Search results

The relevance of present consumption bias on personal finance has been confirmed in several studies and has important theoretical and practical implications. It has important, measurable implications when analyzing commitment or self-control, adherence to healthy habits (e.g. exercising or dieting), procrastination tendencies or savings. The purpose of this paper is to contribute to our understanding of these issues by postulating a model of income uncertainty within a hyperbolic discounting framework that measures the cost of financial intertemporal inconsistencies related to this bias. The emphasis is on the analysis of this cost. We also propose experimental designs and consistent estimation methods, as well as agent-based modelling extensions.

The authors develop a finite-horizon model with hyperbolic preferences. Individuals have a present bias distinct from their discount rate so their choices face intertemporal inconsistencies. The authors further extend the analysis with uncertainty about future incomes. Specifically, individuals live for three periods, and the authors find the optimal consumption levels in the perfect-information benchmark by backward induction. They then proceed to add biases and uncertainty to characterize their implications and measure the costs of the intertemporal inconsistencies they cause.

The authors measure how an agent's utility is greater when they “tie their hands” than when they are free to re-evaluate and change their consumption schedule. This “cost of being vulnerable to falling into temptation” only depends (increasingly) on the measure of the present bias and (decreasingly) on the discount factor. They analyze the varying effects on utility and consumption of changes in impatience and optimism. They conclude by discussing theoretical and practical implications; they also propose agent-based simulations, as well as empirical and experimental designs, to further test the relevance and applications of the results.

This model has important, measurable implications when analyzing commitment or self-control, adherence to healthy habits (e.g. exercising or dieting), procrastination tendencies or savings.

The results enhance the estimation of the costs of present biases such that employers can better identify the incentives required to acquire and retain human capital. The authors provide evidence that workers are vulnerable to contract renegotiations and about the need for a regulator that restores ex-ante efficiency. Similarly, in the private sector, firms could recognize the postulated consumer profiles and focus their resources on anxious, too-optimistic or potentially addictive consumers; this, again, provides some justification about the need for a regulator.

In traditional exponential discounting, the marginal rate of substitution of consumption between two points depends only on their distance; thus, it allows none of the intertemporal inconsistencies we often observe in real life. Therefore, hyperbolic discounting better fits the data. The authors model choice under uncertainty and focus on the costs caused when present biases (ex-post) push behaviour away from ex-ante optimality. They conclude by proposing experimental designs to further enhance the estimation and implications of these costs. The postulated refinements have the potential to improve previous analyses on commitment devices and commitment-related regulation.

The purpose of this paper is to introduce the main measures of inconsistency in the context of intertemporal choice and to identify the relationships between them (more specifically, the measures by Prelec, Takahashi and Rohde). In effect, Thaler (1981), awarded the Nobel Prize in Economics 2017, argued that when a preference must be expressed between two reward options, some people may reverse their original preference when a significant delay is introduced before the reward is to be received. This anomaly is known as inconsistency in intertemporal choice.

After a revision of the existing literature and by using the methods from mathematical calculus, the authors have derived the logical relationships between the measures presented in this paper.

The main contribution of this paper is the proposal of a novel parameter, the so-defined ratio of two instantaneous discount rates, which the authors call the instantaneous variation rate, which allows relating some other measures of inconsistency, namely the measures described by Prelec and Rohde. A limitation of this paper is the unavailability of empirical information about the inconsistency measures needed to substantiate the theoretical findings. Indeed, this paper has social implications because recent behavioral and neuroeconomic studies have shown the existence of preference reversal or time inconsistency in other areas. The authors’ models can be implemented in these fields in order to better analyze the situations of inconsistency.

The originality of this paper lies in the authors’ aim to bring some order to the proposed measures of inconsistency which have arisen as a result of the different approaches adopted.

The main purpose of this paper is to determine the discount function which better fits the individuals' preferences through the empirical analysis of the different functions used in the field of intertemporal choice.

