Decisions are often postponed even when future profits are not expected to compensate for the losses. This is especially relevant for financial and entrepreneurial disinvestment choices, as investors ...often have a disposition to hold on to losing assets for too long. We use an experiment with real real-options to study one possible behavioral motivation. Studies in psychology suggest that individuals have different styles of handling the stress involved in making decisions. We find that participants' styles of decision-making and risk aversion as well as the interaction of those can assist in predicting the likelihood that the participants will make investments and the timing of their disinvestment decisions. We also find the overall structure of the findings to be in line with a planner-doer model.
We conducted two fundraising experiments to study the effects (1) of compassion towards the beneficiary, and (2) of giving participants an opportunity to attribute small donations to luck. We find ...that exposing the participants to a plea to help the beneficiary increases the average donation. Giving participants an opportunity to attribute small donations to luck decreases the average donation. We find that in our setting, the latter effect dominates.
•We conducted two fundraising experiments.•We study: a plea to help the beneficiary vs. attributing decision to luck.•Plea to help the beneficiary increases expressive behavior and increases donations.•Attributing decisions to luck reduces donations.•In our setting, the effect of attributing decisions to luck dominates.
We assess the role of cognitive convenience in the popularity and rigidity of 0-ending prices in convenience settings. Studies show that 0-ending prices are common at convenience stores because of ...the transaction convenience that 0-ending prices offer. Using a large store-level retail CPI data, we find that 0-ending prices are popular and rigid at convenience stores even when they offer little transaction convenience. We corroborate these findings with two large retail scanner price datasets from Dominick’s and Nielsen. In the Dominick’s data, we find that there are more 0-endings in the prices of the items in the front-end candies category than in any other category, even though these prices have no effect on the convenience of the consumers’ check-out transaction. In addition, in both Dominick’s and Nielsen’s datasets, we find that 0-ending prices have a positive effect on demand. Ruling out consumer antagonism and retailers’ use of heuristics in pricing, we conclude that 0-ending prices are popular and rigid, and that they increase demand at convenience settings, not only for their transaction convenience, but also for the cognitive convenience they offer.
Participants in dictator games often contribute significant sums to unknown beneficiaries. This has been interpreted as suggesting that participants like to be perc.eived as generous even in ...anonymous situations.
We show that when participants choose the probabilities with which they contribute, they tend to bias the probabilities in their favor without respect to whether others know only the outcomes or also the probabilities assigned. These results, together with the results of ultimatum games with similar frameworks, suggest that participants that choose probabilities make self-oriented choices even when others are likely to blame them rather than the random mechanism for the outcomes.
•Dictators prefer to choose probabilities of outcomes over choosing the outcomes.•Dictators choosing probabilities assign themselves almost everything.•The dictators' choices are not affected by the receivers' information.•Dictators signal to themselves and not the receivers.•Receivers anticipate dictators, but not always vice versa.
•We show that 0-ending prices are popular and rigid at convenience stores.•We use 3 datasets: two retail price datasets from the US, and CPI data from Israel.•Existing explanations rely on ...transaction convenience 0-ending prices offer.•We argue and show that cognitive convenience is relevant and important as well.•We show that cognitive convenience of 0-ending prices leads to higher demand.
We assess the role of cognitive convenience in the popularity and rigidity of 0-ending prices in convenience settings. Studies show that 0-ending prices are common at convenience stores because of the transaction convenience that 0-ending prices offer. Using large store-level retail CPI data, we find that 0-ending prices are popular and rigid at convenience stores even when they offer little transaction convenience. We corroborate these findings with two large retail scanner price datasets from Dominick's and Nielsen. In Dominick's data, we find that there are more 0-endings in the prices of the items in the front-end candies category than in any other category, even though these prices do not affect the convenience of the consumers' check-out transaction. In addition, in both Dominick's and Nielsen's datasets, we find that 0-ending prices have a positive effect on demand. Ruling out consumer antagonism and retailers’ use of heuristics in pricing, we conclude that 0-ending prices are popular and rigid, and that they increase demand in convenience settings, not only for their transaction convenience but also for the cognitive convenience they offer.
We study the price rigidity of regular and sale prices, and how it is affected by pricing formats (i.e., pricing strategies). We use data from three large Canadian stores with different pricing ...formats (Every-Day-Low-Price, Hi-Lo, and Hybrid) that are located within a 1 km radius of each other. Our data contains both the actual transaction prices and actual regular prices as displayed on the store shelves. We combine these data with two “generated” regular price series (filtered prices and reference prices) and study their rigidity. Regular price rigidity varies with store formats because different format stores treat sale prices differently, and consequently define regular prices differently. Correspondingly, the meanings of price cuts and sale prices vary across store formats. To interpret the findings, we consider the store pricing format distribution across the US.
Recent studies in psychology and neuroscience offer systematic evidence that fictional works exert a surprisingly strong influence on readers and have the power to shape their opinions and ...worldviews. Building on these findings, we study ‘Potterian economics’, the economic ideas, insights and structure, found in Harry Potter books, to assess how the books might affect economic literacy. A conservative estimate suggests that more than 7.3% of the world’s population has read the Harry Potter books, and millions more have seen their movie adaptations. These extraordinary figures underscore the importance of the messages the books convey. We explore the Potterian economic model and compare it to professional economic models to assess the consistency of the Potterian economic principles with the existing economic models. We find that some of the principles of Potterian economics are consistent with economists’ models. Many other principles, however, are distorted and contain numerous inaccuracies, contradicting professional economists’ views and insights. We conclude that Potterian economics can teach us about the formation and dissemination of folk economics—the intuitive notions of naïve individuals who see market transactions as a zero-sum game, who care about distribution but fail to understand incentives and efficiency and who think of prices as allocating wealth but not resources or their efficient use.
We document an asymmetry in the rigidity of 9-ending prices relative to non-9-ending prices. Consumers have difficulty noticing higher prices if they are 9-ending, or noticing price-increases if the ...new prices are 9-ending, because 9-endings are used as a signal for low prices. Price setters respond strategically to the consumer-heuristic by setting 9-ending prices more often after price-increases than after price-decreases. 9-ending prices, therefore, remain 9-ending more often after price-increases than after price-decreases, leading to asymmetric rigidity: 9-ending prices are more rigid upward than downward. These findings hold for both transaction-prices and regular-prices, and for both inflation and no-inflation periods.
We use micro level retail price data from convenience stores to study the link between 0-ending price points and price rigidity during a period of a runaway inflation, when the annual inflation rate ...was in the range of 60%–430%. Surprisingly, we find that more round prices are less likely to adjust, and when they do adjust, the average adjustments are larger. These findings suggest that price adjustment barriers associated with round prices are strong enough to cause a systematic delay in price adjustments even in a period of a runaway inflation, when 85 percent of the prices change every month.
PDF
