcomes frequently this combination leads investors to be more willing to invest a greater proportion of their portfolio in risky assets if they evaluate their investments less frequently we show that these phenomena are present with monetary incentives and also investigate whether people are willing to pay money to accommodate such preferences or whether they are closer to the rational model when incentives are present with the procedure we chose the willingness to actually pa for such preferences depends on the preference the great majority of investors pay for less ambiguity or more frequent feedback investment opportunities but fewer than 10 pay to roll a determinative die themselves 2 we then examine how the preferences between lotteries in the different treatments affect portfolio choice we have participants allocate their investment capital between an asset with a sure return and a risky asset with a higher expected rate of return in fact there is very little variation in investment behavior across any of the illusion of control or ambiguity aversion treatments in contrast the results found in previous experimental studies of myopic loss aversion suggest that participants invest less in their preferred option the main conclusion we draw from these findings is that the relation between which procedure or lottery people prefer and how much they are willing to actually invest in this lottery is not trivial at all people are generally unwilling to pay even small amounts of money to indulge the illusion of control and it does not influence their portfolio choice people are generally willing to pay money for less ambiguity but having less ambiguity does not influence their portfolio choice finally in some cases people are willing to pay money for more frequent feedback and opportunities to change their portfolio but again previous studies have shown that people invest less with this additional information and greater flexibility

the tragedy of the commons revisited the importance of group decision making we use a laboratory experiment to compare the way groups and individuals behave in an inter temporal common pool dilemma the experimental design distinguishes between a non strategic problem where players individuals or groups of three make decisions without interaction and a strategic part where players harvest from a common pool this allows us to correct for differences between individuals and groups in the quality of decisions when testing for differences in competitiveness group decisions are either made by majority rule or unanimity the results show that groups are less myopic than individuals i e they make qualitatively better decisions but that they are more competitive than individuals when placed in a strategic setting the net result for groups deciding by majority rule is that they make less efficient decisions in the strategic game than individuals do we are able to show that this is caused by the median voter departing from her original preference in early periods with a shrinking pool when groups have to make unanimous decisions they start playing the strategic game more efficiently then individuals do but they rapidly become more competitive with repetition of the game

judging experimental evidence on dynamic inconsistency abstract this article briefly summarizes and judges recent experimental developments exploring the predictions of dynamically inconsistent models an opinion is provided as to how the literature ma

reference dependent behaviour of paua abalone divers in new zealand we study dynamic labour supply using data on paua abalone divers in new zealand the divers face stable flat prices per kilogram after each catch but experience transitory wage changes due to varying weather and water conditions and are free to vary their daily working hours and display an intermittent working pattern we find nonlinear wage elasticities rejecting the standard neo classical prediction that these divers should work long hours during days when wages are high and quit early during days when hourly wages are low we explore potentially distorting factors but find little evidence applying k szegi and rabin s 2006 theory where workers have both income and hours targets could explain our result in particular our divers appear to be primarily guided by the hours target

are n 1 heads better than one the case of mutual fund managers abstract recent studies find that mutual funds exhibit differential and persistent performance which is frequently attributed to superior managerial decision making we extend the literature by examining the impact of the fund s management structure on performance outcomes specifically we examine directly whether superior outcomes in terms of risk adjusted returns may be explained by behavioral decision making theory that asserts that teams make better decisions than individuals empirical results are consistent with the classical decision making theory and the efficient market hypothesis

estimating individual discount rates in denmark a field experiment we estimate individual discount rates with respect to time streams of money using controlled laboratory experiments these discount rates are elicited by means of field experiments involving real monetary rewards the experiments were carried out across denmark using a representative sample of 268 people between 19 and 75 years of age individual discount rates are estimated for various households differentiated by socio demographic characteristics such as income and age our conclusions are that discount rates are constant over the 12 month to 3 year horizons used in these experiments and that discount rates vary substantially with respect to several socio demographic variables hence we conclude that it would be reasonable to assume constant discount rates for specific household types but not the same rates across all households

