We study multivariate prevention decisions by disentangling early and late prevention. We show how the modularity of prevention and several measures of prevention efficiency interact with the agent’s risk attitude. We derive comparative statics with respect to impatience, loss severity, and...

This letter develops a set of simple conditions under which an individual is willing to save an extra amount of money due to the presence of ambiguity concerning his second period wealth. This extra precautionary saving motive is naturally associated with the notion of ambiguity prudence.

We show that a steeply increasing workload before a deadline is compatible with time-consistent preferences. The key departure from the literature is that we consider a stochastic environment where success of effort is not guaranteed.

Kimball (1990a,b) established that income risk increases the marginal propensity to consume if and only if absolute prudence decreases. We characterize decreasing and increasing multivariate prudence and show that a multidimensional risk increases the marginal propensity to consume if and only...

I study a single-agent dynamic purchase problem by using a Gul and Pesendorfer’s [Gul, F., Pesendorfer, W., 2007. Harmful addiction. Review of Economic Studies 74 (1), 147–172] dynamic preference: extreme self-control cannot be sustained and leads to addiction. This type of agent exhibits...

We test the predictions of the sticky information model using a survey dataset by comparing shoppers’ accuracy in recalling the prices of regulated and comparable unregulated products. Because regulated product prices are capped, they are sold more than comparable unregulated products, while...

We use micro level retail price data from convenience stores to study the link between 0-ending price points and price rigidity during a period of a runaway inflation, when the annual inflation rate was in the range of 60%–430%. Surprisingly, we find that more round prices are less likely to...

Hyperbolic discounting with naiveté is widely believed to provide a better explanation than exponential discounting of why people borrow so much and why they wait so long to save for retirement. We reach a different set of conclusions. We show that if financial planning is enriched to include...

This paper provides the closed form solution for the standard model of endogenous growth when consumers have present-biased preferences and make time-inconsistent savings plans, which they revise continuously. It is shown that long-run growth is not necessarily lower under present-biased...