Loding Complete
Explore Behavioral Economics
Author(s) - Leonardo Bursztyn, Rafael Jiménez-Durán, Aaron Leonard, Filip Milojević & Christopher Roth
Firms can increase the demand for their products and consolidate their market power not only by increasing user utility but also by decreasing non-user utility. In this paper, we examine this mechanism by considering the case of smartphones. In particular, Apple has faced criticism for allegedly...
We explore the role of memory for choice behavior in unfamiliar environments. Using a unique data set, we document that decision makers exhibit a "memory premium." They tend to choose in-memory alternatives over out-of-memory ones, even when the latter are objectively better. Consistent with well...
This paper studies psychological biases in take-up of annuities, using an incentivized experiment with a probability-based sample (N = 3,038). Choosing an annuity was payoff-maximizing in the experiment at all prices, but take-up was incomplete and price elastic. Reformulating decisions as insurance...
Understanding the role of preferences, beliefs, and constraints on social and wealth inequities is a key unlock for economic growth. This study focuses on the inter-relationship between risk and ambiguity preferences of mothers, their early childhood investments, and their childrens outcomes. To do...
We test whether mental alertness, as proxied by sleep disruption, impairs investor trading performance. Using four complementary approaches, we document that retail investors who experience a later sunset time on average earn lower abnormal returns on their trades. These approaches include panel...
Qualitative self-assessments of economic preferences have recently gained popularity, often supported by experimental validation, a method that links them to choices in incentivized elicitations. We illustrate theoretically that experimental validation may fail to produce reliable new measures....
We present a theory of decisions in which attention to the features of choice options is determined by the decision maker's categorization of the current choice problem in a set of problems she solved in the past. Categorization depends on goal-relevant as well as contextual problem-level features....
Author(s) - Jarod T. Apperson, A. Nayena Blankson, Francesina Jackson, Angelino Viceisza, Bruce Wade & Jimmeka Guillory Wright
Roughly 25 percent of first-year college students do not return for a second year. This has led to a range of policies and interventions aimed at increasing college performance, persistence, and graduation. In this article, we assess whether cognitive strategy instruction (CSI) has the potential to...
Firms frequently fail to adopt profitable business opportunities even when they do not face informational or liquidity constraints. We explore three behavioral frictions that explain inertia among individualspresent bias, limited memory, and distrustin a managerial setting. In partnership with a...
Author(s) - Erika Kirgios, Susan Athey, Angela L. Duckworth, Dean Karlan, Michael Luca, Katherine L. Milkman & Molly Offer-Westort
Effective information sharing is critical for the success of organizations and governments. Because information that is easy to access is more likely to be adopted, leaders often minimize friction in information delivery. However, one type of friction may increase engagement: piquing curiosity by...
How do the employer and the worker interact during a dismissal? This paper tests whether they cooperate to minimize costs, or instead engage in conflicti.e., deliberately amplify costs. We leverage a unique feature of the French labor market: an employer and a worker can jointly opt to replace a...
We study how people think others update their beliefs upon encountering new evidence. We find that when two individuals share the same prior, one believes that new evidence cannot systematically shift the others beliefs in either direction (Martingale property). When the two have different priors,...
We survey a large, representative sample of retail investors in China to elicit their memories of stock market investments and their return expectations. We merge this survey data with administrative transaction data to test a model in which investors selectively recall past experiences to form...
We propose a theory of the complexity of economic decisions. Leveraging a macroeconomic framework of production functions, we conceptualize the mind as a cognitive economy, where a task's complexity is determined by its composition of cognitive operations. Complexity emerges as the inverse of the...
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We conduct an incentivized lab experiment to test participants' ability to understand the DA matching mechanism and the strategyproofness property, conveyed in different ways. We find that while many participants can (using a novel GUI) learn DA's mechanics and calculate its outcomes, such...
We introduce DOSEDynamically Optimized Sequential Experimentationto elicit preference parameters. DOSE starts with a model of preferences and a prior over the parameters of that model, then dynamically chooses a customized question sequence for each participant according to an experimenter-selected...
