Three Essays in Intertemporal Choice PDF Download

Author: John Keith Horowitz
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Category :
Languages : en
Pages : 122

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Author: Lisheng He (Researcher in behavioural science)
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Category : Choice (Psychology)
Languages : en
Pages : 342

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Author: John Keith Horowitz
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Category : Consumer behavior
Languages : en
Pages : 272

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Author: Léa Bousquet
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Category :
Languages : en
Pages : 0

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This thesis uses methods from behavioral economics to contribute to the analyses of intertemporal choices. First, the influences of consumers' present bias and their naivete about this bias on the market power of firms competing imperfectly are studied. In this framework, present-biased but sophisticated consumers allow firms to increase their profit by giving them more market power. Under certain conditions the present bias can also increase social welfare. Individuals' naivete either does not change firms' profit or reduces it. Yet, it always causes inefficiencies so that social welfare is reduced. Second, this thesis, through a lab experiment, aims at measuring the ability of individuals to anticipate their present or future bias. These biases and the accuracy of their anticipation are elicited from the choices of monetary allocations between two dates and the anticipation of those choices. The main result from this study is that individuals who are present- or future-biased tend to underestimate their bias. Finally, this thesis provides a theoretical explanation for the link between risk aversion and screening decision. The value of information can be instrumental but also emotional. Individuals may be risk averse on health status but also derive relatively less utility from a positive emotional reaction than disutility from a negative one, that is to say, be averse to information. If the information is only instrumental, risk aversion increases the likelihood to get tested. However, considering also the emotional value of the information, if the individual is strongly averse to information, the more risk averse she is and the less likely she chooses to get tested.

Author: Pradeep Singh
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Category : Decision making
Languages : en
Pages : 135

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The dissertation investigates intertemporal decision-making under uncertainty. In particular, I analyze how two traditionally under-explored sources of uncertainty affect trade-offs between the present and the future in making decisions: a) uncertainty of life, and b) strategic uncertainty in collective action dilemmas. Chapter 1 deals with the temporal dynamics of value in strategic interactions, and Chapter 2 extends the analysis to incorporate interaction between a homogeneous vis-à-vis a heterogeneous triad. Participants affiliated with different social groups at the University of Washington, Seattle, participated in a series of one-shot Voluntary Contribution Mechanism (VCM) games; the games extended the incentive structure of the VCM to decompose it into the relative temporal change in the public and private accounts, in addition to varying the social composition of the participating groups. Results from the experiment indicate that temporal delay is a significant factor in explaining voluntary contribution, with the outcomes being sensitive to the time horizon. To gauge the mechanisms of voluntary contribution with delayed rewards, the hypothesis as to whether expectation of how others' value the future affect one's own contribution was also tested. The results indicate that conditioning on our future self, how others value the future enters our calculus of voluntary contribution, but conditioning on our present self it has no effect. In "real life" settings, that benefits from cooperative behavior materialize in the near or distant future is perhaps the general rule. The proper functioning of markets is built upon cooperation between buyer and seller, the benefits of which are often realized in the future (for example, e-commerce or group buying schemes). The provision of public goods, whether it be providing immunization to a village, restoring a natural park, or contributing towards global public goods such as carbon offset projects - each have a temporal element embedded into them. In climate change and environmental negotiations, different countries with differing stated valuations of the future interact to provide a global public good, i.e. a habitable climate. Summers and Zeckhauser (2008) note that at International Panel of Climate Change (IPCC) negotiations, how to discount the future is always a thorny issue. Other real-life applications such as the contours of racism and the role of cliques in organizational behavior can also be better understood by unpacking the interaction between social and temporal preferences in collective action. Future studies confirming the robustness of the results, finding contradictory evidence, as well as testing hypothesis not found significant in the present study will be a fruitful line of inquiry. While there has been a plethora of studies on discounting behavior in individual decisions that have documented the phenomenon of present-bias (Kahneman, 1979; Frederick and Loewenstein, 2002), the results from the first two chapters contributes to the nascent literature in the field of discounting in strategic interactions that have been conducted to date by Deck and Jahedi (2013a, 2013b). Chapter 3 analyzes data from the World Bank Living Standard Measurement Survey (LSMS) conducted in Nepal (2003/04 and in 1995/96), in addition to the data on conflict measures collected by INSEC, a non-profit group promoting human rights, to gauge the effect of the "Maoist" civil war on agricultural household decision-making. Results indicate that in addition to causing the destruction of physical capital, life and the deterioration of social norms, the civil war was associated with changes in future-oriented decision making and inhibited household investments in the future. The evidence suggests that the civil conflict in Nepal further exacerbated the existing poverty levels by inhibiting investment levels further pushing households deeper in the chasm of a "poverty trap."

Author: Bianjun Xia
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ISBN:
Category : Decision making
Languages : en
Pages : 0

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The goal of my dissertation is to analyze individuals' behavior when they make choices over time and within a group. The first chapter is devoted to explaining some key time preference anomalies which are inconsistent with the standard discounted utility model. In the second chapter, I focus on how inter-personal comparisons would affect people's intertemporal choices. Finally, the last chapter studies how the concern for status affects the optimal risk sharing across individuals. The first chapter studies some key time preference anomalies. 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. The second chapter develops an intertemporal model in which individuals care about consumption not only for its own sake but also for the status it implies. By putting an additive status term into the utility function, I show that the level of inequality in the initial wealth distribution affects individuals' saving and consumption behavior. The direction of the distortion in intertemporal choice relative to the standard model without status depends on the elasticity of intertemporal substitution in the utility from absolute consumption. I also analyze how changes in the initial wealth distribution affect saving. In the third chapter we develop a series of optimal social insurance models in which people care about both consumption per se and the status it implies. We show that the concern for status does impact the optimal contract under various information structures. Particularly, under complete information without commitment problem, the optimal contract may assign all the society resources to the minority group if the status term is convex enough. Under the limited enforcement regime, compared to the optimal allocation in the pure consumption model, it is optimal to transfer more resources to high income people when the status term is convex. Under moral hazard, the relatively lower status resulting from the higher effort level may make implementation of high effort level more difficult.

Author: Pedro H. Albuquerque
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ISBN:
Category :
Languages : en
Pages : 160

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Author: David Henry Bowman
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Category :
Languages : en
Pages : 230

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Author: Sarah Blaine Kendall
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Category :
Languages : en
Pages : 374

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Author: Alina Ferecatu
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Category :
Languages : en
Pages : 0

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This dissertation is organized in three chapters. Each chapter analyzes decision makers' systematic deviations from economic predictions in well-known experiments. People deviate from the optimal path and excessively explore or exploit in n-armed bandit games, demand interest rates well above financial market averages in order to defer consumption in intertemporal choice settings, and do not settle for receiving small amounts of money, even though they would be better off objectively, in bargaining games such as the ultimatum game. Such “irregularities” are documented in the three dissertation essays. The essays are intended as a first step to formulate individual specific, customized decision aids, useful to overcome such decision biases.