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  • Vol Cxix, Stefano Dellavigna, Ulrike Malmendier, George Baker, Daniel Benjamin, Drew Fudenberg +22 others
  • 2004
How do rational firms respond to consumer biases? In this paper we analyze the profit-maximizing contract design of firms if consumers have time-inconsistent preferences and are partially naive about it. We consider markets for two types of goods: goods with immediate costs and delayed benefits (investment goods) such as health club attendance, and goods(More)
After a quarter century of unbroken development in the theory of allocation under uncertainty, it has become an obvious fact that randomness in endowments, preferences or technology will generally work its way to the prices and allocations which prevail in equilibrium. Is it true, as intuition may suggest in haste, that random prices necessarily reflect(More)
One of the main problems impeding the evolution of cooperation is partner choice. When information is asymmetric (the quality of a potential partner is known only to himself), it may seem that partner choice is not possible without signaling. Many mutualisms, however, exist without signaling, and the mechanisms by which hosts might select the right partners(More)
The woollen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different(More)
The sensitivity of Bayesian implementation to agents'beliefs about others suggests the use of more robust notions of implementation such as ex-post implementation, which requires that each agent's strategy be optimal for every possible realization of the types of other agents. We show that the only deterministic social choice functions that are ex-post(More)
We study collective decisions by time-discounting individuals choosing a common consumption stream. We show that with any heterogeneity in time preferences, any Pareto e¢ cient and non-dictatorial method of aggregating utility functions must be time inconsistent. We also show that utilitarian aggregation necessitates a present bias, and decisions made via(More)
This paper shows that in situations in which the preferences of multiple selves are aggregated into a collective decision, even if the researcher has a fully specified theory of how preferences get aggregated, there are typically no testable implications of the theory unless there is an a priori restriction on the number of selves. This result has(More)
Subsidies in the Affordable Care Act exchanges and other health insurance programs depend on prices set by insurers – as prices rise, so do subsidies. We show that these " price-linked " subsidies incentivize higher prices, with a magnitude that depends on how much insurance demand rises when the price of uninsurance (the mandate penalty) increases. To(More)
A large literature demonstrates that contexts and frames influence decisions. This malleabil-ity of choice is usually invoked as evidence against the assumption that people maximize a stable preference ordering. In a market equilibrium, however, contexts and frames provide payoff-relevant information to consumers: the information implicit in a firm's(More)