We study how institutional design influences moral transgression. People are heterogeneous in their feelings of guilt and can share guilt with others. Institutions determine the number of supporters necessary for immoral outcomes to occur. With more supporters required, every supporter can share guilt more easily. This facilitates becoming a supporter. Conversely, an institution requiring more ...

Many decision models in marketing science and psychology assume that a consumer chooses by proceeding sequentially through a checklist of desirable properties. These models are contrasted to the utility maximization model of rationality in economics. We show on the contrary that the two approaches are nearly equivalent. Moreover, the length of the shortest checklist as a proportion of the numbe...

Rational Students and Resit Exams Resit exams – extra opportunities to do an exam in the same academic year – are widely prevalent in European higher education, but uncommon in the US. I present a simple theoretical model to compare rational student behavior in the case of only one exam opportunity versus the case of two exam opportunities. Numerical examples for a wide range of plausible param...

Experimental studies have shown that subjects exhibit a systematic endowment effect. No acceptable explanation for the existence of this behavior has been offered. This paper shows that the endowment effect can be modeled as respect for private property in the absence of legal institutions ensuring third-party contract enforcement. In this sense, “natural” private property has been observed in ...

Affective decision-making is a strategic model of choice under risk and uncertainty where we posit two cognitive processes — the "rational" and the "emotional" process. Observed choice is the result of equilibirum in this intrapersonal game. As an example, we present applications of affective decision-making in insurance markets, where the risk perceptions of consumers are endogenous. We then d...

Appearance and personal characteristics, such as age, gender, ethnicity and the way a person presents himself have been shown to play a role in many economic exchanges. Various explanations have been proposed for this finding, ranging from ‘statistical discrimination’, where such variables are surrogates for unobservable characteristics related to the quality of the counterparty, to ‘taste-base...

Myopia—time preference—has been shown to be commonplace and is believed to lead to a series of negative outcomes, such as overconsumption and addiction. Yet, little is known about the determinants of myopia. Using a random-assignment experiment, we investigate whether happiness decreases myopia. Subjects are randomly assigned to receive a happyor neutral-affect inducement. Immediately following...

I provide choice-theoretic foundations for a simple two-stage model, called transitive shortlist methods, where choices are made by sequentially by applying a pair of transitive preferences (or rationales) to eliminate inferior alternatives. Despite its simplicity, the model accommodates a wide range of choice phenomena including the status quo bias, framing, homophily, compromise, and limited ...

An experiment tested whether and in what circumstances people are more likely to believe an event simply because it makes them better off. Subjects observed a financial asset's historical price chart, and received both an accuracy bonus for predicting the price at some future point, and an unconditional award that was either increasing or decreasing in this price. Despite incentives for hedging...

This paper applies the concept of damage coefficients introduced in Houba and Kremers (2008) to provide an estimate of the cost of climate change in particular the cost of changes in mean regional temperature and precipitation to the fruit vegetation sector. We concentrate on the production of apples in the German ‘Alte Land’ region. The estimated cost of climate change on apple-growing in the ...