The thesis consists of three stand-alone essays. Defaults are influential, cheap to change, and therefore of great interest to policymakers. However, it is still unclear what explains their influence. Optimal Defaults and Uncertainty presents a model in which uncertainty contributes to default inertia: decision makers may be content to stick with the default and avoid the costs of learning their optimal decision. The socially optimal default policy I find differs significantly from optimal policy in models where procrastination alone drives default inertia. I show that alternative policy measures may be more effective in improving welfare, and so the effectiveness of defaults may be more limited than previous models suggest. In Screening Salient Thinkers, I explore a model of second-degree price discrimination in which consumers with context-dependent preferences choose from a menu of price-quality bundles. Specifically, the range of prices and qualities in the menu determines the weight that consumers give to the two attributes when they evaluate bundles. 'Focusing thinkers' place more weight on the attribute that varies the most within the menu; for 'relative thinkers' the opposite is true. The monopolist exploits both types of bounded rationality. In the focusing case the cost of asymmetric information is directly reduced; with relative thinkers the monopolist can use a 'decoy good' to extract higher revenues from all consumers. Finally How Long Is Now? explores an important degree of freedom in models of present-biased preferences: when does the present end and the future begin? First I present evidence that illustrates how economists have used this degree of freedom to explain behaviour in a variety of different contexts. Second, using a novel, between-subjects experimental design, I test a hypothesis that endogenises the cut-off between the present and the future: the 'as soon as possible' effect. The effect predicts that the soonest option in a menu fixes the present horizon and implies a time-specific form of menu dependence. The experimental data collected does not support the hypothesis and this result appears robust to a number of analytical approaches.

This research examines direct and indirect mode of export in sub-Saharan Africa through a combination of theoretical and empirical analysis. We use firm-level data from 38 sub-Saharan Africa countries to test the theoretical findings. The first chapter analyzes a manufacturing firm that chose to export but faced with the discrete decision of choosing a mode of export. The firm weighs between exporting directly and indirectly. We investigate the factors that affect a firm's decision and compare the payoff in each scenarios viz., direct and indirect exports. We formulate a theoretical model for a single firm that can successfully choose from either export channels under various circumstances. Further, we compare the profits under either modes of export. We find that the profit of using direct export mode improves as a firm becomes more efficient, in which case the difference between the profits from using direct and indirect mode gets larger. Our empirical findings show similar relationships. The results also indicate that factors such as size of the firm, being a subsidiary of a multi-plant firm and access to information technology affect the choice to become direct exporter positively. On the other hand, a firm's increased perceptions of obstacles to current operation in the forms of lack of access to finance and corruption are associated with decreased probability of becoming direct-exporter. The second chapter's primary goal is to investigate the oligopolistic interdependence between direct and indirect exporters in the presence of government subsidy. It makes one main assumption that is government subsidy provision targets only direct exporters. In our analysis, we present the effects of pre-determined subsidy and subsidy as a function of levels of inefficiency of both mode exporters and competition between direct exporters. We find that the socially optimal subsidy is negative implying that the chosen policy instrument is a tax on the direct exporters. For both pre-determined and endogenous subsidy, we find that the level of efficiency of the firm affects export decision positively in either direct or indirect-mode exporters' cases. While, the efficiency level of one type mode exporter negatively affects the output of the other mode exporter. We also find that the indirect exporter's level of inefficiency positively affects optimal subsidy provision to the direct exporters, if the indirect exporter has a large market share. We find empirical evidence that support our theoretical findings. In the last chapter, we investigate the interdependence between the direct and indirect export modes of exporters by including domestic sales. Both our theoretical and empirical results indicate that level of exports and domestic sales are directly related to level of efficiency (or inversely related to inefficiency of the firm). However, level of cross-efficiency affects export and domestic sales negatively for both direct and indirect exporters. The empirical test also reveals that domestic sales and either forms of export sales are substitutes; change in domestic sales has a negative effect on both direct export and indirect export sales.

