This study investigated the effects of unit price structure, unit price descriptions, and unit price sequence on the demand for money in humans. Six groups of 3 participants solved multiplication problems in exchange for money under various unit prices. Consumption of money decreased as the unit price increased across all conditions. However, the data also showed that: (a) fixed price structures produced slightly more elastic demand than did variable price structures, (b) price descriptions produced more elastic demand under variable price structures but had little or no effect under fixed price structures, and (c) the alternate sequence used with fixed price structures produced slightly more elastic demand.

Three groups of participants were exposed to different unit price sequences. Unit prices for all groups ranged from unit price 1 to 21. Analyses of demand curves, response rates, session duration, and elasticity coefficients suggest that the sequence of exposure to unit prices can affect the elasticity of demand. In addition, the size of unit price contrast, direction of unit price change, and proximity to experimental milestones also may affect the consumption of monetary reinforcers.

Mutual funds and money managers have recently come under fire for their inability to beat market level returns since the Great Recession. With the recent trend towards passive money management through ETFs and other market-based securities, many investors have come to doubt whether above market returns are realizable in today’s economic climate. This paper examines whether business news has any predictable impact on stock price. Specifically, the paper explores the impact of analyst reports, mergers & acquisition news, legal affairs, insider buying and selling and changes to executive leadership on a stock’s excess returns. The results show that optimistic analyst ratings are correlated with positive excess returns before, during, and after the ratings are released. Furthermore, pessimistic analyst ratings are correlated with negative excess returns over the same time frame. These results provide support for a short term trading strategy that mirrors analyst opinions.

This dissertation addresses the effect of information on firm and individual behavior. The first chapter examines the design of an optimal feedback mechanism by an informed principal and uses the results to explain why firms tend to assign coarse subjective ratings to their employees. When a firm has private information about an employee's ability, it can communicate this information through a subjective evaluation mechanism. I characterize the firm's optimal disclosure policy as a function of the worker's ability distribution and provide an algorithm to compute it. Further, I show that with some reasonable restrictions on the ability distribution, the firm's optimal strategy is always to reward the best workers, fire the worst ones, and assign one central rating to the rest. The second chapter investigates an informed principal's optimal feedback strategy in a dynamic setting. I first consider the case where both parties have non-binding outside options. In this case, if the principal ever wants to reveal any information, she will do so at the earliest possible stage. Moreover, the optimal disclosure policy can be characterized in the same way as in the static case. The same conclusion holds for the case where both parties have binding and constant outside options. I also discuss the case where both parties have binding and time-variant outside options. After incorporating firms' need to promote and/or to retain workers, the model is used to explain wage dynamics. The third chapter models a decision maker who "rationally" distorts his own belief to avoid the feeling of regret. People often suffer from regret when they realize that their previous choices were suboptimal. As a result, in a dynamic setting where information is revealed gradually, people are tempted to deny new negative information in order to avoid regret. At the same time, they are also aware of the economic cost of such belief distortions. A "rational" decision maker will optimally trade off these two concerns and choose his own belief accordingly. This tradeoff makes the past affect current decisions and hence can explain the sunk cost fallacy.

Understanding the etiological and maintaining processes of problematic drinking continues to be a challenge. There has been a growing amount of research focusing on the decisional processes that act to maintain addictive behaviors. Elucidating this underlying process is key to understanding the range of drinking behavior observed among individuals. Rather than relying on one theory, examining overlap between multiple theories of alcohol use may lead to a better understanding of such a process. Using a construct validation approach, this study utilized motivational (Ambivalence Model of Craving), cognitive (Alcohol Outcome Expectancy Theory), and behavioral theories (Behavioral Economics) of alcohol use to examine the extent to which they tap into a common underlying decisional process of alcohol use behaviors. Two methods were used including establishing motivational profiles using latent profile analysis and an experimental manipulation of situational context to examine the effect of setting on constructs of interest. Results from the two studies provided partial support for the overlap between these theories as it pertains to a common underlying process.

The need to understand the reinforcing properties of smoking and potential precipitants of relapse is exemplified by evidence that relapse rates exceed 95%. The Self-Control Strength model, which proposes that self-control is dependent upon limited resources and susceptible to fatigue, may offer insight into the relapse process. Indeed, there is empirical support that engaging in a task that requires self-control, relative to a comparable control, results in performance decrements on subsequent self-control tasks. The primary goal of the current study was to test whether self-control depletion (SCD) may serve as a novel antecedent for cessation failure, using a validated laboratory analogue of smoking lapse and relapse. We also aimed to compare SCD effects to those of a well-established relapse precipitant (i.e., nicotine deprivation), and test craving and behavioral economic indices as mechanisms for increased cessation failure. We used a 2 X 2 (12-hour deprivation vs. no deprivation; SCD vs. no SCD), crossed-factorial, between-subjects design (N=128 smokers). Replicating prior research, nicotine deprivation significantly increased craving, cigarette demand, delay discounting, and lapse behavior. Furthermore, craving was the only mediator of deprivation effects on lapse behavior. Finally, the primary hypothesis of the study was supported, as SCD increased lapse behavior (p = .04). Although no main effects were found for SCD on putative mediators (i.e., craving, demand, discounting), SCD was found to increase craving among nicotine deprived smokers (p = .04), which mediated cessation failure. SCD appears to play in important role in smoking behavior and may be a viable candidate for intervention.

