This paper suggests a mechanism that describes individuals' positive self-image in subjective assessments of their relative abilities. The mechanism assumes individuals have heterogeneous production functions that determine ability as a function of multiple skills; make skill-enhancing...

We use Koszegi and Rabin's (2006) model of reference-dependent utility, and an extension of it that applies to decisions with delayed consequences, to study preferences over monetary risk. Because our theory equates the reference point with recent probabilistic beliefs about outcomes, it...

The authors examine self-control problems--modeled as time-inconsistent, present-biased preferences--in a model where a person must do an activity exactly once. They emphasize two distinctions: do activities involve immediate costs or immediate rewards, and are people sophisticated or naive...

We develop a rational dynamic model in which people are loss averse over changes in beliefs about present and future consumption. Because changes in wealth are news about future consumption, preferences over money are reference-dependent. If news resonates more when about imminent consumption...

People like to help those who are helping them and to hurt those who are hurting them. Outcomes rejecting such motivations are called fairness equilibria. Outcomes are mutual-max when each person maximizes the other's material payoffs, and mutual-min when each person minimizes the other's...

This article proposes an approach to improving the psychological realism of economics while maintaining its conventional techniques and goals--formal theoretical and empirical analysis using tractable models, with a focus on prediction and estimation. Besides tolerating the imperfections that...

A growing literature explores differences in subjective well-being across demographic groups, often relying on surveys with high nonresponse rates. By using the reported number of call attempts made to participants in the University of Michigan's Surveys of Consumers, we show that comparisons...

We show that any decision maker who "narrowly brackets" (evaluates decisions separately) and does not have constant-absolute-risk-averse preferences will make a first-order stochastically dominated combined choice in some simple pair of independent binary decisions. We also characterize the...