Some experimental participants are averse to compound lotteries: they prefer simple lotteries that depend on only one random event, even when the simple lotteries offer lower expected value. This paper proposes that many behavioral “investments” represent more compound risk for...Read More..
Reference-dependent decision-making – the core of behavioral economics’ prospect theory – makes people more likely to choose an outcome that they expect to receive. Reference-dependence therefore may imply the perpetuation of disadvantage: people who do not expect an opportunity may...Read More..
Cognitive Limits, Apparent Impatience, and Monthly Consumption Cycles: Theory and Evidence from the South African Pension
Larger reactions to earlier incentives are usually attributed to time preference. However, cognitive limits could also generate behavior that appears impatient. We present a simple model illustrating “local” intertemporal decisions, then apply this interpretation to the puzzle of monthly consumption increases upon...Read More..
We compare the administrative data on the implementation of the Mahatma Gandhi National Rural Employment Guarantee Act (MG-NREGA) with the estimates of public works employment from a large-scale survey undertaken by India's National Sample Survey Office. A widely held concern...Read More..
Economic theory and conventional wisdom suggest that time preference can cause or perpetuate poverty. Might poverty also or instead cause impatient or impulsive behavior? This paper reports a randomized lab experiment and a partially randomized field experiment, both in India,...Read More..
Taller children perform better on average on tests of cognitive achievement, in part because of differences in early-life health and net nutrition. Recent research documenting this height–achievement slope has primarily focused on rich countries. Using the India Human Development Survey,...Read More..
How would a boundedly rational agent react to a larger menu? I model bounded rationality as choice from an unobservable, subjective consideration subset. Consideration sets satisfy Sen's (1969) property alpha: larger objective choice sets can generate smaller consideration sets. In...Read More..