After an in-depth revision of the existing literature and unlike most studies which only focus on exponential and hyperbolic discounting, this manuscript compares the adjustment of data to six different discount functions. To do this, the analysis is based on the usual statistical methods, and the non-linear least squares regression, through the algorithm of Gauss-Newton, in order to estimate the models' parameters; finally, the AICc method is used to compare the significance of the six proposed models.

This paper shows that the so-called q-exponential function deformed by the amount is the model which better explains the individuals' preferences on both delayed gains and losses. To the extent of the authors' knowledge, this is the first time that a function different from the general hyperbola fits better to the individuals' preferences.

This paper contributes to the search of an alternative model able to explain the individual behavior in a more realistic way.

In the early 1930s, Nicholas Kaldor could be classified as an Austrian economist. The author reconstructs the intertwined paths of Kaldor and Friedrich A. Hayek to disequilibrium economics through the theoretical deficiencies exposed by the Austrian theory of capital and its consequences on equilibrium analysis.

The author approaches the discussion using a theoretical and historical reconstruction based on published and unpublished materials.

The integration of capital theory into a business cycle theory by the Austrians and its shortcomings – e.g. criticized by Piero Sraffa and Gunnar Myrdal – called attention to the limitation of the theoretical apparatus of equilibrium analysis in dynamic contexts. This was a central element to Kaldor’s emancipation in 1934 and his subsequent conversion to John Maynard Keynes’ The General Theory of Employment, Interest, and Money (1936). In addition, it was pivotal to Hayek’s reformulation of equilibrium as a social coordination problem in “Economics and Knowledge” (1937). It also had implications for Kaldor’s mature developments, such as the construction of the post-Keynesian models of growth and distribution, the Cambridge capital controversy, and his critique of neoclassical equilibrium economics.

The close encounter between Kaldor and Hayek in the early 1930s, the developments during that decade and its mature consequences are unexplored in the secondary literature. The author attempts to construct a coherent historical narrative that integrates many intertwined elements and personas (e.g. the reception of Knut Wicksell in the English-speaking world; Piero Sraffa’s critique of Hayek; Gunnar Myrdal’s critique of Wicksell, Hayek, and Keynes; the Hayek-Knight-Kaldor debate; the Kaldor-Hayek debate, etc.) that were not connected until now by previous commentators.

This paper aims to provide an overall review and assessment of the virtues and flaws of decentralized self-regulated markets, discussing in particular the extent to which deceiving attitudes by some market participants might be potentially diluted and contradicted.

To approach deception and morality in markets, the paper follows two paths. First, the relevant recent literature on the theme is reviewed, examined and debated, and second, one constructs a simulation model equipped with the required elements to discuss the immediate and long-term impacts of deceiving behaviour over market outcomes.

The discussion and the model allow for highlighting the main drivers of the purchasing decisions of consumers and for evaluating how they react to manipulating behaviour by firms in the market. Agents pursuing short-run gains through unfair market practices are likely to be punished as fooled agents spread the word about the malpractices they were allegedly subject to.

Markets are complex entities, where large numbers of individual agents typically establish local and direct contact with one another. These agents differ in many respects and interact in unpredictable ways. Assembling a concise model capable of addressing such complexity is a difficult task. The framework proposed in this paper points in the intended direction.

The debate in this paper contributes to a stronger perception on the mechanisms that attribute robustness and vitality to markets.

The purpose of this paper is to contribute to the teaching of undergraduate macroeconomics.

To suggest a roadmap, based on a consumption function, to be used by instructors willing to teach the Lucas Critique subject.

Therefore, this paper proposes a lesson, which consists of three parts, to help undergraduates better understand the subject: (1) a grading exercise to bring the topic closer to students’ lives; (2) a Keynesian and an optimal consumption function, followed by an example based on an unemployment insurance policy; and (3) two optional topics consisting of extensions of the optimal consumption function and some empirical results related to the Lucas Critique.

The Lucas Critique influenced the evolution of research in macroeconomics, but it is not easily grasped in a classroom.

