This paper computes optimal top marginal tax rates in Bewley-Huggett-Aiyagari–type economies that include entrepreneurs. Consistent with the data, entrepreneurs are overrepresented at of income distribution and thus disproportionately affected by an increase rate. The rate maximizes welfare is 60 percent. While average gains positive similar across occupations along transition, they larger for ...

We study fairness in economies where humans consume one private good and public representing the welfare of other species. show that a social evaluator cannot be egalitarian with respect to while always respecting humans’ unanimous preferences. One solution is preferences only when doing so does not lead decrease Social satisfying these properties reveal surprising connections between concerns ...

We study a dynamic equilibrium search model where sellers differ in their urgency to liquidate an asset. Buyers strategically make price offers without knowing given seller’s urgency. liquidity and dynamics on the transition path after unexpected shock. Generically, includes phase all buyers offer same price, causing market collapse; however, dispersion resumes finite time, leading recovery bot...

It is frequently assumed in several domains of economics that demand functions are invertible prices. At the primitive level preferences, however, corresponding characterization has remained elusive. We identify necessary and sufficient conditions on a utility-maximizing consumer’s preferences for her function to be continuous invertible: strict convexity, monotonicity, differentiability sense ...

We address the following question: When can one person properly be said to be more delay averse than another? In reply, several (nested) comparison methods are developed. These methods yield a theory of delay aversion which parallels that of risk aversion. The applied strength of this theory is demonstrated in a variety of dynamic economic settings, including the classical optimal growth and tr...

The logsum formula, which provides the expected maximum utility for the multinomial logit model, is often used as a measure of welfare. We provide here a closed form formula of the welfare measure of an individual who has not access to his first-best choice, but has access to his rth-best choice, r = 2, ...n, where n is the number of alternatives. The derivation is based on a standard identity ...

We develop a version of Afriat’s Theorem that is applicable to a variety of choice environments, beyond the setting of classical consumer theory. This allows us to devise tests for rationalizability in the context of choice data on lotteries, contingent consumption, and intertemporal consumption. We also establish a version of Richter’s Theorem that characterizes the strict rationalizability of...

We use a money pump argument to measure deviations from the revealed preference axioms. Using a panel data set of food expenditures, we find a large number of violations of the weak axiom of revealed preference. The money pump costs are small, which indicate that the violations of revealed preference are not severe. While most households’ behavior deviates from rationality, by our measure they ...

This paper develops axiomatically a revealed preference theory of reference-dependent choice behavior. Instead of taking the reference for an agent as exogenously given in the description of a choice problem, we suitably relax the Weak Axiom of Revealed Preference to obtain, endogenously, the existence of reference alternatives as well as the structure of choice behavior conditional on those al...

When making choices, decision makers often either lack information about alternatives or lack the cognitive capacity to analyze every alternative. To capture these situations, we formulate a framework to study behavioral search by utilizing the idea of consideration sets. Consumers engage in a dynamic search process. At each stage, they consider only those options in the current consideration s...