Bayesian consumers infer that hidden add-on prices (e.g., the cost of ink for a printer) are likely to be high prices. If consumers are Bayesian, firms will not shroud information in equilibrium. However, shrouding may occur in an economy with some myopic (or unaware) consumers. Such shrouding...

We derive the ï¬rst closed-form optimal reï¬nancing rule: Reï¬nance when the current mortgage interest rate falls below the original rate by at least \(\frac{1}{ψ}\)[φ + W (− exp (−φ))]. In this formula W(.) is the Lambert W-function, ψ = \(\frac{2 (Ï +...

Background: Emerging data from younger and middle-aged persons suggest that cognitive ability is negatively associated with risk aversion, but this association has not been studied among older persons who are at high risk of experiencing loss of cognitive function. Methods: Using data from 369...

Do laboratory subjects correctly perceive the dynamics of a mean-reverting time series? In our experiment, subjects receive historical data and make forecasts at different horizons. The time series process that we use features short-run momentum and long-run partial mean reversion. Half of the...

Extending Barro (1999) and Luttmer & Mariotti (2003), we introduce a new model of time preferences: the instantaneous-gratiï¬cation model. This model applies tractably to a much wider range of settings than existing models. It applies to both complete- and incomplete-market settings and it...

Bernanke (2005) hypothesized that a “global savings glut†was causing large trade imbalances. However, we show that the global savings rates did not show a robust upward trend during the relevant period. Moreover, if there had been a global savings glut there should have been a large...

Hyperbolic discount functions induce dynamically inconsistent preferences, implying a motive for consumers to constrain their own future choices. This paper analyzes the decisions of a hyperbolic consumer who has access to an imperfect commitment technology: an illiquid asset whose sale must be...

The complexity of the retirement savings decision may overwhelm employees, encouraging procrastination and reducing 401(k) enrollment rates. We study a low-cost manipulation designed to simplify the 401(k) enrollment process. Employees are given the option to make a Quick Enrollment [TM]...

Consistent with mental accounting, we document that investors sometimes choose the asset allocation for one account without considering the asset allocation of their other accounts. The setting is a firm that changed its 401(k) matching rules. Initially, 401(k) enrollees chose the allocation of...