This paper is concerned with a policy oriented macroeconomic experiment involving an international economy with a relatively small home country and a large foreign country. It compares the economic performance of two alternative tax systems as a means to finance unemployment benefits: a...

We study the effects of two widely observed behavioral policy interventions⸻the simplification of complex decisions and the implementation of high-quality defaults. Based on a laboratory experiment featuring a dual-task paradigm, we demonstrate that these policies do not only improve decisions...

A nudge is a non-coercive paternalistic intervention that attempts to improve choices by manipulating the framing of a decision problem. As any paternalism, it faces the difficulty of determining the appropriate welfare criterion. We propose a welfare-theoretic foundation for nudging similar in...

In a model where consumers have quasi-hyperbolic preferences, we compare immediate subsidies paid for health-conscious consumption and future subsidies rewarding good health outcome. We characterize the subsidy rates which implement the unbiased choice. These rates differ because of two...

One possible determinant of overpricing on asset markets is a lack of self-control abilities of traders. Self-control is the individual capacity to override or inhibit undesired behavioral tendencies such as impulses and to refrain from acting on them. We implement the first experiment that is...

This paper estimates a New Keynesian model with new and old behavioral elements. Agents in the model exhibit cognitive discounting, or myopia: they discount variables far into the future at higher rates than typically implied in the benchmark model. We investigate the model under different...

Evidence from hypothetical scenarios strongly suggests the existence of a sunk cost bias, the tendency to ‘throw good money after bad money.’ However, the few studies using incentives are inconclusive. In addition, evidence on potential psychological channels underlying such a bias is...

We study the inference and experimentation problem of an agent in a situation where the outcomes depend on the individual's intrinsic ability and on an external variable. We analyze the mistakes made by decision-makers who hold inaccurate prior beliefs about their ability. Overconfident...

Subjective performance evaluations are commonly used to provide feedback and incentives to workers. However, such evaluations can generate significant disagreements and conflicts, the severity of which may be driven by many factors. In this paper we show that a workers' level of self-confidence...