Behavioral Economics Commons^™

Three Essays On Gender Differences On Risk Preferences And Credit Market Constraints, Jyoti Rai

Dissertations

The disadvantages that women face in the financial market hamper their social and economic well-being. These disadvantages may arise from their own risk preferences or from financial market. The aim of this dissertation is to examine different aspects of the disadvantages that women face in the U.S Financial Market. In that light, I present three essays that analyze gender differences in risk preferences and credit market constraints. I use the Survey of Consumer Finances (SCF) data for all my empirical analysis.

In the first essay, I examine whether women exhibit greater financial risk aversion than men using attitudinal and behavioral …

The Business Of Coupons-Do Coupons Lead To Repeat Purchases?, Margaret P. Ross

Pursuit - The Journal of Undergraduate Research at The University of Tennessee

In recent years, couponing has emerged as a pop culture phenomenon. Businesses of all types are taking advantage of this resource by revamping their out-dated programs and turning them into something fresh to excite customers. Many questions remain unanswered concerning the viability, profitability, and usefulness of coupons. This study is an analysis of the effectiveness of coupons in enticing return purchases in the soft-drink category and the effectiveness of price discriminating at this grocery store chain. The dataset is comprised of household level grocery store transactions compiled by dunnhumby USA for 2,500 households over a period of two years. An …

Consumer Credit: Too Much Or Too Little (Or Just Right)?, Jonathan Zinman

Dartmouth Scholarship

The intersection of research and policy on consumer credit often has a Goldilocks feel. Some researchers and policy makers posit that consumer credit markets produce too much credit. Other researchers and policy makers posit that markets produce too little credit. I review theories and evidence on inefficient consumer credit supply. For each of eight classes of theories I sketch some of the leading models and summarize any convincing empirical tests of those models. I also discuss more circumstantial evidence that does not map tightly onto a particular model but has the potential to shed light on, or obscure, answers to …

Are Individuals Fickle-Minded?, Mathew D. Mccubbins, Mark Turner

Faculty Scholarship

Game theory has been used to model large-scale social events — such as constitutional law, democratic stability, standard setting, gender roles, social movements, communication, markets, the selection of officials by means of elections, coalition formation, resource allocation, distribution of goods, and war — as the aggregate result of individual choices in interdependent decision-making. Game theory in this way assumes methodological individualism. The widespread observation that game theory predictions do not in general match observation has led to many attempts to repair game theory by creating behavioral game theory, which adds corrective terms to the game theoretic predictions in the hope …

"Nudging" Better Lawyer Behavior: Using Default Rules And Incentives To Change Behavior In Law Firms, Nancy B. Rapoport

Scholarly Works

This article examines how incentives in law firms can affect lawyer behavior and suggests some possible changes to incentive structures and default rules that might improve the ethical behavior of lawyers.

In the changing landscape of law practice — where law firm profits are threatened by such changes as increased pressure from clients to economize and the concomitant opportunities for clients to shop around for the most efficient lawyers — are there ways to change how things are done in law firms so that firms can provide more efficient and ethical service? This article suggests that an understanding of cognitive …

Can We Build Behavioral Game Theory?, Gale M. Lucas, Mathew D. Mccubbins, Mark Turner

Faculty Scholarship

The way economists and other social scientists model how people make interdependent decisions is through the theory of games. Psychologists and behavioral economists, however, have established many deviations from the predictions of game theory. In response to these findings, a broad movement has arisen to salvage the core of game theory. Extant models of interdependent decision-making try to improve their explanatory domain by adding some corrective terms or limits. We will make the argument that this approach is misguided. For this approach to work, the deviations would have to be consistent. Drawing in part on our experimental results, we will …

Carrots, Sticks, And Salience, Brian Galle

Georgetown Law Faculty Publications and Other Works

This Article considers the second-best design of Pigouvian taxes and subsidies in the presence of agents who are imperfectly aware of the instrument. Until very recently, the price instrument literature has assumed perfect rationality, and even the handful of prior attempts to account for “hidden” prices focus mainly on the income tax. I extend these efforts in several directions. First, I show that the best available instrument for correcting negative externalities is often one whose price is partially adjusted upwards -- or, in the case of subsidies, downwards -- to counter-act the neglect of irrational actors. In addition, I argue …

Against Endowment Theory: Experimental Economics And Legal Scholarship, Greg Klass, Kathryn Zeiler

