We develop a theoretical framework to study the psychology of poverty and 'aspirations failure'. In our framework, the rich and the poor share the same preferences - and also a behavioral bias in setting aspirations. Greater downside risks imposed by poverty exacerbates the effects of this...

We study the public policy implications of a model in which agents do not fully internalize all the conscequences of their actions. Such a model uni es seemingly disconected models with behavioral agents. We evaluate the scope of paternalistic and libertarian-parternalistic policies in the light...

This paper contrasts the normative implications of a model of decision- making with endogenous frames to those of choice theoretic models of Bernheim and Rangel (2007, 2009) and Rubinstein and Salant (2008) in which observed choices are determined by exogenous frames or ancillary conditions. We...

If decision-makers (DMs) do not always do what is in their best interest, what do choices reveal about welfare? This paper shows how observed choices can reveal whether the DM is acting in her own best interest. We study a framework that relaxes rationality in a way that is common across a...

Abstract: To boost employees’ performance, firms often offer monetary bonuses when production goals are reached. However, the evidence suggests that the particular level of a goal is critical to the effectiveness of this practice. Goals must be challenging yet achievable. Computing optimal...

This article is the first attempt to study the empirical link between income aspirations and cooperation in a one shot public good game. By combining experimental with survey data, we find evidence that the more frustrated people are with their income, the lower is their propensity to cooperate...

Abstract: We investigate whether and how the type of unemployment bene t institution affects productivity. We designed a field experiment to compare workers' productivity under a welfare system, where the unemployed receive an unconditional monetary transfer, with their productivity under a...

We study decision problems where (a) preference parameters are de.ned to include psychological/moral considerations and (b) there is a feedback effect from chosen actions to preference parameters. In a standard decision problem the chosen action is required to be optimal when the feedback effect...

Standard Economics assumes that decision makers carefully reflect and meditate on each alternative. Grounded on evidence from Psychology this thesis relaxes this assumption and develops a theoretical framework with imperfect reflection. We analyse the implications for both Positive and Normative...

This paper presents an insight into the theoretical and empirical literature of Loss Aversion and Endowment Effect. The definition and conceptualisation of both ideas is introduced in order to define a framework for further analysis. Their presence implies a radical change in some of the basic...