Psychologists report that people make choices on the basis of "decision utilities" that routinely overestimate the "experienced utility" consequences of these choices. This paper argues that this dichotomy between decision and experienced utilities may be the solution to an evolutionary design...

Experimental evidence demonstrates a human tendency to extrapolate linearly from exponential data. A large literature labels this tendency ‘exponential growth bias.’ This article demonstrates that financial concepts are expressible as linear functions containing exponential terms, and...

Economics seems largely based on the assumption that monetary incentives improve performance. By contrast, a large literature in psychology, including a rich tradition of experimental work, claims just the opposite. In this paper we present and discuss a set of experiments designed to test the...

During the Great Recession of 2007, unemployment reached nearly 10 percent and the ratio of unemployment to open positions (as measured by the Help Wanted OnLine Index) more than tripled. The weak labor market prompted an unprecedented extension in the length of time in which a claimant can...

This commentary, which presents an expanded version of the keynote address at the 2012 Conference on ‘Global Climate Change Without the United States’, outlines Palau’s role in attempting to motivate international action on climate change. It explains two initiatives: the passage of a...

This paper proposes a joint model of tobacco consumption and mortality over the life-cycle. The decision to smoke is a trade off between current utility derived from smoking and a mortality risk increasing with age. Thus, individuals with a shorter potential life expectancy have less incentive...

This paper studies the consumption decisions of agents who face costs of acquiring, absorbing and processing information. These consumers rationally choose to only sporadically update their information and re-compute their optimal consumption plans. In between updating dates, they remain...

This paper examines the relationship between household balance sheets, consumer purchases and expectations. We find few robust empirical relationships between balance sheet measures and spending, but we do find that unemployment expectations are robustly correlated with spending

Results from four experiments suggest that currencies such as loyalty-program points are overvalued. Different allocations of the same quantity of points across the same number of purchases (e.g., 100 points for each first, 200 for each second, 300 for each third purchase vs. 200 for each first,...

I propose and axiomatically characterize a multi-attribute stochastic choice model that simultaneously generalizes the standard model of deterministic choice and the Luce rule. Attributes are cardinal, independent measures of desirability that are endogenously inferred from observed choices, and...