How do anticipated short-term costs affect the likelihood of engaging in an activity that has long-term benefits. Five studies investigated the factors that determine (a) how anticipated short-term costs elicit self-control efforts and (b) how self-control efforts eventually diminish the influence of short-term costs on behavior. The studies manipulated short-term costs (e.g., painful medical procedures) and assessed a variety of self-control strategies (e.g., self-imposed penalties for failure to undergo a test). The results show that short-term costs elicit self-control strategies for self rather than others, before rather than after behavior, when long-term benefits are important rather than unimportant and when the costs are moderate rather than extremely small or large. The results also show that the self-control efforts help people act according to their long-term interests. People sometimes know what they prefer but feel uncertain that this is what they will actually do. This uncertainty often reflects feasibility constraints such as lack of opportunity, freedom of choice, or prerequisite skills. In some cases, however, people may know that what they prefer is entirely feasible but may nevertheless suspect that when faced with the actual choice they will be tempted to do something else. A considerable amount of basic and applied research on self-control has investigated how immediate temptations prevent people from acting according to their preferences and has suggested techniques that may help people resist the

The present research explored the nature of automatic associations formed between short-term motives (temptations) and the overriding goals with which they interfere. Five experimental studies, encompassing several self-regulatory domains, found that temptations tend to activate such higher priority goals, whereas the latter tend to inhibit the temptations. These activation patterns occurred outside of participants’ conscious awareness and did not appear to tax their mental resources. Moreover, they varied as a function of subjective goal importance and were more pronounced for successful versus unsuccessful self-regulators in a given domain. Finally, priming by temptation stimuli was found not only to influence the activation of overriding goals but also to affect goal-congruent behavioral choices. A delicious chocolate cake in the storefront of a bakery may remind individuals of the unfortunate fact that they should go on a diet. A thought of an exotic place, ideal for a relaxing vacation, may conjure up approaching deadlines at work. Momentarily alluring yet morally questionable activities may spontaneously bring to mind the image of a stern parent or a religious leader. On these and similar occasions, elaborating on a seemingly desirable course

The relative susceptibility of individuals and groups to systematic judgmental biases is considered. An overview of the relevant empirical literature reveals no clear or general pattern. However, a theoretical analysis employing J. H. Davis's (1973) social decision scheme (SDS) model reveals that the relative magnitude of individual and group bias depends upon several factors, including group size, initial individual judgment, the magnitude of bias among individuals, the type of bias, and most of all, the group-judgment process. It is concluded that there can be no simple answer to the question, "Which are more biased, individuals or groups?, " but the SDS model offers a framework for specifying some of the conditions under which individuals are both more and less biased than groups. A great deal of research in social and cognitive psychology has been devoted to demonstrating what is probably an uncontroversial proposition: that human judgment is imperfect. What makes this work interesting and useful is that such imperfections often constitute more than random fluctuations around "rational, " prescribed, or ideal judgments. Rather, humans consistently exhibit systematic biases in their judgments. Some of

We present a model in which an asset bubble can persist despite the presence of rational arbitrageurs. The resilience of the bubble stems from the inability of arbitrageurs to temporarily coordinate their selling strategies. This synchronization problem together with the individual incentive to time the market results in the persistence of bubbles over a substantial period. Since the derived trading equilibrium is unique, our model rationalizes the existence of bubbles in a strong sense. The model also provides a natural setting in which news events, by enabling synchronization, can have a disproportionate impact relative to their intrinsic informational content.

The self-regulation process often involves breaking an ongoing goal (e.g., keeping in shape) into many individual, constituent subgoals that monitor actual actions (e.g., eating healthy meals, going to the gym). The article examines how pursuing each of these subgoals may influence subsequent goal pursuit. The authors show that when people consider success on a single subgoal, additional actions toward achieving a superordinate goal are seen as substitutes and are less likely to be pursued. In contrast, when people consider their commitment to a superordinate goal on the basis of initial success on a subgoal, additional actions toward achieving that goal may seem to be complementary and more likely to be pursued. These predictions were tested in four studies that explored the conditions under which subgoals attainment have a counterproductive versus favorable effect on further pursuit of similar actions.

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Does a consumer price index (CPI) need an underlying conceptual framework? If so, should it be the theory of the cost-of-living (COL) index? With respect to the second question, there is no international consensus among statistical agencies. In several countries (the United States, Netherlands, Sweden), COL index

Findings from behavioral organization theory, behavioral decision theory, survey research and experimental economics leave no doubt about the failure of rational choice as a descriptive model of human behavior. But this does not mean that people and their politics are irrational. Bounded rationality asserts that decision-makers are intendedly rational; that is, they are goal-oriented and adaptive, but because of human cognitive and emotional architecture, they sometimes fail, occasionally in important decisions. Limits on rational adaptation are of two types: procedural limits, which are limits on how we go about making decisions, and substantive limits, which affect particular choices directly. Rational analysis in institutional contexts can serve as a standard for adaptive, goal-oriented human behavior. In relatively fixed task environments, such as asset markets or elections, we should be able to divide behavior into adaptive, goal-oriented behavior (that is, rational action) and behavior that is a consequence of processing limits, and measure the deviation. The extent of deviation is an empirical issue. These classes are mutually exclusive and exhaustive, and may be examined empirically in situations in

Humans and other animals need to make inferences about their environment under constraints of limited time, knowledge, and computational capacities. However, most theories of inductive inferences model the human mind as a supercomputer like a Laplacean demon, equipped with unlimited time, knowledge, and computational capacities. In this article I review models of fast and frugal inference, that is, satisfi cing strategies whose task is to infer unknown states of the world (without relying on computationaly expensive procedures such as multiple regression). Fast and frugal inference is a form of bounded rationality (Simon, 1982). I begin by explaining what bounded rationality in human inference is not. 1. Bounded Rationality is Not Irrationality In his chapter in John Kagel and Alvin Roth’s Handbook of Experimental Economics (1995), Colin Camerer explains that “most research on individual decision making has taken normative theories of judgment and choice (typically probability rules and utility theories) as null hypotheses about behavior, ” and has labeled systematic deviations from these norms “cognitive illusions ” (p. 588). Camerer continues, “The most fruitful, popular alternative theories spring from the idea that limits on computational ability force people to use simplifi ed procedures or ‘heuristics ’ that

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