Buyer and seller interactions are analyzed with intermediaries called traders using a network structure. Goods are traded in the market through those networks. Each seller and buyer is linked to a trader through a network. We introduce asymmetric information on the valuation of goods by sellers and buyers. We deal with a two-stage game with incomplete information. The trader tries to maximize his profit. In Chapter 1, we analyze even network structures with one seller-one trader-one buyer and two buyers-one trader-two sellers and the asymmetric network cases with one seller-one trader-two buyers and two sellers-one trader-one buyer. We find that he sometimes offers different prices to sellers or to buyers when the penalty is almost zero in the second even network. We obtain that the trader sometimes offers the same price to all three parties to receive the maximum profit in the second asymmetric case. In Chapter 2, we allow there to be multiple traders and analyze how buyer and seller prices are influenced by competition among traders in a model of uncertainty. Sometimes, the seller and buyer both benefit from the competition between the two traders. The traders compete in the sense of a Bertrand duopoly to choose the price where each trader aims to maximize his profit. In other network structures, we note that the sellers who are not subject to the competition between two traders suffer from the consequences of the monopoly competition. We obtain that there will not be one fixed price that the traders offer the second seller and the second buyer in the last two network structures depending on the conditions on the valuations for the traded good. Middlemen, either as individuals or realtors, seem to have influential effects on the pricing strategy in the housing market. In Chapter 3, we analyze the contribution of the middlemen in the housing market as an application to trade networks. We work on a specific dataset related to the housing prices for two main neighborhoods in Atlanta, Georgia. The characteristics of those neighborhoods differ in terms of its distance to downtown or high-valued residential houses. We compare and contrast the returns for those two neighborhoods with distinct properties in order to investigate if any of these neighborhoods yield higher returns for the middlemen.

Thesis advisor: Michael Grubb / Thesis advisor: Lucas Coffman / What You Don’t Know Can’t Pass Through: Consumer Beliefs and Pass-through Rates I model consumer search with imperfect information about firms’ costs and test predictions about consumer beliefs and pass-through in the US residential mortgage market. In the model, when consumers are unaware of an increase in costs, a high price would be surprising and may induce additional search. In equilibrium, sellers do not pass though the entire change in costs, and average pass-though is decreasing in consumer uncertainty about costs. The model provides a unified explanation for a number of patterns in pass-through rates including incomplete pass-through (passthrough rates less than one), pass-through over-shifting (pass-through rates greater than one), and asymmetric pass-through (greater pass-through rates for cost increases than decreases). I test a novel prediction of this model using confidential Home Mortgage Disclosure Act data. I find that different components of the marginal cost of mortgage lending have different average pass-through rates. Widely known costs are passed through nearly completely while more obscure costs have much lower pass-through rates. This pattern is not explained by existing models of pass-through, as the standard determinants of pass-through are identical across all cost components of the same mortgage. People Don’t Demand Commitment Devices That Might Not Work Demand for costly commitment devices is rare. A possible explanation is that individuals are unaware of their present bias and their need for commitment. I run an experiment that successfully corrects subjects’ beliefs about their present bias and find that this increased awareness does not increase demand for commitment. These results, interpreted through the lens of a theoretical model of commitment demand, imply that low demand for commitment is not driven by a perceived lack of present bias, but rather subjects’ accurate belief that they may fail to follow through, even with the offered level of commitment. The Illusion of Competition with Michael Grubb Most existing models of price competition in the presence of search costs ignore the possibility that multiple products in a market are sold by the same firm. We develop a theoretical model of equilibrium price dispersion under costly consumer search over prices in the presence of jointly owned “brands.” We establish conditions on consumers’ search technology that determine consumer welfare implications and suggest antitrust remedies (e.g. post-merger consolidation of brands). / Thesis (PhD) — Boston College, 2023. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

