Traditionally economics is based on very narrow presumptions about human behavior, namely selfishness. In the last 20 years, however, experimental research has accumulated overwhelming evidence that is at odds with these classical assumptions. It has been shown that people very often care about the distributional consequences of their actions and intentions. Against this background, in this thesis the impact of broader models of human behavior on decision making and human interactions is studied, for example the impact of indirect reciprocity on human relationships. If educational expenditures of parents into children depend on grandparents' investments into the parent’s education, then private educational spending is inefficiently low and should be supported by the state. This finding stands in contrast to earlier results that show that parents might invest optimally into the education of their children out of pure altruism or strategic transfer motives.

This thesis analyzes the interplay between natural disasters, human behavior, and insurance markets. Prospect theory can help us understand how fundamental behavioral biases in human nature affect insurance purchases and can begin to explain previously exhibited irrational behavior in regards to earthquake insurance. The Great East Japan Earthquake presents a useful case study to examine the performance of Japanese residential earthquake insurance in light of a devastating major catastrophe. Analysis suggests that prospect theory can explain low earthquake insurance penetration rates, and that insurance policies can be improved by taking into account behavioral biases. Examination of the disaster insurance market highlights the debate of government intervention, and brings into question long-term sustainability of the private insurance market.

This is a substantially revised version of an earlier paper with the same title written by co-authors Mark Gertler and Simon Gilchrist written in 1994. The goal of this paper is to further understand the importance of financial propagation mechanisms for aggregate behavior and build upon their results. A large portion of economic research on the topic has concluded, with convincing evidence, that credit market frictions may influence business cycles, as well as the direction of changes to monetary policy moving forwards. It also shows that the change in business cycle behavior should be evident across all firms, with the level of effect being dependent on access to credit markets. Because of these conclusions, this paper will look to explore the differences in behavior between small firms and large firms regarding their sales, inventory, and short-term debt.

Niobium cavities are important components in modern particle accelerators based on superconducting radio frequency (SRF) technology. The interior of SRF cavities are cleaned and polished in order to produce high accelerating field and low power dissipation on the cavity wall. Current polishing methods, buffered chemical polishing (BCP) and electropolishing (EP), have their advantages and limitations. We seek to improve current methods and explore laser polishing (LP) as a greener alternative of chemical methods. The topography and removal rate of BCP at different conditions (duration, temperature, sample orientation, flow rate) was studied with optical microscopy, scanning electron microscopy (SEM), and electron backscatter diffraction (EBSD). Differential etching on different crystal orientations is the main contributor to fine grain niobium BCP topography, with gas evolution playing a secondary role. The surface of single crystal and bi-crystal niobium is smooth even after heavy BCP. The topography of fine grain niobium depends on total removal. The removal rate increases with temperature and surface acid flow rate within the rage of 0~20 °C, with chemical reaction being the possible dominate rate control mechanism. Surface flow helps to regulate temperature and avoid gas accumulation on the surface. The effect of surface flow rate on niobium EP was studied with optical microscopy, atomic force microscopy (AFM), and power spectral density (PSD) analysis. Within the range of 0~3.7 cm/s, no significant difference was found on the removal rate and the macro roughness. Possible improvement on the micro roughness with increased surface flow rate was observed. The effect of fluence and pulse accumulation on niobium topography during LP was studied with optical microscopy, SEM, AFM, and PSD analysis. Polishing on micro scale was achieved within fluence range of 0.57~0.90 J/cm 2, with pulse accumulation adjusted accordingly. Larger area treatment was proved possible by overlapping laser tracks at proper ratio. Comparison of topography and PSD indicates that LP smooths the surface in a way similar to EP. The optimized LP parameters were applied to different types of niobium surfaces representing different stages in cavity fabrication. LP reduces the sharpness on rough surfaces effectively, while doing no harm to smooth surfaces. Secondary ion mass spectrometer (SIMS) analysis showed that LP reduces the oxide layer slightly and no contamination occurred from LP. EBSD showed no significant change on crystal structure after LP.

The complex social relationships in society can be understood as a network. In recent years, complex networks have given researchers a more accurate picture of social interactions than aggregation models such as compartmental models had hitherto provided. Compartmental models which collect individuals into population classes based on infection state, for instance, had left out local interactions that could be important for understanding social relationships and attendant phenomena such as epidemics, rumors, etc., in the society. Topics of modeling for complex networks have included the dynamics of social relationships and how they affect disease and opinion spread. Different types of relationships, such as friendly or unfriendly, have been considered. In this dissertation we study social network models in which interactions can be beneficial or detrimental to the parties involved. Motivated by HIV, in which a person's infection status is not readily known to others, we implement a model where individual decisions may affect the disease transmission. Individuals in such a situation may use information about each other's behavior such as the number of connections (degree) to form a risk-benefit assessment for whether to engage in a relationship. We study this model for a single benefit case, and then a multiple benefit case. We also investigate the case where offspring may inherit the benefit of their parents to determine how this affects disease transmission. We find that human behavior and individual differences can affect infection transmission and that adaptation in behavior can mitigate the disease prevalence. Further, we study mutual ratings in a growing social network. We use two types of links, positive for favorable ratings between two nodes, and negative otherwise. We model a social network where positive and negative ratings are assigned preferentially based on existing positive and negative links. Extending previous ideas and analytical methods in the growing networks literature, we study the resulting network structure. For one of the preferential attachment mechanisms we consider, we derive an analytical expression for the joint distribution of positive and negative degrees in the limit of large networks. The insights gleaned in these studies will inform potential investigations of the impact of personal decisions on transmission of STIs such as HIV, and empirical studies of the evolution of friend-foe relationships on online social networks that have mechanisms for users to note or express opinions about other users or the contributions they made.

