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Showing papers in "Journal of Economic Psychology in 2008"


Journal ArticleDOI
TL;DR: A detailed review of the literature on subjective well-being and its determinants can be found in this paper, where the authors highlight a range of problems in drawing firm conclusions about the causes of SWB; these include some contradictory evidence, concerns over the impact on the findings of potentially unobserved variables and the lack of certainty on the direction of causality.
Abstract: There is increasing interest in the “economics of happiness”, reflected by the number of articles that are appearing in mainstream economics journals that consider subjective well-being (SWB) and its determinants. This paper provides a detailed review of this literature. It focuses on papers that have been published in economics journals since 1990, as well as some key reviews in psychology and important unpublished working papers. The evidence suggests that poor health, separation, unemployment and lack of social contact are all strongly negatively associated with SWB. However, the review highlights a range of problems in drawing firm conclusions about the causes of SWB; these include some contradictory evidence, concerns over the impact on the findings of potentially unobserved variables and the lack of certainty on the direction of causality. We should be able to address some of these problems as more panel data become available.

2,586 citations


Journal ArticleDOI
TL;DR: In this paper, a framework for tax compliance is suggested in which both the power of tax authorities and trust in the tax authorities are relevant dimensions for understanding enforced and voluntary compliance, and the dynamic interactions between power and trust are considered.
Abstract: A framework for tax compliance is suggested in which both the power of tax authorities and trust in the tax authorities are relevant dimensions for understanding enforced and voluntary compliance. Dynamic interactions between power and trust are considered. Using the framework as a conceptual tool, factors studied in previous research, such as fines, audit probabilities, tax rate, knowledge, attitudes, norms and fairness are reviewed and discussed with reference to the power and trust dimensions. Using the framework as an operational tool, approaches of responsive regulation to increase tax compliance are discussed.

915 citations


Journal ArticleDOI
TL;DR: In this article, the authors describe an empirical study that relates three personality traits (agreeableness, conscientiousness and openness) to knowledge sharing, and discover significant correlations between the personality traits and knowledge sharing within teams of an engineering company.
Abstract: In this paper, we describe an empirical study that relates three personality traits (agreeableness, conscientiousness and openness) to knowledge sharing. In the existing literature considerable attention has been paid to managerial influences on knowledge sharing, technological support through information and communication systems, or individual characteristics like motivation or the perception of conflict of interest or vulnerability. Instead we concentrate on the role that personal dispositions play in individual’s knowledge sharing behavior. By means of structural equation modeling with PLS, we discover significant correlations between the personality traits and knowledge sharing within teams of an engineering company. Our results clearly contribute to the existing literature, as they offer empirical evidence of the impact of enduring individual characteristics on knowledge sharing.

350 citations


Journal ArticleDOI
TL;DR: The existence of a beauty premium in the labor market and the male-female wage gap suggests that appearance can matter in the real world as mentioned in this paper, even though beautiful people contribute, on average, no more or less than others.
Abstract: The existence of a beauty premium in the labor market and the male-female wage gap suggests that appearance can matter in the real world. We explore beauty and gender in a public goods experiment and find similar effects. We find a beauty premium, even though beautiful people contribute, on average, no more or less than others. The beauty premium, however, disappears when we provide information on individual contributions, and becomes a beauty penalty. Players seem to expect beautiful people to be more cooperative. Relative to these expectations, they appear more selfish, which in turn results in less cooperation by others. These appear to be clear examples of stereotyping. We also find a substantial benefit to being male, especially with information. This is primarily due to men being better "leaders." Men tend to make large contributions, and people follow their example and give more in later rounds.

301 citations


Journal ArticleDOI
TL;DR: In this article, the relationship between religion and trust was investigated using a questionnaire, and measures of individual religiosity were then analyzed alongside behavior in an experimental trust game, where trusters were informed of their potential trustee's religiosity.
Abstract: What is the relationship between religion and trust? Using a questionnaire, we elicit data on individual religiosity. Measures of individual religiosity are then analyzed alongside behavior in an experimental trust game. Here, trusters are – at times – informed of their potential trustee’s religiosity. We find that more religious trustees are trusted more, and such behavior is more pronounced in more religious trusters. More religious trustees are found to be trustworthier.

267 citations


Journal ArticleDOI
TL;DR: In this article, a model that explicitly links how the characteristics of the individual and the information simultaneously influence an information program's success is presented, and the results point toward the importance of well-designed labeling practices as they significantly impact individuals' perceptions of the eco-friendliness of products.
Abstract: Current studies on eco-labeling have been limited because they either examine the relationship between individual characteristics and eco-behavior or between label characteristics and eco-behavior. We extend this literature by designing and testing a model that explicitly links how the characteristics of the individual and the information simultaneously influence an information program’s success. The specific application studies the potential effects of providing eco-information in the private market for passenger vehicles and light-duty trucks sold in the United States. The results point toward the importance of well-designed labeling practices as they significantly impact individuals’ perceptions of the eco-friendliness of products. Further, the importance of underlying psychological factors; and individuals’ priors of the product and of the environmental problem suggests a strong role for the long-run provision of eco-information, especially in cases where individuals hold incorrect perceptions.