Author(s) - Maria Angélica Bautista, Juan Sebastián Galán, James A. Robinson, Rafael F. Torres & Ragnar Torvik
Political leaders make policy choices which are often hard to explain via institutions. We use the behavior of Colombian paramilitary groups as an environment to study non-institutional sources of variation in how public good provision and violence are combined to control populations. We hypothesize...
We report a large-scale examination of behavioral attenuation: due to information-processing constraints, the elasticity of peoples decisions to fundamentals is generally too small. We implement 30 experiments on a broad range of economic decisions, including choice, valuation, belief formation,...
A new wave of social service programs aims to build a pathway out of poverty by helping clients define their own goals and then supporting them flexibly and intensively over multiple years to meet those goals. We conduct a randomized controlled trial of one such program. Participants randomly...
Prosumers are becoming increasingly important in global energy consumption and production. We partner with an energy service provider in Sweden to explore the economics facing such agents by conducting a natural field experiment over a 32-month period. As a policy instrument, we explore how simple...
We document a causal effect of social interactions on investor behavior using the number of local soccer games as a measure of social interaction intensity. Social transmission is identifiable in buy but not sell trades. Social Interaction Intensity (SII) increases the sensitivity of buying to past...
We demonstrate the pitfalls when extrapolating behavioral findings across different contexts and decision environments. We focus on regret theory and the use of regret lotteries for motivating behavior change. Here, findings from one-shot settings have been used to promote regret as a tool to boost...
Since formal rules can only partially reduce opportunistic behavior, third-party sanctioning to promote fairness is critical to achieving desirable social outcomes. Social norms may underpin such behavior, but they can also undermine it. We study one such norm the "dont be a toad" norm, as it is...
We study how people's beliefs about the economy covary with household-level events, utilizing a unique link between Danish administrative data and a large-scale survey of consumer expectations. We find that compared to actual inflation, people's inflation forecasts covary much more strongly (and...
Author(s) - Jonathan Reuter
I review the academic literature on defined contribution retirement plan design and participant behavior. While adoption of automatic enrollment has significantly increased participation rates, recent studies find the long-run effects on savings are smaller than the short-run effects, with some...
In a model of memory and selective recall, household inflation expectations remain rigid when inflation is anchored but exhibit sharp instability during inflation surges, as similarity prompts retrieval of forgotten high-inflation experiences. Using data from the New York Feds Survey of Consumer...
We explore the mechanics of empathy. We show that information about an outgroup can potentially activate and magnify empathy when presented in conjunction with an experience simulating their struggles. This response increases the willingness to help the struggling group, but it is only activated...
Laboratory experiments find a robust relationship between decision times and perceived values of alternatives. This paper investigates how these findings translate to experts' decision making and information acquisition in the field. In a stylized model of expert choice between two alternatives, we...
We investigate the potential welfare cost of relative rank considerations using a series of vignettes and lab-in-the-field experiments with over 2,000 individuals in Abidjan, Ivory Coast. We show that: (1) individuals judged to be of a lower rank are perceived as more likely to be sidelined from...
We study a sequential experimentation model with endogenous feedback. Agents choose between a safe and risky action, the latter generating stochastic rewards. When making this choice, each agent is selfishly motivated (myopic). However, agents can disclose their experiences to a public record, and...
Author(s) - Crick Lund, Kate Orkin, Marc Witte, John H. Walker, Thandi Davies, Johannes Haushofer, Sarah Murray, Judy Bass, Laura Murray, Wietse Tol & Vikram H. Patel
Mental health conditions are prevalent but rarely treated in low- and middle-income countries (LMICs). Little is known about how these conditions affect economic participation. This paper shows that treating mental health conditions substantially improves recipients capacity to work in these...
Almost 50 million Americans are burdened by the need to repay almost $2 trillion in student loan debt, while at the same time having to save for retirement. This article analyzes the potential impact of the 2022 SECURE 2.0 Act reform which permits employers to match contributions for student loan...
We survey the recent literature in economics using open-ended survey data to uncover mechanisms behind economic beliefs and behaviors. We first provide an overview of different applications, including the measurement of motives, mental models, narratives, attention, information transmission, and...
