We provide a method to measure welfare, in money-metric terms, taking into account expectations about the future. Our two key assumptions are that (1) the expenditure function is separable between the present and the future, and (2) there are some households that do not face idiosyncratic...

A subset of harm reduction strategies encourages individuals to switch from a harmful addictive good to a less harmful addictive good; examples include e-cigarettes (substitutes for combustible cigarettes) and methadone and buprenorphine (substitutes for opioids). Such harm reduction methods have...

Amidst the recent resurgence of inflation, this paper investigates the interplay of corporate profits and income distribution in shaping inflation and aggregate demand within the New Keynesian framework. We derive a novel analytical condition for profits to be procyclical and inflationary....

This paper characterizes the transition dynamics of a continuous-time neoclassical production economy with capital accumulation in which households face idiosyncratic income risk and cannot commit to repay their debt. Therefore, even though a full set of contingent claims that pay out...

We study habitual brand loyalty, one of the earliest empirically-studied forms of switching costs and a classic source of structural state-dependence in consumer demand. Auxiliary instruments and economically-motivated restrictions can tighten nonparametric bounds on the extent of brand loyalty...

It is not unusual in real-life that one has to choose among finitely many alternatives when the merit of each alternative is not perfectly known. This may be the case when an individual chooses school, doctor or pension plan, or when a firm chooses between alternative R&D projects. Instead of...

When income growth under price dispersion reduces the time of search and raises prices of purchases, the increase in purchase price can be presented as the increase in the willingness to pay for insurance or the willingness to pay for consumer credit. The optimal consumer decision represents the...

This document analyzes the changes that suffer the amounts demanded of a good, due to changes in its price. For this we use the decomposition in Income and Substitution effects posed by Slutsky and Hicks in their work concerning the analysis of the demand. In general, when the price of a good...

A common explanation for biases in judgment and choice has been to postulate two separate processes in the brain: a “System 1” that generates judgments automatically, but using only a subset of the information available, and a “System 2” that uses the entire information set, but is only...

The paper describes the microeconomic trade-off between prices, savings on purchases, and the time horizon of the consumption-leisure choice during the search for different products. When marginal costs of the search are equal to its marginal benefit, the time of search is proportional to...