I develop the Generalized Evolutionary Nash Equilibrium Estimator (GENEE) library. The tool is designed to provide a generic computational library for running genetic algorithms and individual evolutionary learning in economic decision-making environments. Most importantly, I have adapted the library to estimate equilibria bidding functions in auctions. I show it produces highly accurate estimates across a large class of auction environments with known solutions. I then apply GENEE to estimate the equilibria of two additional auctions with no known solutions: first-price sealed-bid common value auctions with multiple signals, and simultaneous first-price auctions with subadditive values

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This dissertation investigates whether criticisms of standard economic models can be addressed with only minimal modifications to the assumptions. In the first essay, the Real Business Cycle (RBC) model is studied, though it is well known that it cannot match the data on money. My solution is to retain the RBC framework but add money as a sunspot variable. This leaves all the main elements of the RBC model intact and successfully replicates many features of the monetary data. The second essay examines rational choice, the foundation of economics. Laboratory experiments have exposed small violations of the theory. I introduce preference discovery costs as a way to accommodate minor violations of revealed preference while retaining rationality and optimization. An experiment tested my idea. For several subjects, my model explained their behavior while standard theory could not. However, there were many other subjects whose behavior was incompatible with both theories. The last essay is about the equity premium puzzle. The standard framework in macroeconomics predicts that the equity premium will be quite small, but this prediction is off by an order of magnitude. However, I demonstrate that the problem can be resolved if there is no market for insurance against idiosyncratic income shocks. Though it is very realistic to relax the complete markets assumption and this suffices to solve the puzzle, it is debatable if this modification is truly minimal, given the prevalence of models that rely on market completeness. / 10000-01-01

The emerging field of household finance, which studies the welfare benefits of financial markets for households and how effectively households use this market, is of significant importance for both academics and policy makers. However, studies in this new field remain scarce. Using data from a national representative survey that is unique for its combination of abundant household characteristics and heterogeneous individual preferences, attitudes and believes, and for its inclusion of investment behaviour and performances, this thesis pioneers a positive household finance study in developing countries by systematically investigating Chinese householders’ investments in the stock market. Moreover, this is the first study to regard the psychological concept of ‘trait anxiety’ (which refers to a person’s inherent propensity to feel anxious) as negatively associated with stock investment return performance. This thesis comprises three main studies. In the first study, I investigate the reasons households participate in the stock market. I find that the evidence from China is systematically consistent with previous studies, which mainly focus on developed countries. That is, the poor and the less educated are less likely to hold equity in their final portfolios; and variables reflecting cost, constraint, preference and expectation play a statistically significant role in stock market participation. I also investigate the stock market participation problem from the new perspective of job satisfaction. Discontentment with one’s job, especially on job salary motivates stock investment activity. Satisfaction with hours of work and job stability boosts the probability of participation. Individual investment performance plays an increasingly important role in household wealth accumulation and financial well-being. Then in the second study I examine the performance of the households that participate in the stock market. First, the evidence from China on this issue is also consistent with that from developed countries. Investors that are poor, less-educated and facing high information costs underperform significantly. Moreover, two so-called ‘investor mistakes’ also undermine stock investment outcomes in China. Second, I study investor performance form a new angle, preference for information screening with respect to resources, and find that investors who rely on their own analysis when making trading decisions earn more. These investors are usually wealthier, have more financial knowledge and are more likely to be male. My third study further explores determinant of investment performance by identifying a more fundamental, intrinsic and stable heterogeneity that is embedded in human personality, i.e., trait anxiety, which reflects people’s innate propensity to feel anxious. I find that investors who are more prone to anxiety have significantly inferior investment performance in terms of stock market return rate, after controlling for many other relevant factors. This finding is robust across investment periods of both half a year and three years, and across regressions using different proxies for trait anxiety.

Obesity and overweight attributable deaths together are the second highest cause of death in the United States, according to the National Institute of Health. Obesity, diabetes, and heart disease also have an enormous economic cost to the American government and its citizens due to the rising cost of health care. The medical community agrees that preventive care, particularly diet, plays a crucial role in solving this health crisis. The Healthy, Hunger Free Kids Act of 2010 drastically changed the requirements of the National School Lunch Program in order to increase nutrition in school lunches. This thesis seeks to understand how improved health outcomes for children as well as adults. This paper analyzes previous research from the fields of Health and Behavioral Economics. It also conducts an empirical analysis of data from the California Health Interview Survey to understand the effects of the policy food on consumption of children and adults. Using theories from Behavioral Economics, the study hypothesizes that child and adult consumption of nutritious food increased following the implementation of this policy. The results of the empirical analysis do not entirely support the hypothesis that children’s and adult’s consumption of nutritious food increased. Food consumption is highly sensitive to a wide range of influences, and further empirical research accounting for these influences must be conducted to fully understand the potential benefits of public policy on health.