Results 1  10
of
26
Unemployed, but Optimistic: Optimal Insurance Design with Biased Beliefs,”Unpublished MIT mimeo
, 2008
"... This paper analyzes how job seekers’biased perceptions about their employment prospects affect the optimal design of unemployment insurance. Biased perceptions change the perceived value of insurance and the perceived return to search efforts. Policies implementing standard “suffi cientstatistics”f ..."
Abstract

Cited by 24 (3 self)
 Add to MetaCart
This paper analyzes how job seekers’biased perceptions about their employment prospects affect the optimal design of unemployment insurance. Biased perceptions change the perceived value of insurance and the perceived return to search efforts. Policies implementing standard “suffi cientstatistics”formula become suboptimal and a wedge arises between social and private insurance. A paternalistic social planner corrects for the implied search distortions, while private insurers respond to the misperceived value of insurance. Empirically, I find that unemployed job seekers greatly overestimate how quickly they will find work. As a consequence, privatizing unemployment insurance results in too low or rapidly decreasing unemployment benefits.
A model of focusing in economic choice
 Quarterly Journal of Economics
, 2013
"... Abstract We present a theory of individual choice in which the decisionmaker focuses more on, and hence weights more heavily, attributes in which the options in her consideration set are more different. Consistent with evidence on salience in monetary choices, our model predicts a bias toward optio ..."
Abstract

Cited by 12 (0 self)
 Add to MetaCart
(Show Context)
Abstract We present a theory of individual choice in which the decisionmaker focuses more on, and hence weights more heavily, attributes in which the options in her consideration set are more different. Consistent with evidence on salience in monetary choices, our model predicts a bias toward options whose advantages are concentrated in fewer attributes. In intertemporal choice, because the relative concentrations of an option's costs and benefits can be different from the perspective of a single period and the perspective of the entire choice problem, our model often predicts a form of time inconsistency. The decisionmaker exhibits present bias when the costs of current misbehavior are distributed over many future dates (such as in harmful consumption), but is "futurebiased" when reaching a goal with concentrated benefits requires many periods of effort (such as in career advancement). In product design, a profitmaximizing firm chooses products with one core attribute and many price components. A strong firm wants to be especially strong on its competitor's weak attribute, while a weak firm wants to be relatively strong on its competitor's strong attribute. * Takeshi Murooka provided excellent research assistance. We thank
FUTILE ATTEMPTS AT SELFCONTROL
"... We investigate costly yet futile attempts at selfcontrol when consumption of a harmful product has a binary breakdown/nobreakdown nature and individuals tend to underestimate their need for selfcontrol. Considering timeinconsistent preferences as well as temptation disutility, we show that becom ..."
Abstract

Cited by 6 (1 self)
 Add to MetaCart
We investigate costly yet futile attempts at selfcontrol when consumption of a harmful product has a binary breakdown/nobreakdown nature and individuals tend to underestimate their need for selfcontrol. Considering timeinconsistent preferences as well as temptation disutility, we show that becoming more sophisticated can decrease welfare and investigate what kind of mistaken beliefs lead to low welfare. With timeinconsistent preferences, being close to perfectly understanding one’s preferences but assigning zero probability to true preferences induces the worst outcome. (JEL: D03, D11, D91) 1.
Choice, Rationality and Welfare Measurement
, 2007
"... We present a method for evaluating the welfare of a decision maker, based on observed choice data. Our method can be used whether or not the observed choices are rational. We parallel the standard revealed preference theory, which does require rationality, by modeling choices "as if" they ..."
Abstract

Cited by 5 (1 self)
 Add to MetaCart
We present a method for evaluating the welfare of a decision maker, based on observed choice data. Our method can be used whether or not the observed choices are rational. We parallel the standard revealed preference theory, which does require rationality, by modeling choices "as if" they were the result of a specific decision making process. However, in place of the usual preference relation whose maximization induces the observations, we explain choice as arising from a compromise among a set of simultaneouslyheld, con‡icting preference relations. We use these preference relations as the basis to measure the decision maker’s welfare. In general our method does not yield a unique set of explanatory preferences. Thus we characterize all the explanatory combinations of preferences any one of which could generate the data. We use this set of explanations to compute bounds on welfare changes. We show that some standard results of rational choice theory can be extended to irrational decision makers. The theory can be used to explore a number of contextdependent choice patterns found in psychological experiments.
Choice and Individual Welfare
"... We propose an abstract method of systematically assigning a “rational” ranking of outcomes to choice data which may not be rationalizable in any sense. An individual welfare functional maps stochastic choice functions into weak orders. A stochastic choice function gives the empirical frequency of ch ..."
Abstract

Cited by 3 (0 self)
 Add to MetaCart
(Show Context)
We propose an abstract method of systematically assigning a “rational” ranking of outcomes to choice data which may not be rationalizable in any sense. An individual welfare functional maps stochastic choice functions into weak orders. A stochastic choice function gives the empirical frequency of choices for any possible opportunity set (framing factors may also be incorporated into the model); we call such general choice functions “choice distributions.” We require that for any two alternatives x and y, if our individual welfare functional recommends x over y given two distinct choice distributions, then it also recommends x over y for any mixture of the two choice distributions. Together with some mild technical requirements, such an individual welfare functional must weight every opportunity set and assign a utility to each alternative x which is the sum across all opportunity sets of the weighted probability of x being chosen from the set. It therefore requires us to have a “prior view ” about how important a choice of x from a given opportunity set is.
Revealed Conflicting Preferences: Rationalizing Choice with MultiSelf Models
, 2008
"... We model a DM as a collection of utility functions (selves, rationales) and an aggregation rule (a theory of how selves are activated by choice sets) on which we impose five simple axioms of social choice. This framework encompasses many multiself models proposed in the existing literature. For a ..."
Abstract

Cited by 2 (0 self)
 Add to MetaCart
We model a DM as a collection of utility functions (selves, rationales) and an aggregation rule (a theory of how selves are activated by choice sets) on which we impose five simple axioms of social choice. This framework encompasses many multiself models proposed in the existing literature. For a broad class of aggregators we show that with sufficiently many selves the resulting model can rationalize any choice function. We define an accounting procedure for IIA violations and show that for any fixed number of selves, a lower bound on the set of choice functions that these aggregators can rationalize is given by the set of choice functions that exhibit no more IIA violations than a certain linear function of the number of selves.
Behavioral Economics and Public Policy: A Pragmatic Perspective
 American Economic Review
, 2015
"... The views expressed herein are those ..."
(Show Context)
Rationalizing Choice with MultiSelf Models
, 2010
"... To facilitate systematic study of multiself decision making, this paper proposes a framework that encompasses a variety of models proposed in economics, psychology, and marketing. We model a decisionmaker as a collection of utility functions (selves) and an aggregation rule (model of multiself de ..."
Abstract

Cited by 1 (0 self)
 Add to MetaCart
(Show Context)
To facilitate systematic study of multiself decision making, this paper proposes a framework that encompasses a variety of models proposed in economics, psychology, and marketing. We model a decisionmaker as a collection of utility functions (selves) and an aggregation rule (model of multiself decisionmaking). We propose a method for counting IIA violations in a choice behavior, and use this measure to provide a lower bound on the set of choice behaviors that can be rationalized with n selves. For a broad class of models, we show that any behavior can be rationalized if sufficiently many selves are permitted. We apply our results to study both Strotzian decisionmaking and household choice.
Behavioral Economics of Education: Progress and Possibilities
, 2015
"... (ii) development of ..."
(Show Context)