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Inspired by experimental evidence, we amend the recursive utility model to let risk aversion decrease with the temporal horizon. Our pseudo-recursive preferences remain tractable and retain appealing features of the long-run risk framework, notably its success at explaining asset pricing moments. In addition, our model addresses two challenges to the standard model. Calibrating the agents' preferences to explain the equity premium no longer implies an extreme preference for early resolutions of uncertainty. Horizon-dependent risk aversion helps resolve key puzzles in finance on the valuation of assets across maturities and captures the term structure of equity risk premiums and its dynamics. [ABSTRACT FROM AUTHOR]

The study aims to examine the relationship between Sustainable Development Goals (SDGs) knowledge, sustainability attitudes, sustainable entrepreneurship, and sustainable behaviors among students enrolled in business-related courses at Spanish universities. Employing the Knowledge-Attitude-Behavior (KAB) model, this study innovatively disaggregates the attitude variable into attitudes toward sustainability and sustainable entrepreneurship. The findings affirm the direct and indirect effects posited in the model, indicating that familiarity with SDGs positively impacts attitudes toward sustainability, subsequently influencing sustainable behaviors. Moreover, positive attitudes toward sustainable entrepreneurship also directly influence sustainable behaviors. Additionally, the study examines the moderating influence of receiving a scholarship; results indicate that attitudes toward sustainability and sustainable entrepreneurship significantly shape behavior, with the scholarship variable altering the relationship between attitudes toward entrepreneurship and behavior. These outcomes underscore the significance of enhancing SDGs awareness and nurturing favorable attitudes toward sustainability and sustainable entrepreneurship among university students to stimulate sustainable behaviors and advance SDGs objectives. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to assess the role of financial inclusion (FI) in moderating the incidence of entrepreneurship on energy poverty in Ghana. Design/methodology/approach: The assessment is made by using pooled data and two-stage least squares. The exposition builds from the 7th (GLSS7) and 6th (GLSS6) rounds focusing on the Ghana Living Standards Survey (GSS, 2014, 2019) that is collected by the Ghana Statistical Service (GSS) from 10 principal regions in the country. Findings: The findings show that entrepreneurship has an unconditional positive incidence on energy poverty while the interactive incidence between entrepreneurship and FI on energy poverty is negative. The corresponding FI policy thresholds that should be exceeded in order for FI to effectively moderate entrepreneurship for negative outcomes in energy poverty are between 0.154 and 0.280 index for the full sample; 0.187 index for the rural subsample; 0.200 and 0.333 index for the male sample. Thresholds are not computed for the rural and female subsamples because at least one estimated coefficient that is needed for the computation of such thresholds is not significant. Policy implications are discussed. Originality/value: This study has complemented the existing literature by assessing how FI can be used to influence the nexus between entrepreneurship and poverty in Ghana. [ABSTRACT FROM AUTHOR]

Adam Smith argued that ‘moral sentiments’ – the norms, customs and conventions of society - provide a benefit, improving both economic efficiency and well-being. Three important moral sentiments are a perception of fairness, a willingness to trust people, and a sense of community. We analyse representative national socioeconomic surveys of the China Household Income Project (CHIP), containing information that is used to create scores of happiness, fairness, trust, and community for each respondent. Three main hypotheses are tested: that higher reported fairness, higher reported trust, and greater sense of community each raises happiness. Evidence is found for each hypothesis, as well as for related questions, Attempts are made to ascertain whether the associations are causal; some support is found. The evidence is generally consistent with the broader argument that an informal social contract constrains antisocial behaviour and improves wellbeing in ways little studied by economists. [ABSTRACT FROM AUTHOR]

What would it truly mean to treat individuals "as real people" when designing public policies? This paper addresses this question by critically assessing the arguments put forth by Mario Rizzo and Glen Whitman's Escaping Paternalism: Rationality, Behavioral Economics, and Public Policy (2019). Rizzo and Whitman argue that the endeavor of Behavioral Economics to reintroduce psychology into economics and to critique the narrow concept of homo economicus used by neoclassical economics was commendable. However, Behavioral Economics failed to deliver the theoretical breakaway from Neoclassical Economics that it promised. They argue that while Behavioral Economics rejects neoclassical rationality descriptively, it still adheres to it normatively, a move the authors find unjustified. The authors critique libertarian paternalism, a normative branch of Behavioral Economics, for its narrow concept of rationality, emphasizing the ambiguity in determining decision failures and true preferences. Moreover, even when it is apparent that agents are behaving erroneously, implementing policy measures to rectify the situation would be an almost impossible task or, in a worst-case scenario, could have unintended negative consequences. Overall, the book excels in scrutinizing the methodological foundations of libertarian paternalism. Building on their critique, in the final chapter of the book, the authors endeavor to outline their vision for the future of behavioral public policy. They advocate for treating humans as intricate beings rather than mere marionettes. [ABSTRACT FROM AUTHOR]