We share our world with many people who ignore the principles of justice and who regularly take advantage of others by breaching trust or breaking agreements. This dissertation is about the irrationality of the actions of these covenant-breakers. A covenant-breaker typically believes that unjust behavior is to his advantage and that only a fool would act in any other way. Would it not be disturbing if this were true? My central claim will be that adherence to the precepts of justice is a rational strategy for a self-interested actor. I intend to demonstrate that con men and covenant-breakers do not act rationally when violating an agreement. I will trace the concept of justice as it evolves through philosophical history and show that, while the concept of justice changes as the underlying concept of human nature and psychology changes, the argument in favor of the rationality of just behavior remains coherent throughout. Each historical interpretation will advance some form of the claim that the consistent observance of cooperative agreements is a rational strategy, and at each point an interlocutor will object. I will show that these interlocutors are mistaken. My motivating goal is to show that justice, understood as the consistent observance of cooperative agreements, is rational. I want to respond to the clandestine cheaters and other skeptics who believe that just behavior is for suckers, because, if the skeptics are right, and justice is indeed irrational, then those among us who are acting in a just manner are paying an unnecessary cost.

Voluntary environmental labeling or certification programs provide information about the environmental characteristics of one or more aspects of a product’s life cycle to consumers. The U.S. Environmental Protection Agency and Department of Energy were among the first governmental agencies in the world to adopt environmental information programs. This study examines two U.S. programs – Energy Star, an energy efficiency labeling program, and Green Power Partnership (GPP), a green energy purchasing program, and estimates how much consumers are willing to pay for refrigerators that have been awarded these labels and what factors motivate that willingness to pay. The data were obtained from a survey conducted in March and April of 2009 via an online research panel, which was constructed to be representative of the U.S. population. Analysis of the data was conducted using conditional logit regression models with fixed parameters and mixed logit regression models with random parameters. Results revealed that consumers, on average, have a willingness to pay ranging from $237.81 to $350.54 for the Energy Star label and a willingness to pay ranging from $48.52 to $70.95 for the GPP label. The results also indicate that consumer demographics and attitudes influence WTP. In particular, individuals with greater levels of stated concern for the environment or individuals exhibiting strong perceptions on the effectiveness of consumers to affect product design and the ambient environment had a greater likelihood of choosing a labeled alternative, and thus, a greater WTP for both the Energy Star and GPP label. To manufacturers and government regulators, these results suggest that energy labels can play a significant role in a consumer’s decision making process when selecting a new appliance.

The purpose of this thesis is to examine if professional investors areindicating tendencies of irrational behavior when exposed to certainpsychological dilemmas related to the financial world.

<p>This dissertation collects work concerning the way individuals deal with imperfect information, both related to their knowledge of themselves and of others. The second chapter shows that bounded rationality, in the form of limited knowledge of utility, is an explanation for common stylized facts of prospect theory like loss aversion, status quo bias and non-linear probability weighting. Locally limited utility knowledge is considered within a classical demand model framework, suggesting that costs of inefficient search for optimal consumption will produce a value function that obeys the loss aversion axiom of Tversky and Kahneman (1991). Moreover, since this adjustment happens over time, new predictions are made that explain why the status quo bias is reinforced over time. This search can also describe the behavior of a consumer facing an uncertain future wealth level. The search cost justifies non-linear forms of probability weighting. The effects that have been observed in experiments will follow as a consequence.</p><p>The third chapter looks to understand how firms create and maintain long term relationships with consumers, or how procurement relations evolve over time, by studying a dynamic variant of the classical two-type-buyer contract in mechanism design. It is less trivial and more interesting if the utility determinant (or utility type) is not fixed or completely random, and fair assumptions are that it is either stochastic, or given by a distribution whose parameters are common knowledge. The first approach is that of Battaglini (2005), while the second is pursued in this paper. With two possible types of buyers, the buyer more likely to have a high utility type will receive the first-best allocations, while the other will receive the first best only if he has the high utility type. </p><p>The last chapter analyzes a dynamic procurement setting with promise keeping, where two firms (agents) with private information on their costs contract competitively with a principal. To this end, two models are proposed and the optimal allocations are determined. The agents face liquidity constraints, which induce distortions when high marginal costs are reported. We deduce that the principal uses promised utilities to incentivize the agents, which act as state variables in the recursive maximization problem. High cost types are allocated less than efficient quantities and the inefficiency of the allocation is relieved as the promised utilities increase.</p> / Dissertation