estimating time preferences from convex budgets experimentally elicited discount rates are frequently higher than what seems reasonable for economic decision making such high rates are often attributed to present biased discounting a well known bias of standard measurements is the assumption of linear consumption utility attempting to correct this bias using measures of risk aversion to identify concavity researchers find reasonable discounting but at the cost of exceptionally high utility function curvature we present a new methodology for identifying time preferences both discounting and curvature from simple allocation decisions we find reasonable levels of both discounting and curvature and surprisingly dynamically consistent time preferences jel c91 d12 d81 understanding and estimating time preferences is obviously of great importance to economists marketers and policy makers consumers decide how much to invest in savings education real estate and life insurance how much to diet exercise and smoke whether to marry when to have children and what to leave in their wills while there has been substantial research estimating time preferences using aggregate consumption data 1 the bulk of the effort has occurred in laboratory environments 2 among the many laboratory techniques employed recent studies have favored multiple price lists mpl with monetary payments 3 with mpls individuals are asked multiple times to choose between smaller payment amounts closer to the present and larger amounts further into the future the interest rate increases monotonically in a price list such that the point where an individual switches from preferring sooner payments to later payments carries interval

consume now or later time inconsistency collective choice and revealed preference this paper develops a revealed preference methodology for exploring whether time inconsistencies in household choice are the product of nonstationarities at the individual level or the result of individual heterogeneity and renegotiation within the collective unit an empirical application to household level microdata highlights that an explicit recognition of the collective nature of choice allows the vast majority of household behaviour to be rationalised by theory that assumes preference stationarity at the individual level for our particular short panel data set simply permitting limited intrahousehold heterogeneity in time preferences allows the choices of 98 4 of the sample to be rationalised by a model that assumes exponential discounting at the individual level we also find that couples characterized by lower divergence in spousal discount rates are older more likely to have children and wealthier which we take as indications of experiencing higher match quality

do interest groups reward politicians for their votes in the legislature evidence from the great recession interest groups lobby politicians in various ways to influence their policy decisions especially their voting decisions in the legislature most if not all of the studies on this issue examine

are impatient farmers more risk averse evidence from a lab in the field experiment in rural uganda based on data from a field experiment in rural uganda we show that impatient farmers are more risk averse than patient farmers we relied on a simplified version of the convex time budget ctb method to elicit farmers time preferences and on an independent method for eliciting their risk preferences we report two important findings first we show that our simplified ctb method applied to farmers from uganda replicates the key findings of andreoni and sprenger s lab experiments that involved student subjects second we establish the existence of a negative correlation between risk tolerance and impatience based on two independent measures

information and legislative bargaining the political economy of u s tariff suspensions this paper studies the political influence of individual firms on congressional decisions to suspend tariffs on u s imports of intermediate goods we develop a legislative bargaining model in which firms influence legislators by transmitting information about the value of protection using verbal messages and lobbying expenditures model estimation using firm level data on tariff suspension bills and lobbying expenditures reveals that the probability a suspension is granted decreases with each additional firm that expresses opposition this effect is significantly larger than that of either opponent or proponent lobbying due to the greater information content of verbal opposition and legislative bargaining costs jel f13 d7

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

framing effects and impatience evidence from a large scale experiment we confront a representative sample of 1102 dutch individuals with a series of incentivized investment decisions and also elicit their time preferences there are two treatments that differ in the frequency at which individuals decide about the invested amount the low frequency treatment stimulates decision makers to frame a sequence of risky decisions broadly rather than narrowly we find that the framing effect is significantly larger for impatient than for patient individuals this result is robust to controlling for various economic and demographic variables and for cognitive ability

causes consequences and cures of myopic loss aversion an experimental investigation we examine in an experiment the causes consequences and possible cures of myopic loss aversion mla for investment behaviour under risk we find that both investment horizons and feedback frequency contribute almost equally to the effects of mla longer investment horizons and less frequent feedback lead to higher investments however when given the choice subjects prefer on average shorter investment horizons and more frequent feedback exploiting the status quo bias by setting a long investment horizon or low feedback frequency as a default turns out to be a successful behavioural intervention that increases investment levels

the effect of myopia and loss aversion on risk taking an experimental test myopic loss aversion is the combination of a greater sensitivity to losses than to gains and a tendency to evaluate outcomes frequently two implications of myopic loss aversion are tested experimentally 1 investors who display myopic loss aversion will be more willing to accept risks if they evaluate their investments less often 2 if all payoffs are increased enough to eliminate losses investors will accept more risk in a task in which investors learn from experience both predictions are supported the investors who got the most frequent feedback and thus the most information took the least risk and earned the least money language en

