This paper discusses how to improve the identification of the preference of a decision maker (DM) with limited attention proposed by Masatlioglu, Nakajima, and Ozbay (2012). Their identification method relies on choice reversals so the obtained revealed preference is often very incomplete. We propose three approaches to address this problem. The first one is accommodating to a model-free approa...

This paper studies how a seller should design its price schedule when consumers’ preferences are subject to temptation. As in Gul and Pesendorfer (2001), consumers exercise costly self-control to some degree and foresee their impulsive behavior and self-control. Since consumers may pay a premium for an option set that is less tempting, the seller may offer multiple small menus. Building on the ...

We derive, by using the revealed preference method, an individual decision making model that allows for an agent not only to exhibit status quo bias, but also to make use of her default option as a reference point. The resulting model contains elements of the classical rational choice model — indeed it reduces to that model in the case of choice problems without default options — but can also b...

While firms claim to be concerned with consumer reactions to price increases, these often do not cause large reductions in purchases. The model developed here fits this by letting consumers react negatively only when they become convinced that prices are unfair. This can explain price rigidity, though its implications are not identical to those of existing models of costly price adjustment. In ...

In addition to his role as a consumer pursuing his own interests, an individual may also regard himself as an ethical observer or citizen, judging matters from society’s point of view. However, an individual’s personal preferences do not necessarily coincide with his social preferences. This paper presents a formal model in which individuals are assumed to have two distinct preference orderings...

Stability of Time Preferences Individuals frequently face intertemporal decisions. For the purposes of economic analysis, the preference parameters assumed to govern these decisions are generally considered to be stable economic primitives. However, evidence on the stability of time preferences is notably lacking. In a large field study conducted over two years with about 1,400 individuals, tim...

How much income would a woman living alone require to attain the same standard of living that she would have if she were married? What percentage of a married couple’s expenditures are controlled by the husband? How much money does a couple save on consumption goods by living together versus living apart? We propose and estimate a collective model of household behavior that permits identificati...

The main result of this paper is a representation theorem for time preferences (on the prize-time space) that cover a variety of time preference models considered in the experimental and theoretical literature on intertemporal choice. In particular, along with many models induced by similarity relations on time and outcomes, exponential, quasi-hyperbolic, hyperbolic, subadditive, and intransiti...

This paper studies the outcome of the amendment voting procedure based on a potentially incomplete binary relation. We assume that the decision-maker evaluates candidates in a list and iteratively updates her choice by comparing the status-quo to the next candidate. With a complete binary relation, it is known that the final selected candidate belongs to the “top cycle.” In reality however, not...

We examine the intertemporal optimal consumption and investment problem in a continuous-time economy with a divisible durable good. Consumption services are assumed to be proportional to the stock of the good held and adjustment of the stock is costly, in that it involves the payment of a proportional transaction cost. For the case in which the investor has an isoelastic utility function and as...