Climate change poses new challenges for portfolio management. In our not-yet-low carbon world, investors face a trade-off between minimizing their exposure to climate risks and maximizing the benefits of portfolio diversification. This article investigates how investors and financial intermediaries navigate this trade-off. After the release of Morningstar's novel carbon risk metrics in April 2018, mutual funds labeled as "low carbon" experienced a significant increase in investor demand, especially those with high risk-adjusted returns. Fund managers actively reduced their exposure to firms with high carbon risk scores, especially stocks with returns that correlated more with the funds' portfolios and were thus less useful for diversification. These findings shed light on whether and how climate-related information can re-orient capital flows in a low carbon direction. [ABSTRACT FROM AUTHOR]

We study individuals' incentives to make investment decisions. Using data from a large pension system in Chile we find that individuals who are active in managing their investments have, on average, poor performance. We provide robust evidence suggesting that learning plays an important part in this phenomenon. Indeed, individuals who have made successful investment decisions in the past go on to trade more frequently. However, this result holds when using a naive definition for successful decisions. Also, average performance is negatively related to the number of investment decisions, casting doubt on the existence of market timing skills. [ABSTRACT FROM AUTHOR]

Contributions to public goods, such as nature areas, are often made by private actors, as well as governmental agencies. Typically, the motivation of citizens to voluntarily contribute depends on how the distribution of such tasks has evolved between public and private actors, and wider contextual factors. Therefore, it is unclear whether decreased public spending on nature areas affects private funding. We conduct an economic experiment in The Hague Forest in the Netherlands and ask citizens to perform a task that generates funding for the forest. In the treatment condition, we describe the ongoing policy changes, which implies less state funding and greater dependency on private actors. We find that highlighting a greater need for private funding reduces individual contributions significantly, which is mostly due to a drop in motivation of frequent visitors. Overall, our study suggests that decreasing public spending may have unexpected repercussions on citizens' motivation to contribute. [ABSTRACT FROM AUTHOR]

We study what induces delinquent wage earners to pay their taxes due, using high-quality administrative data from the Swedish Tax Agency. We find a strong effect of the standard enforcement regime: a threat of having the debt handed over to the Enforcement Agency increases payments by more than 9 percentage points (from a baseline of 58%). When including actual enforcement, payment increases by 19 percentage points compared with those who do not risk enforcement. In a field experiment, we compare these effects of standard enforcement to those involving much milder nudges, consisting of letters reminding tax delinquents to pay their taxes due. We find that a 'pure nudge' (i.e. the inclusion of an extra sheet of paper with no valuable information) has an effect of around 7 percentage points for those who do not risk enforcement upon non-payment, that is, an effect almost as large as for the threat of enforcement. However, the same nudge has no detectable effect on the group that is subject to enforcement. Finally, we find a small additional effect on payments from social norm messages both for those who risk enforcement and for those who do not. [ABSTRACT FROM AUTHOR]

I analyze sequential auctions with expectations‐based loss‐averse bidders who have independent private values and unit demand. Equilibrium bids are history dependent and subject to a "discouragement effect": the higher is the winning bid in the current round, the less aggressive are the bids of the remaining bidders in the next round. Moreover, because they experience a loss in each round in which they fail to obtain an object, bidders are willing to pay a premium to win sooner rather than later. This desire to win earlier leads prices to decline in equilibrium. I also show how various disclosure policies regarding the outcome of earlier auctions affect equilibrium bids, and that sequential and simultaneous auctions are neither bidder‐payoff equivalent nor revenue equivalent. [ABSTRACT FROM AUTHOR]

This paper empirically analyzes how individual characteristics are associated with risk aversion, loss aversion, time discounting, and present bias. To this end, we conduct a large-scale demographically representative survey across eight European countries. We elicit preferences using incentivized multiple price lists and jointly estimate preference parameters to account for their structural dependencies. Our findings suggest that preferences are linked to a variety of individual characteristics such as age, gender, and income as well as some personal values. We also report evidence on the relationship between cognitive ability and preferences. Incentivization, stake size, and the order of presentation of binary choices matter, underlining the importance of controlling for these factors when eliciting economic preferences. [ABSTRACT FROM AUTHOR]

This paper studies gender differences in performance in a male‐dominated competitive environment chess tournaments. We find that the gender composition of chess games affects the behaviors of both men and women in ways that worsen the outcomes for women. Using a unique measure of within‐game quality of play, we show that women make more mistakes when playing against men. Men, however, play equally well against male and female opponents. We also find that men persist longer before losing to women. Our results shed some light on the behavioral changes that lead to differential outcomes when the gender composition of competitions varies. [ABSTRACT FROM AUTHOR]

If an individual's health costs are U-shaped in weight with a minimum at some healthy level and if the individual has both self-control problems and rational motives for over- or underweight, the optimal paternalistic tax on calorie intake mitigates the individual's weight problem (intensive margin), but does not induce the individual to choose healthy weight (extensive margin). Implementing healthy weight by a calorie tax is not only inferior to paternalistic taxation, but may even be worse than not taxing the individual at all. With heterogeneous individuals, the optimal uniform paternalistic tax may have the negative side effect of reducing calorie intake of the under- and normal weights. We confirm these theoretical insights by an empirical calibration to US adults. [ABSTRACT FROM AUTHOR]

