Some economists believe that the work of neuroeconomists threatens the theory of economics. Glenn Harrison’s paper “Neuroeconomics: A Critical Reconsideration” attempts to set the score, though the points he makes are hidden behind the fumes of his anger (Glenn W. Harrison 2008). The field...

This expository note shows Alchian and Allen’s conjecture–consumers purchase fine quality relatively more than coarse one– is true under some specific conditions about homogeneity, inner solution and substitutability while allowing the influence of the income effect. In the proof, to be an...

We formulate a model of reference-dependent preferences based on the marginal rate of substitution at the reference-point of a reference-free utility function. Using binary choices on the trade-off between money and travel time, reference-dependence is captured by value functions that are...

A key open question for theories of reference-dependent references is what determines the reference point. One candidate is expectations: what people expect could affect how they feel about what actually occurs. In a real-effort experiment, we manipulate the rational expectations of subjects and...

A Discrete Choice Experiment (DCE) in the health-care sector is used to test the loss aversion theory that is derived from reference-dependent preferences: The absolute subjective value of a deviation from a reference point is generally greater when the deviation represents a loss than when the...

Pricing schemes that vary prices in response to demand shocks may antagonize consumers and reduce demand. At the same time, consumers may take advantage of the opportunities offered by price changes. Overall, the net impact of varying price on demand is ambiguous. We investigate the issue...

Using data from a unique pricing experiment, we investigate Vickrey’s conjecture that responsive pricing can be used to smooth both predictable and unpredictable demand shocks. Our evidence shows that increasing the responsiveness of price to demand conditions reduces the magnitude of...

In Gary Becker’s (1991) theory of bandwagon effects, a portion of market demand is positively sloped. In this, he ignores Harvey Leibenstein’s (1950) hypothesis that market demands for bandwagon goods are everywhere negatively sloped (stemming from scarcity imposed constraints). A...

The choice functions that are consistent with selections of VNM-stable sets of an underlying revealed dominance digraph are characterized both under VNM-perfection of the latter and in the general case.

This study contains several tests to show that individuals overreact to negative wealth changes, relative to positive wealth changes. This asymmetry, that is found using micro data, suggests that economists should not treat symmetrically the relation between economic variables (consumption for...