May 1, 2024 - Article
Author(s) - John Beshears, Matthew Blakstad, James J. Choi, Christopher Firth, John Gathergood, David Laibson, Richard Notley, Jesal D. Sheth, Will Sandbrook & Neil Stewart
Many countries require employers to enroll their workers in retirement savings plans that deposit a regular percentage of their paycheck in a retirement account unless the worker opts out. These automatic enrollment programs are meant to address concerns that the employees, left to their own devices...
We present an approach for automatically generating and testing, in silico, social scientific hypotheses. This automation is made possible by recent advances in large language models (LLM), but the key feature of the approach is the use of structural causal models. Structural causal models provide a...
Misinformation represents a vital threat to the societal fabric of modern economies. While the supply side of the misinformation market has begun to receive increased scrutiny, the demand side has received scant attention. We explore the demand for misinformation through the lens of augmenting...
Business cycle models often abstract from persistent household heterogeneity, despite its potentially significant implications for macroeconomic fluctuations and policy. We show empirically that the likelihood of being persistently financially constrained decreases with cognitive skills and...
Author(s) - Ashvin Gandhi, Paola Giuliano, Eric Guan, Quinn Keefer, Chase McDonald, Michaela Pagel & Joshua Tasoff
Economic research on entertainment is scant despite its large share of time use. We test economic theories of belief-based utility in the context of video-game engagement. Using data on 2.8 million matches from League of Legends, we find evidence supporting reference-dependent preferences, loss...
April 1, 2024 - Article
Some organizations reward employees who meet production quotas by pre-set deadlines. Such structures allow employees to manage their time between deadlines, but may also result in procrastination or rushed efforts near the deadline. In Deadlines versus Continuous Incentives: Evidence from the Patent...
A principal contracts with multiple agents, as in Lazear and Rosen (1981) and Green and Stokey (1983). The setup is classical except for the assumption that agents have interdependent preferences. We characterize cost effective contracts, and relate the direction of co-movement in rewards joint...
We use a longitudinal dataset measuring beliefs and behaviors to study the dynamics of model or narrative adoption during the Covid-19 pandemic. We show that individuals switch beliefs about the effectiveness of preventive behaviors following changes in perceived risk. The adoption of narratives...
The standard revealed-preference approach to welfare economics encounters fundamental difficulties when the act of choosing directly affects welfare through emotions such as guilt, pride, and anxiety. We address this problem by developing an approach that redefines consumption bundles in terms of...
We propose a framework where perceptions of uncertainty are driven by the interaction between cognitive constraints and the way that people learn about itwhether information is presented sequentially or simultaneously. People can learn about uncertainty by observing the distribution of outcomes all...
We introduce smooth diagnosticity. Under smooth diagnosticity, agents over-react to new information defined as the difference between the current information set and a previous information set. Since new information typically changes not just the conditional mean, but also the conditional...
Programs that engage young children in movement and song to help them learn are popular but experimental evidence on their impact is sparse. We use an RCT to evaluate the effectiveness of Big Word Club (BWC), a classroom program that uses music and dance videos for 3-5 minutes per day to increase...
Author(s) - John Beshears, Matthew Blakstad, James J. Choi, Christopher Firth, John Gathergood, David Laibson, Richard Notley, Jesal D. Sheth, Will Sandbrook & Neil Stewart
Does automatic enrollment into retirement saving increase household debt? We study the randomized roll-out of automatic enrollment pensions to ~160,000 employers in the United Kingdom with 2-29 employees. We find that the additional savings generated through automatic enrollment are partially offset...
Author(s) - Miles S. Kimball, Collin B. Raymond, Jiannan Zhou, Junya Zhou, Fumio Ohtake & Yoshiro Tsutsui
Collecting and analyzing panel data over the last four U.S. presidential elections, we study the drivers of self-reported happiness. We relate our empirical findings to existing models of elation, reference dependence, and belief formation. In addition to corroborating previous findings in the...
How quickly does marginal utility fall with increasing consumption? It depends on the dimension along which we consider concavity of the utility function. This paper estimates the distribution of heterogeneous curvature parameters in individuals utility functions from hypothetical choice data, while...
We survey aspects of the intellectual development of the economics of information from the 1970s to today. We focus here on models where information is communicated indirectly through actions. Basic results, such as the failure of the fundamental theorems of welfare economics, the non-existence of...
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