The purpose of this paper is to investigate and identify the price sensitivity of consumers of three- and five-star hotels and to determine the impact of bundling strategies on consumers’ price sensitivity.

To calculate price sensitivity, authors apply the van Westendorp’s price sensitivity meter (PSM). To understand the impact of bundling strategies, univariate and bivariate techniques are applied.

PSM results reveal the optimal prices and the range of acceptable prices for three- and five-star hotel. The bundling strategy results reveal that five-star customers are less sensitive to mixed-leader bundling. Regarding mixed-joint bundling, managers could improve sales through bundling strategies if they selected an attractive service (e.g. restaurants).

Findings assist hotel managers to understand the different price sensitivities, according to the hotel typology. Managers can manage prices without the risk of losing market share or revenue. The results help managers in deciding which bundling strategies they can create, as well as the services to be included to achieve highest profitability.

No research to date to the best of the authors’ knowledge has attempted to understand and compare the role of bundling strategies in three- and five-stars hotels. Moreover, no research has attempted to measure and compare customers’ price sensitivity of three- and five-stars hotels.

The purpose of this paper is to show that the environmental income drives economic growth of a large open country.

The authors detect that the relative environmental income has double effect of “conspicuous consumption” on the international renewable resource stock changes when a new social norm shapes to environmental-friendly behaviors by using normal macroeconomic approaches.

Every unit of extra demand for renewable resource consumption increases the net premium of domestic capital asset. Even if the technology spillovers are inefficient to the substitution of capital to labor force in a real business cycle, the relative income with scale effect increases drives savings to investment. In this case, the renewable resource consumption promotes both the reproduction to a higher level and saving the potential cost of environmental improvement. Even if without scale effects, the loss of technology inefficient can be compensated by net positive consumption externality for economic growth in a sustainable manner.

It implies how to earn the environment income determines the future pathway of China’s rural conversion to the era of eco-urbanization.

We test the tax incidence to demonstrate an experimental taxation for environmental improvement ultimately burdens on international consumption side.

This study aims to test the compensatory consumption theory with the explicit hypothesis that China's new-rich tend to waste relatively more food.

In this study, the authors use Heckman two-step probit model to empirically investigate the new-rich consumption behavior related to food waste.

The results show that new-rich is associated with restaurant leftovers and less likely to take them home, which supports the compensatory consumption hypothesis.

Understanding the empirical evidence supporting compensatory consumption theory may improve forecasts, which feed into early warning systems for food insecurity. And it also avoids unreasonable food policies.

This research is a first attempt to place food waste in a compensatory-consumption perspective, which sheds light on a new theory for explaining increasing food waste in developing countries.

Chinese beer consumption has undergone major changes within the last decade. The combination of a growing middle class and greater exposure to foreign products has resulted in a significant increase in beer imports. The authors examined transformations in this market and how beer preferences have changed over time. This study focuses on changes is origin-specific preferences (e.g. German beer and Mexican beer) as reflected by habit formation (i.e. dynamic consumption patterns) and changes in demand sensitivity to expenditure and prices.

The authors estimated Chinese beer demand – differentiated by source – using a generalized dynamic demand model that accounted for habit formation and trends, as well as the immediate and long-run effects of expenditures and prices on demand. The authors employed a rolling regression procedure that allowed for model estimates to vary with time. Preference changes were inferred from the changing demand estimates, with a particular focus on changes in habit formation, expenditure allocating behaviour, and own-price responsiveness.

Results suggest that Chinese beer preferences have changed significantly over the last decade, increasing for Mexican beer, Dutch beer and Belgian beer. German beer once dominated the Chinese market. However, all indicators suggest that German beer preferences are declining.

Although China is the world's third largest beer importing country behind the United States and France. Few studies have focused on this market. While dynamic analyses of alcoholic beverage demand are not new, this is the first study to examine the dynamics of imported beer preferences in China and implications for exporting countries.