This dissertation consists of three research papers in Applied Microeconomics. Each paper uses an econometric technique to analyze a problem related to human behavior. The first paper examines the separate effects of time and location of the School Breakfast Program on participation and consumption of breakfast by elementary school children in northern Nevada. Controlling for potential selection bias and unobserved individual fixed effects with a panel version of the Heckman sample selection model, it is shown that extra time allowed for breakfast leads to an approximately 20% increase in average participation, and the transition from cafeteria to classroom adds another 40% for the typical student. The second paper uses the Hedonic Property Valuation Method to quantify the willingness-to-pay of residents in the Dan River region for three dimensions of an improved food environment---availability, accessibility, and acceptability of food. This paper accounts for potential omitted variables issue in the hedonic analysis by applying a spatial-lag model, and finds an overall negative or null preference of residents in this region for an improved food environment. The third paper investigates the effects of characteristics of human interpreters and images on the accuracy of cloud interpretation for satellite images in an online experiment, using a fractional logit model. The results indicate that an image with higher cloud coverage and/or larger brightness is more likely to receive higher accuracy, and the more time spent on the image and more image completed are also beneficial for improving the accuracy. This paper also uses a logistic regression model to compare the performance of human interpreters to that of an automated algorithm, and finds that human interpreters outperform the automated algorithm for an average satellite image out of our twelve selected images. / Ph. D. / This dissertation consists of three research papers with each focusing on a problem related to human economic behavior. The first paper examines the separate effects of time and location of the School Breakfast Program on participation and consumption of breakfast by elementary school children in northern Nevada. The School Breakfast Program is a national food assistance program that provides subsidized breakfast to children from low-income families at participating institutions. It is shown that extra time allowed for breakfast leads to an approximately 20% increase in average participation, and the transition from cafeteria to classroom adds another 40% for the typical student. The second paper quantifies the preferences of residents in the Dan River region for three dimensions of an improved food environment—availability, accessibility, and acceptability of food. The results suggest an overall negative or null preference of residents in this region for an improved food environment. This is consistent with the focus group findings with local residents showing a desire for high fat and high energy-dense “comfort foods” and little social/cultural norms around healthful foods. The third paper investigates the effects of characteristics of human interpreters and images on the accuracy of cloud interpretation for satellite images in an online experiment. The results indicate that an image with higher cloud coverage and/or larger brightness is more likely to receive higher accuracy, and the more time spent on the image and more image completed are also beneficial for improving the accuracy. This paper also compares the performance of human interpreters to that of an automated algorithm, and finds that human interpreters outperform the automated algorithm for an average satellite image out of our twelve selected images.

Rural inhabitants of developing countries face extraordinarily risky environments, and decision-making under risk has crucial implications for the welfare of the rural poor. Therefore, obtaining a better understanding of the behaviour under risk of low-income populations is a vital step in the comprehension of human behaviour, and is important for effective policy design and evaluation, as well as for shedding light on production, investment and technology adoption decisions. In Chapter One, I analyze data collected from a laboratory experiment involving poor subjects in rural Ethiopia, in order to determine which decision models (and corresponding risk preferences) best describe the decision-making under risk of inhabitants. I find that expected utility theory (EUT) does not provide a good overall description of the decisions made by participants in the experiment; instead, there is evidence of probability weighting and loss aversion, implying that rank-dependent and reference-dependent choice models are more likely to represent the true latent decision-making process of subjects. In Chapter Two, I analyze combined experimental and survey data from rural Ethiopia in order to evaluate the determinants of risk preferences as well as assess the degree of asset integration in experimental decisions. Analyzing both EUT and non-EUT decision models and using an instrumental variable strategy, I find that household wealth negatively affects both risk aversion and loss aversion, but independent background risk has no effect on risk preferences. Further, I find evidence of narrow framing, as opposed to asset integration, suggesting that participants make decisions in the experiment in isolation from outside wealth. In Chapter Three, I analyze experimental data from Brazil to evaluate whether subjects understand decision problems that use the complex Multiple Price List (MPL) elicitation procedure, and to determine which decision models best describe observed choices. I find that the MPL decision problems of the experiment enable a finer characterization of risk preferences as compared to Ordered Lottery Selection problems (used in the Ethiopian experiment). However, I find that a significant fraction of choice patterns in the MPL problems are intransitive, and the evidence indicates that subjects did not properly understand the decision problems and thus observed choices do not reveal true risk preferences. Therefore, the relatively complex MPL procedure may not be suitable for experiments conducted with poorly-educated subjects in developing country settings. Chapter Four presents a theory outlining the relationship between rational demand for index insurance – for which the net transfer between insurer and policyholders depends only on a publicly verifiable index – and wealth. Further, the validity of this theory is tested using the experimental data from Ethiopia. In line with the theoretical model presented, due to basis risk and actuarially unfair premiums, demand for index insurance is hump-shaped – first increasing then decreasing – in wealth. The results indicate that the low take-up of this product observed among the poorest (and most risk averse) individuals in recent field studies may result from rational choice rather than credit constraints or poor decision-making.