information for sale in the european union abstract this paper empirically explores the role of informational lobbying in shaping the eu trade policy to this purpose we construct an original dataset by collecting information on the participation of national and international organizations in the european commission consultations on trade issues and by merging it with newly released data on non tariff measures aggregated at the tariff line level between 1999 and 2007 our results suggest that european lobbies exert a major influence on policy makers drawing upon the panel structure of the dataset we find that participation in consultation meetings increases the probability of a protectionist policy even after controlling for product fixed effects and a number of control variables moreover actual attendance turns out to be more effective than simple registration and organizations representing more than one industrial category are more likely to obtain protection than single sector organizations these findings are interpreted in light of a political economy model of lobbying with possibly endogenous costs

procedures for eliciting time preferences we study three procedures to elicit attitudes toward delayed payments the becker degroot marschak procedure the second price auction and the multiple price list the payment mechanisms associated with these methods are widely considered as incentive compatible thus if preferences satisfy procedure invariance which is also widely and often implicitly assumed they should yield identical time preference distributions we find instead that the monetary discount rates elicited using the becker degroot marschak procedure are significantly lower than those elicited with a multiple price list we show that the behavior we observe is consistent with an existing psychological explanation of preference reversals

intertemporal choice with liquidity constraints theory and experiment since thaler 1981 we have lived with the uncomfortable stylized fact that many humans choose strictly dominated actions in intertemporal choice experiments we designed an experiment to probe the reasons for the apparently suboptimal behavior and we find that the classic fisher 1930 intertemporal choice theory with perceived transaction costs and liquidity constraints is perfectly consistent with our experimental data whereas hyperbolic discounting is not

strotz meets allais diminishing impatience and the certainty effect abstract decision makers tend to exhibit a higher degree of impatience when considering a delay to an immediate reward than when contemplating an identical delay to an equal future reward this work argues that diminishing impatience originates from the distinction between the certain present and the risky future a simple functional representation of preferences exhibiting time inconsistency when the future is uncertain is derived experimental evidence which is inconsistent with other formulations that account for diminishing impatience supports the proposed approach the new theory uncovers a tight relation between diminishing impatience and well known behavioral regularities in choice under risk and uncertainty jel d12 d81

myopic risk taking in tournaments abstract there is a common notion that incentive schemes in the financial industry trigger myopia and risk taking in some sense this contrasts with the concept of myopic loss aversion mla which implies that myopia mitigates risk taking a number of experimental studies support the mla hypothesis by showing that people take less risk the more frequently their investments are evaluated in this paper we show experimentally that if subjects are exposed to tournament incentives the standard mla effect disappears rather there is a tendency towards more risk taking the more frequently investments are evaluated

attention driven demand for bonus contracts abstract in many markets supply contracts include a series of small regular payments made by consumers and a single large bonus that consumers receive at some point during the contractual period but if for instance its production costs exceed its value to consumers such a bonus creates inefficiencies we offer a novel explanation for the frequent occurrence of bonus contracts which builds on a model of attentional focusing our main result identifies market conditions under which bonus contracts should be observed while a monopolist pays a bonus to consumers if at all only for low value goods firms standing in competition always i e independent of the consumers valuation offer bonus contracts thus competition does not eliminate but rather exacerbates inefficiencies arising from contracting with focused agents common contract schemes in markets for electricity telephony and bank accounts are consistent with our model but cannot be reconciled with alternative approaches such as models on consumption smoothing quasi hyperbolic discounting or switching costs

does commitment or feedback influence myopic loss aversion an experimental analysis empirical research has shown that a lower feedback frequency combined with a longer bind ing period decreases myopia and thereby increases the willingness to invest into a risky asset in an experimental study we disentangle the intertwined manipulation of feedback frequency and binding period to analyze how both variables alone contribute to the change in myopia and how they interact we find a strong effect for the length of commitment a much less pro nounced effect for the feedback frequency and a strong interaction between both variables the results have important implications for real world intertemporal decision making

income and consumption a micro semistructural analysis with pervasive heterogeneity we develop a model of consumption and income that allows for pervasive heterogeneity in the parameters of both processes introducing codependence between household income parameters and preference

