A host of recent studies show that attention allocation has important economic consequences. This paper reports the first empirical test of a cost-benefit model of the endogenous allocation of attention. The model assumes that economic agents have finite mental processing speeds and cannot...

One of the most striking results in experimental economics is the ease with which market bubbles form in a laboratory setting and the difficulty of preventing them. This article re-examines bubble experiments in light of the results of an earlier series of market experiments that examine how...

This paper introduces an emerging interdisciplinary research field, namely neuroeconomics, which uses the neuroscientific methods to investigate the neural systems supporting economically relevant behaviors. Traditional economic research is restricted to the level of describing decision...

Information asymmetries are important in theory but difficult to identify in practice. We estimate the empirical importance of adverse selection and moral hazard in a consumer credit market using a new field experiment methodology. We randomized 58,000 direct mail offers issued by a major South...

Higher-order risk effects play an important role in examining economic behavior under uncertainty. A precautionary demand for saving has been linked to the property of prudence and the property of temperance has been used to show how the presence of an unavoidable risk affects one's behavior...

One of the basic tenets of expected utility theory is the principle of invariance in stating preferences between options. The preference should not depend on the description of the options (description invariance) or on the method of elicitation (procedure invariance). In Experiment 1, the...

Social interdependence is believed to play an important role in individual choice behavior. This paper outlines a simple model constructed on the premise that people are motivated by their own payoff and by how their action compares to others in their reference group. I show that conformity in...

We examine the temporal stability of risk preference measures obtained by different elicitation methods in a controlled laboratory experiment at two distinct times. Our results indicate remarkable temporal stability of risk measures at the aggregated level and temporal instability at the...

This article addresses the reactions of the Union of South American Nations (UNASUR) economies to external shocks. Because it was conceived as a political alliance, the UNASUR is likely to be a promising integration project. Thus, assessing the union from an economic perspective is essential....

Using data from a laboratory-controlled environment we analyze the decisions of principals to veto the allocations of grossed-up investments proposed by their agents in a modified trust game. We also analyze the changes in the surplus associated with the introduction of empowerment and the...