Cognitive and emotional factors have played a larger role in economists' understanding of the world in the last decades. While earlier work has focused on experimental and theoretical results, a larger number of recent contributions have tested ideas from the field of Psychology using econometric methods for causal identification on field data. This line of research seeks to analyze market situations in which specific psychological factors can be identified to cause observed economic behavior. My dissertation, at the intersection of Behavioral and Applied Microeconomics, offers examples of behavior in which cognitive aspects are shown to play a central role and is unified across the three chapters by a common methodological approach. The first chapter, based on joint work with Kareem Haggag, reports evidence from tipping behavior of New York city taxicab customers. For credit card payments, the payment screen in the car displays suggested tip amounts. In particular, for one of the main companies, the suggested amounts are $2, $3, $4 for fares below $15, and 20, 25 or 30 percent above $15. Using this variation, the chapter shows that suggestions play an important role in tipping behavior of customers: comparing rides below and above $15 using regression discontinuity methods, it is possible to show a large local causal effect of the suggestions on average tips. Moreover, a backlash effect is observed, as more customers decide not to tip on a credit card at all. These findings contribute to our understanding of default effects beyond the area of tipping, for instance in savings. An even broader lesson is that these findings isolate a case in which cognitive and emotional responses are likely to mediate the relationship between preferences and choice. The second chapter, based on a joint work with Kareem Haggag, presents field evidence on cheating behavior. During the two years 2008-2010, several taxi drivers cheated customers by charging a higher fare amount that is allowed only for rides outside the city even for rides in the city. The choice of whether to cheat a customer on a individual ride is shown to be affected by loss aversion. The estimates can be effectively reconciled by models of reference-dependent preferences that take drivers' expectation as reference points: drivers are more likely to cheat on those rides within a shift in which they are below expectations. The results highlight the role played by a classic decision-making bias in shaping unethical behavior in a market. These findings suggests that cognitive and emotional aspects of the valuation of benefits are relevant to our economic understanding of ethical problems. The third chapter presents regression-discontinuity evidence on an investment-incentive program. The methodology, which compares firms who received the award with those that marginally lost it, allows for a cleaner identification of the effect of the policy. In this last essay, the conceptual tools from Applied Microeconomics used in the first chapter are put to work in the context of firms' behavior. The tool allows one to show in a straightforward manner the main outcomes of the policy.

Thesis (M. Ed.)--University of Hong Kong, 1997. / Includes bibliographical references (leaves 69-73).

Thesis (M.Ed.)--University of Hong Kong, 1997. / Includes bibliographical references (leaves 69-73). Also available in print.

The purpose of this study was to determine the effect on student learning from the sequence in which microeconomics and macroeconomics courses are taken. The sample for this study consisted of all students enrolled in 23 sections of Economics 1100 (Principles of Microeconomics) and 10 sections of Economics 1110 (Principles of Macroeconomics) during the fall semester, 1987, at the University of North Texas. The sample also consisted of all students enrolled in 14 sections of Economics 1100 and 12 sections of Economics 1110 during the spring semester, 1988, at the University of North Texas. The instruments chosen for use in measuring cognitive gains were two versions, each with 14 items, selected from the Joint council on Economic Educations's Revised Test of Understanding College Economics. Data were analyzed using hierarchical regression on five models. Each model used a different dependent variable to measure cognitive gain. The dependent variables were additive grade points, additive absolute improvement posttest scores, gap-closing posttest scores, microeconomic gap-closing scores and macroeconomic gap-closing posttest scores. The general hypothesis that students who complete microeconomics instruction followed by macroeconomics instruction have significantly higher cognitive gains than students who complete macroeconomics instruction followed by microeconomics instruction was not verified by the main effects. While the main effect of sequence was not significant, the interaction of sequence with previous high school economics was significant in the models using dependent variables of additive absolute improvement posttest score, gap-closing posttest score and microeconomic gap-closing posttest score. In addition, the interaction of sequence with previous college economics was significant on the dependent variable gap-closing posttest score. These findings seem to indicate that students who complete a sequence of macroeconomics followed by microeconomics with no previous exposure to economics have higher cognitive gains. In addition, students who complete a sequence of microeconomics followed by macroeconomics and had a previous college economics course have higher cognitive gain than students who complete the opposite sequence.