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

hyperbolic discounting and the standard model eliciting discount functions abstract experiments on static intertemporal choice find evidence of particularly extreme impatience toward immediate rewards while this is often taken as support for hyperbolic discounting it could also arise because the most likely participants in experiments may be those with the most immediate need for money we conduct a calibration exercise and find that the extreme impatience observed in experiments can be accommodated by a standard exponential discounting model with no discounting and expectation of a small increase in the base consumption level the calibration uses existing estimates of curvature of utility

the effect of short term information on long term investment an experimental study abstract we present a multi trial experiment that extends the classic experiment of thaler et al 1997 by adding short term information to long term investment the allocation to the risky asset is reduced in the long term when we add short term information

do lottery payments induce savings behavior evidence from the lab this paper presents the results of a laboratory experiment designed to investigate whether the option of a prize linked savings pls product alters the likelihood that subjects choose to delay payment by comparing pls and standard savings products in a controlled way we nd strong evidence that a pls payment option leads to greater rates of payment deferral than does a straightforward interest payment option of the same expected value the appeal of the pls option is strongest among men and selfreported lottery players we use the results of our experiment to structurally estimate the parameters of the decision problem governing time preference risk aversion and probability weighting we employ the parameter estimates in a series of policy simulations that compare the relative eectiveness of pls products as compared to standard

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

anti lobbying gains from international agreements abstract i argue that an important potential benefit of international agreements is to reduce wasteful rent seeking activities by domestic and foreign special interest groups through a reduction in policy discretion the presence of foreign lobbying generates a novel type of international externality by inviting wasteful rent seeking by foreign lobbies the presence of policy discretion itself generates a negative international externality i examine the potential anti lobbying effects of three salient types of international rules exact policy commitments policy bounds and non discrimination rules unlike exact policy commitments which remove policy discretion and hence shut down ex post lobbying policy bounds may invite ex post lobbying and hence may forego part or all of the potential anti lobbying gains i also find that policy bounds may lead to mixed strategy equilibria of the rent seeking game a non discrimination rule can reduce rent seeking by foreign lobbies by injecting a free rider problem in the strategic interaction between these lobbies and under some conditions can achieve all the potential anti foreign lobbying gains

myopic loss aversion information feedback vs investment flexibility we experimentally disentangle the effect of information feedback from the effect of investment flexibility on the investment behavior of a myopically loss averse investor our findings show that varying the information condition alone suffices to induce behavior that is in line with the hypothesis of myopic loss aversion

the personal discount rate evidence from military downsizing programs the military drawdown program of the early 1990s provides an opportunity to obtain estimates of personal discount rates based on large numbers of people making real choices involving large sums the program offered over 65 000 separatees the choice between an annuity and a lump sum payment despite break even discount rates exceeding 17 percent most of the separatees selected the lump sum saving taxpayers 1 7 billion in separation costs estimates of discount rates range from 0 to over 30 percent and vary with education age race sex number of dependents ability test score and the size of payment

tourism as a long run economic growth factor the spanish case this paper examines the role of tourism in the spanish long run economic development the tourism led growth hypothesis is confirmed through cointegration and causality testing the results indicate that at least during the last three decades economic growth in spain has been sensible to persistent expansion of international tourism the increase of this activity has produced multiplier effects over time external competitivity has also been proved in the model to be a fundamental variable for spanish economic growth from the empirical analysis it can be inferred the positive effects on income that government policy in the adequacy of supply as well as in the promotion of tourist activity may bring about

the contribution of tourism development to economic growth in the korean economy abstract this study investigates the causal relations between tourism growth and economic expansion for the korean economy by using engle and granger two stage approach and a bivariate vector autoregression var model two principle results emerge from this study first the results of a cointegration test indicate that there is no long run equilibrium relation between two series second the outcomes of granger causality test imply the one way causal relationship of economic driven tourism growth the hypothesis of tourism led economic growth is not held in the korean economy this consequence is supported by testing the sensitivity of causality test under different lag selections along with the optimal lag

do professional traders exhibit myopic loss aversion an experimental analysis two behavioral concepts loss aversion and mental accounting have been combined to provide a theoretical explanation of the equity premium puzzle recent experimental evidence supports the theory as students behavior has been found to be consistent with myopic loss aversion mla yet much like certain anomalies in the realm of riskless decision making these behavioral tendencies may be attenuated among professionals using traders recruited from the cbot we do indeed find behavioral differences between professionals and students but rather than discovering that the anomaly is muted we find that traders exhibit behavior consistent with mla to a greater extent than students

teams take the better risk abstract one reason why decision makers are often teams and not individuals may be that team decisions comply more closely with economic rationality we compare individual and team decisions when systematic deviations from the expected utility theory eut and the portfolio selection theory pst are to be expected we find almost no evidence for the greater compliance of team decisions with the principles of eut however there is substantial evidence for the consistency of team decisions with the pst compared to individuals teams accumulate significantly more expected value at a significantly lower total risk measured in standard deviation s d