Faculty Scholarship

Endowment theory holds the mere ownership of a thing causes people to assign greater value to it than they otherwise would. The theory entered legal scholarship in the early 1990s and quickly eclipsed other accounts of how ownership affects valuation. Today, appeals to a generic “endowment effect” can be found throughout the legal literature. More recent experimental results, however, suggest that the empirical evidence for endowment theory is weak at best. When the procedures used in laboratory experiments are altered to rule out alternative explanations, the “endowment effect” disappears. This and other recent evidence suggest that mere ownership does not …

Obstacles To Dieting Behavior, Shahram Heshmat

Journal of Food Law & Policy

Despite documented short term success, dieting has a very low success rates, most dieters regain their weight back within 3-5 years. The question is why do people fail to stick to their goal for eating a healthy diet in order to lose weight? One possible answer is that people have self-control problems in the form of a present-biased preference. From a prior perspective, they want to behave relatively patiently, but as the moment of action approaches, they want to behave relatively impatiently. The essay presents some insights from behavioral economics to explain why people fail to maintain healthy behavior.

Dynamic Decision Making And Race Games, Shipra De

Calvert Undergraduate Research Awards

Frequent criticism in dynamic decision making research pertains to the overly complex nature of the decision tasks used in experimentation. To address such concerns we study dynamic decision making with respect to the simple race game Hog, which has a computable optimal decision strategy. In the two-player game of Hog, individuals compete to be the first to reach a designated threshold of points. Players alternate rolling a desired quantity of dice. If the number one appears on any of the dice, the player receives no points for his turn; otherwise, the sum of the numbers appearing on the dice is …

Do Firms Have Short Memories? Evidence From Major League Baseball, Andrew Healy

Economics Faculty Works

When deciding what salary to offer an employee, a firm needs to predict that employee’s future productivity. One piece of information that a firm can use to predict productivity is the employee’s past performance record. Classical theory predicts that firms will effectively use the available information to choose an appropriate salary offer. Evidence from baseball contracts indicates, however, that memory-based biases influence salary offers. Consistent with insights from psychology and behavioral economics, salaries are affected too much by recent performance compared with past performance. All organizations do not suffer equally from short memories. The teams that achieve the most with …

Endowment Effects In Chimpanzees, Owen D. Jones, Sarah F. Brosnan, Susan P. Lambeth, Mary Catherine Mareno, Amanda S. Richardson, Steven Schapiro

Vanderbilt Law School Faculty Publications

Human behavior is not always consistent with standard rational choice predictions. The much-investigated variety of apparent deviations from rational choice predictions provides a promising arena for the merger of economics and biology. Although little is known about the extent to which other species also exhibit these seemingly irrational patterns of human decision-making and choice behavior, similarities across species would suggest a common evolutionary root to the phenomena.

The present study investigated whether chimpanzees exhibit an endowment effect, a seemingly paradoxical behavior in which humans tend to value a good they have just come to possess more than they would have …

The Promise (And Limits) Of Neuroeconomics, Jedediah S. Purdy

Faculty Scholarship

Neuroeconomics — the study of brain activity in people engaged in tasks of reasoning and choice — looks set to be the next behavioral economics: a set of findings about how people make decisions that casts both light and doubt on widely accepted premises about rationality and social life. This Article explains what is most exciting about the new field and lays out some specific research tasks for it.

Law And Behavioral Biology, Owen D. Jones, Timothy H. Goldsmith

Vanderbilt Law School Faculty Publications

Society uses law to encourage people to behave differently than they would behave in the absence of law. This fundamental purpose makes law highly dependent on sound understandings of the multiple causes of human behavior. The better those understandings, the better law can achieve social goals with legal tools. In this Article, Professors Jones and Goldsmith argue that many long held understandings about where behavior comes from are rapidly obsolescing as a consequence of developments in the various fields constituting behavioral biology. By helping to refine law's understandings of behavior's causes, they argue, behavioral biology can help to improve law's …

Time-Shifted Rationality And The Law Of Law's Leverage: Behavioral Economics Meets Behavioral Biology, Owen D. Jones

Vanderbilt Law School Faculty Publications

A flood of recent scholarship explores legal implications of seemingly irrational behaviors by invoking cognitive psychology and notions of bounded rationality. In this article, I argue that advances in behavioral biology have largely overtaken existing notions of bounded rationality, revealing them to be misleadingly imprecise - and rooted in outdated assumptions that are not only demonstrably wrong, but also wrong in ways that have material implications for subsequent legal conclusions. This can be remedied. Specifically, I argue that behavioral biology offers three things of immediate use. First, behavioral biology can lay a foundation for both revising bounded rationality and fashioning …