Economics Commons^™

Cross-Country Heterogeneity In Students’ Reporting Behavior: The Use Of The Anchoring Vignette Method, Hana Vonkova, Gema Zamarro, Collin Hitt

Gema Zamarro

Why The Rich Drink More But Smoke Less: The Impact Of Wealth On Health Behaviors, Hans Van Kippersluis, Titus Galama

Titus Galama

Wealthier individuals engage in healthier behavior. This paper seeks to explain this phenomenon by developing a theory of health behavior, and exploiting both lottery winnings and inheritances to test the theory. We distinguish between the direct monetary cost and the indirect health cost (value of health lost) of unhealthy consumption. The health cost increases with wealth and the degree of unhealthiness, leading wealthier individuals to consume more healthy and moderately unhealthy, but fewer severely unhealthy goods. The empirical evidence presented suggests that differences in health costs may indeed provide an explanation for behavioral differences, and ultimately health outcomes, between wealth …

Demonstrations And Price Competition In New Product Release, Raphael Boleslavsky, Christopher Cotton, Haresh Gurnani

Raphael Boleslavsky

We develop a game theoretic model of price competition in which an innovating firm can offer product demonstrations. Placing minimal restriction on the firm's ability to design demonstrations, we show that the equilibrium demonstration resolves some but not all customer valuation uncertainty and allows the innovating firm to attract customers while maintaining a high price. Consumer surplus may be lower with endogenous demonstrations than without demonstrations. Regulation requiring firms to provide fully-informative demonstrations (e.g., generous return policies or inspection periods) can further reduce consumer surplus. The ability to design demonstrations also creates incentives for innovating firms to limit the market …

Selloffs, Bailouts, And Feedback: Can Asset Markets Inform Policy?, Raphael Boleslavsky, David L. Kelly, Curtis R. Taylor

Raphael Boleslavsky

We present a model in which a policymaker observes trade in a financial asset before deciding whether to intervene in the economy, for example by offering a bailout or monetary stimulus. Because an intervention erodes the value of private information, informed investors are reluctant to take short positions and selloffs are, therefore, less likely and less informative. The policymaker faces a tradeoff between eliciting information from the asset market and using the information so obtained. In general she can elicit more information if she commits to intervene only infrequently. She thus may benefit from imperfections in the intervention process or …

Empirical Evidence For Decreasing Returns To Scale In A Health Capital Model, Titus Galama, Patrick Hullegie, Meijer Erik, Sarah Outcault

Titus Galama

We estimate a health investment equation, derived from a health capital model that is an extension of the well-known Grossman model. Of particular interest is whether the health production function has constant returns to scale, as in the standard Grossman model, or decreasing returns to scale, as in the Ehrlich-Chuma model and extensions thereof. The model with decreasing returns to scale has a number of theoretically and empirically desirable characteristics that the constant returns model does not have. Although our empirical equation does not point-identify the decreasing returns to scale curvature parameter, it does allow us to test for constant …

Evolving Influence: Resolving Extreme Conflicts Of Interest In Advisory Relationships, Raphael Boleslavsky, Tracy Lewis

Raphael Boleslavsky

An advocate for a special interest provides advice to an uninformed planner for her to consider in making a sequence of decisions. Although the advocate may have valuable information for the planner, it is also known that the advocate is interested only in advancing his cause and will distort his advice in order to influence the planner's decision. Each time she repeats the problem, however, the planner learns about the accuracy of the advocate's recommendation, mitigating some of the advocate's incentive to act in a self-serving manner. We propose a theory to explain why planners do sometimes rely on information …

Group Diversity And Salience: A Natural Experiment From A Television Game Show, Gabriella A. Bucci, Rafael A. Tenorio

Gabriella A. Bucci

We take advantage of a naturally occurring experiment in a television game show to study the impact of group characteristics on their ability to select salient solutions in a matching game. The Family Feud features families seeking to earn prizes by matching the results of public opinion surveys on various subjects. Our main result is that, controlling for task difficulty, families that are more diverse, as measured by the relatedness of their members, are more successful at matching wider ranges of survey responses. This highlights the importance of member diversity in expanding information and decision frames of reference within a …