do interest groups affect us immigration policy while anecdotal evidence suggests that interest groups play a key role in shaping immigration policy there is no systematic empirical analysis of this issue in this paper we construct an industry level dataset for the united states by combining information on the number of temporary work visas with data on lobbying activity associated with immigration we find robust evidence that both pro and anti immigration interest groups play a statistically significant and economically relevant role in shaping migration policy across sectors barriers to migration are lower in sectors in which business interest groups incur larger lobbying expenditures and higher in sectors where labor unions are more important

lobbying and asymmetric information informational lobbying the use by interest groups of their alleged expertise or private information on matters of importance for policymakers in an attempt to persuade them to implement particular policies is often regarded as an important means of influence this paper analyzes this phenomenon in a game setting on the one hand the interest group is assumed to have private information which is relevant to the policymaker whilst on the other hand the policymaker is assumed to be fully aware of the strategic incentives of the interest group to mis report or conceal its private information

normality of demand in a two goods setting we study the testable implications of normal demand in a two goods setting for a finite dataset on prices and quantities we present the revealed preference conditions for normality of one or both goods our characterization provides an intuitive extension of the well known weak axiom of revealed preference and is easy to use in practice we illustrate the empirical relevance of our theoretical results through an application to the experimental dataset presented in andreoni and miller 2002

alcohol and self control a field experiment in india this paper studies alcohol consumption among low income workers in india in a 3 week field experiment the majority of 229 cycle rickshaw drivers were willing to forgo substantial monetary payments in order to set incentives for themselves to remain sober thus exhibiting demand for commitment to sobriety randomly receiving sobriety incentives significantly reduced daytime drinking while leaving overall drinking unchanged i find no evidence of higher daytime sobriety significantly changing labor supply productivity or earnings in contrast increasing sobriety raised savings by 50 percent an effect that does not appear to be solely explained by changes in income net of alcohol expenditures

comment on risk preferences are not time preferences separating risk and time preference andreoni and sprenger 2012a b observe that utility functions are distinct for risk and time preferences and show that their findings are consistent with a preference for certainty we revisit this question in an enriched experimental setting in which subjects make intertemporal decisions under different risk conditions the observed choice behavior supports a separation between risk attitude and intertemporal substitution rather than a preference for certainty we further show that several models including epstein and zin 1989 chew and epstein 1990 and halevy 2008 exhibit such a separation and can account for the overall experimental findings jel c91 d81 d91 risk and time preferences are the cornerstones of economic analyses regarding risk preference expected utility eu has been the predominant theory in which the curvature of the utility index captures risk attitude regarding time preference discounted utility is the most widely used model in which the curvature of the utility index captures intertemporal substitution when risk and time are intertwined integrating the two theories yields discounted expected utility deu which evaluates a contingent consumption plan c c c 3 as follows

can poor countries lobby for more us bilateral aid summary this article explores if countries can lobby the us government for the allocation of us bilateral foreign aid we consider an informational lobby model where lobbying has two effects first a direct effect by informing us policymakers about their countries needs second an indirect effect on policymakers by informing them about common interests in economic or geopolitical terms the lobbyist thus influences the decisions about the allocation of aid resources we estimate the effect of the recipient country s lobbying agents in obtaining foreign aid the econometric results show that lobbying positively affects the amount of bilateral aid received

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

risk preferences are not time preferences risk and time are intertwined the present is known while the future is inherently risky this is problematic when studying time prefer ences since uncontrolled risk can generate apparently present biased behavior we systematically manipulate risk in an intertemporal choice experiment discounted expected utility performs well with risk but when certainty is added common ratio predictions fail sharply the data cannot be explained by prospect theory hyperbolic discounting or preferences for resolution of uncertainty but seem consistent with a direct preference for certainty the data suggest strongly a difference between risk and time preferences jel c91 d81 d91 understanding individual decision making under risk and over time are two foundations of economic analysis 1 in both areas there has been research to suggest that standard models of expected utility eu and exponential discounting are flawed or incomplete regarding time experimental research has uncovered evidence of a present bias or hyperbolic discounting frederick loewenstein and o donoghue 2002 regarding risk there are number of well documented departures from eu such as the allais 1953 common consequence and common ratio paradoxes an organizing principle behind expected utility violations is that they seem to arise as so called boundary effects where certainty and uncertainty are combined camerer 1992 harless and camerer 1994 and starmer 2000 indicate that violations of expected utility are notably less prevalent when all choices are uncertain this observation is especially interesting when considering decisions about risk taking over time in particular certainty and uncertainty are combined in intertemporal decisions the present is known and certain while the future is inherently risky this observation is problematic if one intends to study time preference in isolation from

