We propose a rich model of household behavior to study the effect two important policies: mortgage interest tax deduction and mandatory amortization. These policies have attracted some controversy, first because they are conceived increase overall saving, an objective that literature does not agree can achieve, second incentivize illiquid savings may thus share ‘wealthy hand-to-mouth’ household...

Individuals whose self-control strength is depleted through the prior exertion of self-control may consume more alcohol in situations that demand restraint. Male social drinkers either exerted self-control by suppressing their thoughts or did not exert self-control while doing arithmetic. They then sampled beer. Participants expected a driving test after drinking and therefore were motivated to...

We analyze a novel principal-agent problem of moral hazard and adverse selection in continuous time. The constant private shock revealed at time zero when the agent selects the contract has a long-term impact on the optimal contract. The latter is based not only on the continuation value of the agent who truthfully reports, but also contingent upon the continuation value of the agent who misrep...

We investigate how the evolution of communication strategies affects signal credibility when there is common interest as well as a conflict between communicating individuals. Taking alarm calls as an example, we show that if the temptation to cheat is low, a single signal is used in the population. If the temptation increases cheaters will erode the credibility of a signal, and an honest mutant...

The present research explores a self-control operation, namely, counteractive construal, that helps consumers resolve the conflicts between an important goal and a short-term temptation by altering the construal of the temptation. We propose that when experiencing a self-control conflict, consumers intentionally construe temptation as more damaging to the attainment of a long-term goal and use ...

This paper argues that the relation between temptations and the level of consumption plays a key role in explaining the observed behaviors of the poor. Temptation goods are defined to be the set of goods that generate positive utility for the self that consumes them, but not for any previous self that anticipates that they will be consumed in the future. We show that the assumption of declining...

Whereas hedonic consumption is often labeled as impulsive, findings from self-licensing research suggest that people sometimes rely on reasons to justify hedonic consumption. Although the concept of self-licensing assumes the involvement of reasoning processes, this has not been demonstrated explicitly. Two studies investigated whether people indeed rely on reasons to allow themselves a guilty ...

Ethical dilemmas pose a self-control conflict between pursuing immediate benefits through behaving dishonestly and pursuing long-term benefits through acts of honesty. Therefore, factors that facilitate self-control for other types of goals (e.g., health and financial) should also promote ethical behavior. Across four studies, we find support for this possibility. Specifically, we find that onl...

A life-cycle model with equilibrium default in which consumers with and without temptation coexist is constructed to evaluate the 2005 bankruptcy law reform and other counterfactual reforms. The calibrated model indicates that the 2005 bankruptcy reform achieves its goal of reducing the number of bankruptcy filings, as seen in the data, but at the cost of loss in social welfare. The creditor-fr...