Rational Attention and Adaptive Coding: A Puzzle and a Solution

By Camillo Padoa-Schioppa and Aldo Rustichini

American Economic Review, May 2014

Adaptive Coding is the property of the brain to adjust its response to statistical properties of the environment. Its effect is an improved discrimination among signals under the constraints on the dynamic range of its response. It can thus be considered ...

Who Is (More) Rational?

By Syngjoo Choi, Shachar Kariv, Wieland Müller, and Dan Silverman

American Economic Review, June 2014

Revealed preference theory offers a criterion for decision-making quality: if decisions are high quality then there exists a utility function the choices maximize. We conduct a large-scale experiment to test for consistency with utility maximization. Cons...

Gift Exchange versus Monetary Exchange: Theory and Evidence

By John Duffy and Daniela Puzzello

American Economic Review, June 2014

We study the Lagos and Wright (2005) model of monetary exchange in the laboratory. With a finite population of sufficiently patient agents, this model has a unique monetary equilibrium and a continuum of non-monetary gift exchange equilibria, some of w...

Evolutionary Origins of the Endowment Effect: Evidence from Hunter-Gatherers

By Coren L. Apicella, Eduardo M. Azevedo, Nicholas A. Christakis, and James H. Fowler

American Economic Review, June 2014

The endowment effect, the tendency to value possessions more than non-possessions, is a well known departure from rational choice and has been replicated in numerous settings. We investigate the universality of the endowment effect, its evolutionary sig...

Micro-loans, Insecticide-Treated Bednets, and Malaria: Evidence from a Randomized Controlled Trial in Orissa, India

By Alessandro Tarozzi, Aprajit Mahajan, Brian Blackburn, Dan Kopf, Lakshmi Krishnan, and Joanne Yoong

American Economic Review, July 2014

We describe findings from the first large-scale cluster randomized controlled trial in a developing country that evaluates the uptake of a health-protecting technology, insecticide-treated bednets (ITNs), through micro-consumer loans, as compared to free ...

Household Bargaining and Excess Fertility: An Experimental Study in Zambia

By Nava Ashraf, Erica Field, and Jean Lee

American Economic Review, July 2014

We posit that household decision-making over fertility is characterized by moral hazard since most contraception can only be perfectly observed by the woman. Using an experiment in Zambia that varied whether women were given access to contraceptives alone...

E-lections: Voting Behavior and the Internet

By Oliver Falck, Robert Gold, and Stephan Heblich

American Economic Review, July 2014

This paper analyzes the effects on voting behavior of information disseminated over the Internet. We address endogeneity in Internet availability by exploiting regional and technological peculiarities of the preexisting voice telephony network that hinder...

Default Tips

By Kareem Haggag and Giovanni Paci

American Economic Journal: Applied Economics, July 2014

We examine the role of defaults in high-frequency, small-scale choices using unique data on over 13 million New York City taxi rides. Using a regression discontinuity design, we show that default tip suggestions have a large impact on tip amounts. These r...

Learning about an Infrequent Event: Evidence from Flood Insurance Take-Up in the United States

By Justin Gallagher

American Economic Journal: Applied Economics, July 2014

I examine the learning process that economic agents use to update their expectation of an uncertain and infrequently observed event. I use a new nation-wide panel dataset of large regional floods and flood insurance policies to show that insurance take-up...

Beyond Happiness and Satisfaction: Toward Well-Being Indices Based on Stated Preference

By Daniel J. Benjamin, Ori Heffetz, Miles S. Kimball, and Nichole Szembrot

American Economic Review, September 2014

This paper proposes foundations and a methodology for survey-based tracking of well-being. First, we develop a theory in which utility depends on "fundamental aspects" of well-being, measurable with surveys. Second, drawing from psychologists, philosopher...

The Short-Run and Long-Run Effects of Behavioral Interventions: Experimental Evidence from Energy Conservation

By Hunt Allcott and Todd Rogers

American Economic Review, October 2014

We document three remarkable features of the Opower program, in which social comparison-based home energy reports are repeatedly mailed to more than six million households nationwide. First, initial reports cause high-frequency "action and backsliding,...

Consumption, Income Changes, and Heterogeneity: Evidence from Two Fiscal Stimulus Programs

By Kanishka Misra and Paolo Surico

American Economic Journal: Macroeconomics, October 2014

Almost half of American families did not adjust their consumption following receipt of the 2001 or 2008 tax rebates. Another 20 percent, with low income and more likely to rent, spent a small but significant amount. Households with large spending prope...

Fiscal Policy and MPC Heterogeneity

By Tullio Jappelli and Luigi Pistaferri

American Economic Journal: Macroeconomics, October 2014

We use responses to survey questions in the 2010 Italian Survey of Household Income and Wealth that ask consumers how much of an unexpected transitory income change they would consume. The marginal propensity to consume (MPC) is 48 percent on average. W...

Can Marginal Rates of Substitution Be Inferred from Happiness Data? Evidence from Residency Choices

By Daniel J. Benjamin, Ori Heffetz, Miles S. Kimball, and Alex Rees-Jones

American Economic Review, November 2014

We survey 561 students from U.S. medical schools shortly after they submit choice rankings over residencies to the National Resident Matching Program. We elicit (a) these choice rankings, (b) anticipated subjective well-being (SWB) rankings, and (c) expec...

The Control Premium: A Preference for Payoff Autonomy

By David Owens, Zachary Grossman, and Ryan Fackler

American Economic Journal: Microeconomics, November 2014

We document individuals' willingness to pay to control their own payoff. Experiment participants choose whether to bet on themselves or on a partner answering a quiz question correctly. Given participants' beliefs, which we elicit separately, expected-mo...

Gasoline Taxes and Consumer Behavior

By Shanjun Li, Joshua Linn, and Erich Muehlegger

American Economic Journal: Economic Policy, November 2014

Gasoline taxes can be employed to correct externalities from automobile use and to raise government revenue. Our understanding of the optimal gasoline tax and the efficacy of existing taxes is largely based on empirical analysis of consumer responses to g...

A Test for the Rational Ignorance Hypothesis: Evidence from a Natural Experiment in Brazil

By Fernanda Leite Lopez de Leon and Renata Rizzi

American Economic Journal: Economic Policy, November 2014

This paper tests the rational ignorance hypothesis by Downs (1957). This theory predicts that people do not acquire costly information to educate their votes. We provide new estimates for the effect of voting participation by exploring the Brazilian du...

Present Bias and Collective Dynamic Choice in the Lab

By Matthew O. Jackson and Leeat Yariv

American Economic Review, December 2014

We study collective decisions by time-discounting individuals choosing a common consumption stream. We show that with any heterogeneity in time preferences, utilitarian aggregation necessitates a present bias. In lab experiments three quarters of "soci...

Consumption and Debt Response to Unanticipated Income Shocks: Evidence from a Natural Experiment in Singapore

By Sumit Agarwal and Wenlan Qian

American Economic Review, December 2014

This paper uses a unique panel dataset of consumer financial transactions to study how consumers respond to an exogenous unanticipated income shock. Consumption rose significantly after the fiscal policy announcement: during the ten subsequent months, for...

Cellular Service Demand: Biased Beliefs, Learning, and Bill Shock

By Michael D. Grubb and Matthew Osborne

American Economic Review, January 2015

Following FCC pressure to end bill shock, cellular carriers now alert customers when they exceed usage allowances. We estimate a model of plan choice, usage, and learning using a 2002-2004 panel of cellular bills. Accounting for firm price adjustment, we ...