the less you discount the more it shows you really care interpersonal discounting in households abstract household members make monetary tradeoffs across time classical economics treats these decisions as if one rational individual makes them this assumption masks important other regarding concerns between spouses we designed an artefactual field experiment and collected data from 94 pairs of cohabiting couples to capture the complex nature of intra household time preferences estimation results show that 1 the interpersonal discount rate the rate used to tradeoff intertemporal payoffs between one s own payoff and the spouse s payoff is significantly different from the individual discount rate and 2 the interpersonal discount rate may provide an alternative way for people to express their other regarding preferences towards their spouses

patience self control and the demand for commitment evidence from a large scale field experiment patience and self control are important non cognitive skills that are associated with favorable educational economic and social outcomes this paper provides empirical evidence to inform discussions on possible educational interventions to make children more forward looking or less present biased by putting forward a way to identify self control problems in children and exploring the role of commitment devices in mitigating such problems we report results from an experiment that measures planned allocations the demand for a commitment device and actual choices in the context of chocolate consumption over two days the experiment is conducted as part of a large field study on children s preferences which allows us to correlate behavior with variables related to the subjects socio economic background and educational environment as well as preference parameters elicited through other tasks and surveys we find a large demand for commitment among children in addition we identify important correlations between patience commitment demand and time inconsistency as well as student specific personality traits and outcomes such as school success

time inconsistent preferences and the annuitization decision good news can involve difficult decisions for example winning a lottery jackpot can go along with the decision whether to have the jackpot paid out immediately as a lump sum or as periodic annual payments also when entering retirement most people face the decision whether they want their defined contribution account balance paid as a lump sum or to annuitize that amount the fact that people tend to choose the lump sum even if economic reasons suggest that they should choose the annuity is called the annuity paradox in a large online survey we find that people behave time inconsistent older people have a stronger tendency to choose the lump sum than younger people when they are asked to predict today what to choose when they retire this effect is considerably stronger for participants that answer simple time preference questions inconsistently our findings suggest to think about precommitment devices for the annuitization decision in the retirement case already at the time when the defined benefit plan is started

tourism welfare and de industrialization in a small open economy this paper investigates the effects of an expansion of tourism on welfare output and factor prices in the host country using a general equilibrium international trade model in the absence of taxes foreign ownership and distortions an increase in foreign visitors will increase welfare only if the price of nontradables increases factor mobility and foreign ownership tend to reduce the gains from tourism while commodity taxes tend to increase them conditions under which an increase in tourism can lead to deindustrialization are also discussed copyright 1991 by the london school of economics and political science

linking risk aversion time preference and fertilizer use in burkina faso this paper investigates whether burkinabe maize farmers fertilizer use decisionsare correlated with their risk and time preferences we conducted a survey and a se ries of hypothetical experiments on a sample of 1 500 farmers we find that morepatient farmers do use more fertilizer but it is only because they plant more maize afertilizer intensive crop rather than because they use more fertilizer per hectare ofmaize planted conversely we find no statistically significant link between risk aver sion and fertilizer use we use a simple two period model which suggests that riskaversion may indeed have an ambiguous effect on fertilizer use

protection versus free trade lobbying competition between domestic and foreign firms this article considers how political interaction between policymakers and domestic and foreign firms endogenously determines tariff rates we show that because of lobbying competition between foreign and domestic firms even a less competitive foreign firm can successfully elicit a tariff reduction under reasonable conditions moreover lobbying competition may also increase the level of aggregate domestic welfare when the market powers of the competing firms are sufficiently alike

foreign lobbies and us trade policy abstract in popular discussion much has been made of the susceptibility of government policies to lobbying by foreigners the general presumption being that this is harmful to the home economy however in a trade policy context this may not be the case if the policy outcome absent any foreign lobbying is characterized by welfare reducing trade barriers foreign lobbying may reduce such barriers and possibly raise welfare using a new data set on foreign political activity in the united states this paper investigates this question empirically tariffs and nontariff barriers are both found to be negatively related with foreign lobbying activity

