Periodic Reporting for period 3 - Topics in Behavioral (Topics in Behavioral-Economics Theory)
Berichtszeitraum: 2021-11-01 bis 2022-06-30
The project spans a diverse set of specific topics in the theoretical parts of behavioral economics. Much of the work is best described as basic research: the team develops broadly applicable models of decision making that incorporate psychologically realistic assumptions about individuals, and that can be used by myself and others to study the implications of psychological phenomena for economic outcomes. We develop a framework for understanding heuristics individuals and households use to simplify their budgeting and spending decisions, a model of “insecurity” about one’s self-esteem and its effects on decisions, and the implications of learning when one is overconfident or in another way “misspecified” about himself.
The other part of the project is more applied: I use psychologically realistic models to shed light on important economic issues regarding markets and organizations. Here, one main agenda of the research team is understanding economics issues related to consumer protection, a major form of existing intervention in markets that has not been much addressed by our profession so far. We study the role of regulation when consumers have limited attention that they can devote to economic decisions; how consumer procrastination affects price competition between firms; and we also address the increasingly important phenomenon of “steering” in consumer retail markets (when an internet company such as Google or Facebook suggests, or otherwise directs a consumer’s attention toward, products based on information about the consumer). This research promises to inform policymakers involved in the regulation of number of markets.
The other part of the project is more applied: I use psychologically realistic models to shed light on important economic issues regarding markets and organizations. Here, one main agenda of the research team is understanding economics issues related to consumer protection, a major form of existing intervention in markets that has not been much addressed by our profession so far. We study the role of regulation when consumers have limited attention that they can devote to economic decisions; how consumer procrastination affects price competition between firms; and we also address the increasingly important phenomenon of “steering” in consumer retail markets (when an internet company such as Google or Facebook suggests, or otherwise directs a consumer’s attention toward, products based on information about the consumer). This research promises to inform policymakers involved in the regulation of number of markets.
We have been fortunate enough to make progress on many of the proposed topics.
Among the foundational projects described above, we have completed papers for all of them. One of these papers, joint with Filip Matejka, is published under the title “Choice Simplification: A Theory of Mental Budgeting and Naive Diversification” in the Quarterly Journal of Economics. A second paper titled “Fragile Self-Esteem,” joint with George Loewenstein and Takeshi Murooka, is published in the Review of Economic Studies. We have also completed three foundational papers on misspecified learning, all with Paul Heidhues and Philipp Strack. The first, “Convergence in Models of Misspecified Learning,” is published in Theoretical Economics. The second, “Overconfidence and Prejudice,” and third, “Misinterpreting Yourself,” are completed and in an extremely polished state, and both are submitted to journals. The foundational projects have therefore far exceeded the plans set out in the proposal.
Among the applied topics, progress has also been on pace. One paper titled “Browsing versus Studying: A Pro-Market Case for Regulation,” joint with Paul Heidhues and Johannes Johnen, is published at the Review of Economic Studies. Another paper, “Steering Fallible Consumers”, joint with Paul Heidhues and Mats Köster, is conditionally accepted at the Economic Journal. Our paper with Paul Heidhues and Takeshi Murooka on “Procrastination Markets” is also completed and polished and will soon be ready for submission.
Among the foundational projects described above, we have completed papers for all of them. One of these papers, joint with Filip Matejka, is published under the title “Choice Simplification: A Theory of Mental Budgeting and Naive Diversification” in the Quarterly Journal of Economics. A second paper titled “Fragile Self-Esteem,” joint with George Loewenstein and Takeshi Murooka, is published in the Review of Economic Studies. We have also completed three foundational papers on misspecified learning, all with Paul Heidhues and Philipp Strack. The first, “Convergence in Models of Misspecified Learning,” is published in Theoretical Economics. The second, “Overconfidence and Prejudice,” and third, “Misinterpreting Yourself,” are completed and in an extremely polished state, and both are submitted to journals. The foundational projects have therefore far exceeded the plans set out in the proposal.
Among the applied topics, progress has also been on pace. One paper titled “Browsing versus Studying: A Pro-Market Case for Regulation,” joint with Paul Heidhues and Johannes Johnen, is published at the Review of Economic Studies. Another paper, “Steering Fallible Consumers”, joint with Paul Heidhues and Mats Köster, is conditionally accepted at the Economic Journal. Our paper with Paul Heidhues and Takeshi Murooka on “Procrastination Markets” is also completed and polished and will soon be ready for submission.
We expect to build on the progress beyond the state of the art we have achieved so far and press further with the applied research agendas of the project. We will study implications of limited attention for other issues, including how it interacts with the breadth of consumer-protection regulation. We will work on the implications of social preferences, for instance consumers’ concerns for global warming or other externalities, for classical (price-based, large, and anonymous) markets. And we will think about how to debias individuals about issues related to their misspecifications.