Happiness is strongly correlated with goal attainment, productivity, mental health and suicidal risk. This paper examines the association between satisfaction with areas of life and overall life satisfaction, the importance of relative perceptions compared to absolute measures in predicting overall life satisfaction, and differences in the domains of life which are the most strongly related to overall life satisfaction of men and women. The findings suggest that relative perceptions have a large statistically significant association with SWB. Satisfaction with family life and health are the strongest predictors while satisfaction with income and leisure time are the weakest predictors of overall life satisfaction for both genders. Work satisfaction is more important for men than for women, whereas partner's happiness is more valued by female respondents. Satisfaction with household compared to personal income has a larger association with life satisfaction in all subsamples except employed women. Understanding the perceived and factual determinants of happiness has urgent implications discussed in the article.

We report on two novel choice experiments with real goods where subjects in one treatment are forced to choose, as is the norm in economic experiments, while in the other they are not but can instead incur a small cost to defer choice. Using a variety of measures, we find that the active choices (i.e., those that exclude the deferral outside option) of subjects in the nonforced‐choice treatment are generally more consistent. We also find that the combined deferral and active‐choice behavior of subjects in that treatment is explained better by a model of dominant choice with incomplete preferences than it is by rational choice. Our results suggest that nonforced‐choice experiments and models can be helpful in separating people's rational, hesitant/not‐yet‐rational and genuinely irrational behavior, and can potentially offer important new insights in revealed preference analysis. [ABSTRACT FROM AUTHOR]

The study aims to explore the effect of behavioral biases on financial decision making in the real estate sector of Pakistan. The data of a sample of 244 real estate investors are collected through a survey carried out using different sources. The findings of the study show the relationship of different biases, including overconfidence, herding effect, gambler’s fallacy, and regret aversion on prices of real estate. Real estate prices are more affected by overconfidence and gambler’s fallacy than herding effect and regrets aversion bias in Pakistan. The findings furthermore reveal that these biases do not depend on gender, education, and demographics. It is recommended to carefully consider the market factors while making decisions in real estate, as the prices do not always show the real value of the property.

We introduce a game‐theoretic model with switching costs and endogenous references. An agent endogenizes his reference strategy, and then taking switching costs into account, he selects a strategy from which there is no profitable deviation. We axiomatically characterize this selection procedure in one‐player games. We then extend this procedure to multiplayer simultaneous games by defining a Switching Cost Nash Equilibrium (SNE) notion, and prove that (i) an SNE always exists; (ii) there are sets of SNE, which can never be a set of Nash equilibrium for any standard game; and (iii) SNE with a specific cost structure exactly characterizes the Nash equilibrium of nearby games, in contrast to Radner's (1980) ε‐equilibrium. Subsequently, we apply our SNE notion to a product differentiation model, and reach the opposite conclusion of Radner (1980): switching costs for firms may benefit consumers. Finally, we compare our model with others, especially Köszegi and Rabin's (2006) personal equilibrium. [ABSTRACT FROM AUTHOR]

We study a principal‐agent framework in which the agent forms beliefs about the principal's project based on a misspecified subjective model. She fits this model to the objective probability distribution to predict output under alternative actions. Misspecifications in the subjective model may lead to biased beliefs. However, under mild restrictions, the agent has correct beliefs on the equilibrium path so that the optimal contract is nonexploitative. This allows for a behavioral version of the informativeness principle: The optimal contract conditions on an additional variable only if it is informative about the action according to the agent's subjective model. We further characterize when misspecifications affect the optimal contract. One implication of this characterization is that the scope for belief biases depends on the agent's job, for example, her position in the hierarchy. [ABSTRACT FROM AUTHOR]

Laboratory studies of social interaction have revealed a wide range of phenomena that are difficult to explain using standard economic models. For example, people will often sacrifice their own earnings in order to be generous, cooperative, punitive, and retributive in interactions with anonymous strangers. "Behavioral" models that redefine agents' preferences attempt to provide an account of these phenomena as reflecting a "taste for fairness" or altruism, aversion to inequality, concern about others' beliefs, and so on. Such models either fail to account for the rich sensitivity of actions to context or in allowing for rich context-dependence, these models ultimately substitute description for explanation. Hayek's work provides a foundation for thinking about how to explain these phenomena, by conceiving of people as both purpose-seeking (as in economic models) and rule-following. Decisions are shaped both by material interests and by a normative framework that is evoked by context and helps people decide what one ought to do in a particular situation. The implication of this approach is that rather than trying to understand heterogeneity across individuals in terms of preferences, experimenters should instead try to understand heterogeneity across contexts in terms of the rules and norms that operate in the background and guide or constrain people's purpose-seeking tendencies. What economics needs, then, is a theory of how and why these rules and norms vary with context as they do. [ABSTRACT FROM AUTHOR]