eliciting discount functions when baseline consumption changes over time abstract many empirical studies on intertemporal choice report preference reversals in the sense that a preference between a small reward to be received soon and a larger reward to be received later reverses as both rewards are equally delayed such preference reversals are commonly interpreted as contradicting constant discounting this interpretation is correct only if baseline consumption to which the outcomes are added remains constant over time the difficulty with measuring discounting when baseline consumption changes over time is that delaying an outcome has two effects 1 due to the change in baseline consumption it changes the utility from receiving the outcome and 2 it changes the factor by which this utility is discounted in this paper we propose a way to disentangle the two effects which allows us to draw conclusions about discounting even when baseline consumption changes over time

gender training and female empowerment experimental evidence from vietnam we combine an rct and a lab in the field experiment to explore how participating in an entrepreneurship and gender training affects the intra household bargaining position of women while male preferences dominate household decisions the training attenuates the bargaining gap considerably inviting husbands to participate in the training does not further improve outcomes

no myopic loss aversion in adolescents an experimental note abstract myopic loss aversion mla has been found to play a persistent role for investment behavior under risk we study whether mla is already present during adolescence quite surprisingly we find no evidence of mla in a sample of 755 adolescents this finding is at odds with previous findings and it might be explained by self selection effects in other dimensions however we are able to replicate stylized findings in our pool of adolescents such that teams invest higher amounts than individuals and that women invest less than men

an experiment on risk taking and evaluation periods does the period over which individuals evaluate outcomes influence their investment in risky assets results from this study show that the more frequently returns are evaluated the more risk averse investors will be the results are in line with the behavioral hypothesis of myopic loss aversion which assumes that people are myopic in evaluating outcomes over time and are more sensitive to losses than to gains the results have relevance for the equity premium puzzle and also for the marketing strategies of fund managers

are teams prone to myopic loss aversion an experimental study on individual versus team investment behavior abstract myopic loss aversion mla has been found to have a persistent influence on individual decision making under risk in this paper i show that team decision making attenuates mla but that teams are also prone to mla

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

tourism and economic development a survey this article surveys the literature on tourism and economic development identifying the contribution that tourism can make to development including foreign currency income and employment and the costs that it entails single equation and system of equations models for estimating tourism demand are provided indicating developing countries potential to benefit from increasing expenditure on tourism but their susceptibility to deterioration in price competitiveness the main sectors of tourism supply transportation tour operators travel agents and accommodation are examined and the importance of cross country integration between firms is highlighted the article argues that many of the problems associated with the use of environmental resources for tourism stem from market failure and it considers methods for increasing sustainably the returns from them

foreign informational lobbying can enhance tourism evidence from the caribbean there exist legal channels for informational lobbying of u s policymakers by foreign principals foreign governments and private sector principals frequently and intensively use this institutional channel to lobby on trade and tourism issues this paper empirically studies whether such lobbying effectively achieves its goal of trade promotion in the context of caribbean tourism and suggests the potential for using foreign lobbying as a vehicle for development panel data are used to explore and quantify the association between foreign lobbying by caribbean principals and u s tourist arrivals to caribbean destinations a variety of sensitivity analyses support the finding of a strong association the policy implications are obvious and potentially important for developing countries

time discounting for primary and monetary rewards this paper reports a positive and statistically significant relation between short term discount rates elicited with a monetary and a primary reward chocolate the relation is most evident among people who like chocolate and are hungry this finding suggests that high short term discount rates are related to an underling individual trait consistent with models of presentbiased preferences

endogenous time horizon and behavioral poverty trap theory and evidence from mozambique abstract this paper provides a model where a long term planning horizon improves economic decisions but also increases the salience of anticipated future utility hence a gloomy future induces the agent to shorten her time horizon in order to reduce distress caused by the anticipation of poverty at the cost of worsening her realized future consumption resulting in a behavioral poverty trap where poverty and shortsightedness reinforce each other the paper also provides primary empirical evidence of the endogenous determination of time horizon and of the existence of a behavioral poverty trap using a randomized controlled trial in mozambique that provided agro input subsidies and a matched savings program i show that improvement in economic prospects resulted in a significant increase in the planning horizon of the poor beneficiaries moreover the increase in horizon significantly predicts asset accumulation of beneficiaries during the two years following the intervention

