This article investigates the portfolio choices of homeowners, taking into account the investment constraint introduced by Henderson and Ioannides (1983). This constraint requires housing investment by homeowners to be at least as large as housing consumption. It is shown that when the constraint is binding, the homeowner's optimal portfolio is ineffcient in a mean-variance sense. Thus, portfol...

It is often assumed that two heads are better than one, but reliance on decision aids is often inappropriate. Decisions to rely on an aid are thought to be based on a comparison between the perceived reliability of own performance and that of the decision aid. Unfortunately, perceived reliabilities are unlikely to be perfectly calibrated. This may result in inappropriate decisions to rely on ad...

All human beings are "endowed with reason." This assumption is the basis of the United Nations' Universal Declaration of Human Rights, as clearly expressed in its very first article. Obviously the authors of the declaration had not considered the particular case of the process of parturition, when there is no room for rational means of expression. One cannot interpret literally the irrational l...

Research in behavioral economics should have consequences of three types. First, policy analyses should take account of the weaknesses and strengths of human inferential and decision processes. Second, general education should strive toward improving these same processes. For example, good courses in probabilistic reasoning should perhaps be central in high-school and college education. Third, ...

A problem with the location-free nature of cell phones is that callers have difficulty predicting receivers' states, leading to inappropriate calls. One promising solution involves helping callers decide when to interrupt by providing them contextual information about receivers. We tested the effectiveness of different kinds of contextual information by measuring the degree of agreement between...

This paper constructs a model of corporate investment decisions under hyperbolic discounting of present values. The hyperbolic discounted present value can be interpreted as reáecting irrational myopic preferences or, as this paper demonstrates, reduced-form implications of corporate agency issues. Both cases result in an underinvestment problem for the Örm, but the Örm valuation criteria di§er...

Financial Literacy has a significant role in the individual decision-making process. Existing studies have proven that lower levels of financial literacy lead to irrational decisions funds as well savings and debt. Basically, Indonesian students PISA 2018 lowest mean scores compared other countries. At same time, there is no integration Indonesia curriculum with education. This study focuses on...