to ban or not to ban foreign lobbying and cross national externalities this paper studies the costs and benefits of foreign lobbying we show how and when foreign lobbying can help internalize cross national externalities we argue that this is an often overlooked benefit of foreign lobbying we also study under what conditions a constitutional rule banning foreign lobbying is in the national interest of a country a key factor in this calculus is whether the interests of foreign lobby groups and domestic unorganized groups coincide or not we illustrate the logic with examples from trade policy and environmental regulation bannir ou ne pas bannir lobbying etranger et effets externes transnationaux ce texte etudie les couts et avantages du lobbying etranger on montre quand et comment que le lobbying etranger peut aider a internaliser des effets externes transnationaux on suggere que c est souvent un avantage qu on est porte a negliger du lobbying etranger on etudie sous quelles conditions une regle constitutionnelle bannissant le lobbying etranger peut etre dans l interet national d un pays un facteur cle dans ce calcul est le fait que les interets des groupes etrangers coincident ou non avec ceux des groupes nationaux non organises on illustre la logique sous jacente a l aide d exemples portant sur la politique commerciale et la reglementation environnementale

decision environment effects on intertemporal financial choices how relevant are resource depletion models a large literature in psychology studies the effects of the immediate decision environment on behavior and conceptualizes both cognitive capacity and self control as scarce resources that can be depleted by recent use and replenished by factors like rest and nutrition we assess the relevance of resource depletion models for intertemporal financial decisions by estimating the effects of three interventions prior impulse controlling activity consumption of a sugared drink and consumption of a placebo sugar free drink on intertemporal monetary choices in a cash advance framework these manipulations have large impacts on the demand for advances but contrary to resource based models prior impulse controlling activity and placebo drink consumption increase patience to understand these effects we estimate treatment effects on the three parameters of a decision utility model for every subject in our sample all treatments reduce utility curvature and present bias and these movements are highly correlated together we argue that these patterns suggest that the treatments are acting not on subjects fundamental utility parameters but on subjects tendencies to frame financial decisions narrowly within the frame of the lab experiment versus broadly in the context of their other financial options thus while decision environments have large effects on intertemporal financial decisions both the direction and the mechanisms underlying these effects appear to be quite different from those suggested by resource depletion models

reversal and magnitude effects in long term time preferences results from a field experiment we use a multiple price list approach with real payments to elicit long term time preferences on a sample of french farmers elicited individual discount rates vary with the time delay which supports the existence of a reversal effect in long term time preferences and increase with rewards which contradicts the usual magnitude effect finding

evaluation periods and asset prices in a market experiment we test whether the frequency of feedback information about the performance of an investment portfolio and the flexibility with which the investor can change it influence her risk attitude in markets in line with the prediction of myopic loss aversion benartzi and thaler 1995 we find that more information and more flexibility result in less risk taking market prices of risky assets are significantly higher if feedback frequency and decision flexibility are reduced this result supports the findings from individual decision making and shows that markets do not eliminate such behavior

time consistency stationarity and time invariance a sequence of experiments documents static and dynamic preference reversals between sooner smaller and later larger rewards when the sooner reward could be immediate the theoretically motivated design permits separate identification of time consistent stationary a ndtime invariant choices at least half of the subjects are time consistent but only three quarters of them exhibit stationary choices about half of subjects with time inconsistent choices have stationary preferences these results chal lenge the view that present bias preferences are the main source of time inconsistent choices the past twenty years have seen a surge of interest in time inconsistent preferences mostly this has been motivated by psychological experiments and introspection that have suggested the existence of present bias a decision maker prefers smaller immediate reward to a larger delayed reward but when she is asked about her preferences between these two alternatives when both are equally shifted into the future her preferences are reversed although there is no inconsistency per se in her answers this behavior has been taken to suggest that when the decision maker will be asked to update her choices in the future she will generally deviate from her ex ante plans our goal in the present study is to perform a dynamic preference reversal experiment as such one is required to extend the standard framework of pref erences over temporal payments to a dated collection of such preferences this extension allows us to formally define three distinct properties stationarity im plies that ranking of temporal payments depends only on the time distance and payment distance between the alternatives time invariance assumes that the decision maker evaluates each temporal payment relative to the evaluation pe

myopic loss aversion and market experience abstract we probe the boundaries of myopic loss aversion mla theory through market treatments designed to reduce the mla effect our market settings separate investment commitment from information frequency display a running average asset value and explore the influence of participant experience the market based results suggest mla persists with inexperienced participants despite efforts to mitigate mla prices in markets with returning participants do not display an mla effect however the same experienced participants individually succumb to mla in an allocation setting immediately following the market overall our results suggest that while market experience mitigates the mla effect participants do not transfer these results to other settings