162 citations


Journal ArticleDOI
TL;DR: In this paper, the hypothesis that injunctive and descriptive norms interact positively or synergistically to promote cooperation in social dilemmas is tested in the context of a survey study focusing on environmentally responsible behavior.
Abstract: The hypothesis, that injunctive and descriptive norms interact positively or synergistically to promote cooperation in social dilemmas, is tested in the context of a survey study focusing on environmentally responsible behaviour. Measurement error and strong and positive correlations between the two types of normative beliefs make it difficult to test the interaction hypothesis. By using structural equation modelling with residual centering, these problems are overcome and the interaction hypothesis is confirmed. The result is stable across three replications spanning a two-year period.

143 citations


Journal ArticleDOI
TL;DR: This article found that working as a volunteer in an association has a causal impact on the probability of making friends in that association, which also supports the relational motive, which is seen as a way to build friendly relationships.
Abstract: While economists have mainly focused on investment or altruistic motives to explain why people undertake volunteer activities, we rely instead in this paper on the relational motive previously emphasized by social psychologists. Volunteering is seen as a way to build friendly relationships. Drawing on the French survey Vie Associative conducted by INSEE in 2002 on volunteer work and association membership, we shed light on the relevance of this relational motive using two samples of, respectively, 1578 volunteers and 2631 participants in associations. According to their own statements, many volunteers seek to make friends and to meet other people through these activities. Econometric results show that working as a volunteer in an association has a causal impact on the probability of making friends in that association, which also supports the relational motive.

137 citations


Journal ArticleDOI
TL;DR: In this article, the authors argue that happiness is just one value among many, and not the only conscious goal people set for themselves, and that even when people are striving to maximize happiness, our tendency to overweight short-term payoffs leads us to overvalue the shortterm rewards that income provides.
Abstract: Research on income and subjective well-being shows that among the non-poor, increased income has little or no lasting impact on happiness Yet the desire for more income remains a powerful motive among many people at all income levels Is this simply because many people are misinformed and believe that higher incomes will make them happier, or are they motivated by something other than the pursuit of happiness? This paper argues for the latter The paper begins by exploring this question, reviewing the literature on income and subjective well-being, and discussing of the role of utility in decision making This paper then argues that three main factors lead us to value increased income even if it does not make us happier First, happiness is just one value among many, and not the only conscious goal people set for themselves Second, even when people are striving to maximize happiness, our tendency to overweight short-term payoffs leads us to overvalue the short-term rewards that income provides Finally, I argue that our values-based decision making competes with other motivational systems and evolutionary drives Three evolutionary desires are discussed: (1) to store resources, (2) to be sexually attractive, and (3) to manage our social relationships and our personal identity within those relationships While all three motivations play a role in our desire for increased income, this paper argues that it is the third – the use of money and consumption as a social tool – that has the most important overall influence on our desire for increased income past the point where it ceases to increase personal happiness

131 citations


Journal ArticleDOI
TL;DR: The authors found that the more people associate themselves with masculine attributes, the more financial risks they tend to take, regardless of biological sex, and that gender priming on masculinity and femininity affected risk taking of the male sample.
Abstract: Women have proven to be more risk-averse than men in investment decisions in many studies. In Western cultures, risk taking is perceived as a masculine characteristic. We therefore hypothesize that the more people associate themselves with masculine attributes, the more financial risks they tend to take, regardless of biological sex. Study 1 showed that differences between men and women in financial risk taking decreased when identification with masculine attributes remained constant. Femininity, on the other hand, was not related to financial risk taking. In the second study, gender priming on masculinity and femininity affected risk taking of the male sample.

129 citations


Journal ArticleDOI
TL;DR: In this paper, the determinants of entry to Information Technology occupations were examined and it was shown that men and women differ systematically in their interests, and these differences can account for an economically and statistically large fraction of the occupational gender gap.
Abstract: Despite increases in female labor force participation, women remain substantially under represented in most scientific and technical fields. The small number of women in engineering, physics, chemistry, computer science and other similar fields has variously been attributed to discrimination, differences in ability or choice. This paper uses a unique data set containing information on vocational interests to examine the determinants of entry in to Information Technology occupations. We show that men and women differ systematically in their interests, and that these differences can account for an economically and statistically large fraction of the occupational gender gap.

Journal ArticleDOI
TL;DR: The authors provide a detailed review of the literature and an analysis of open issues in current research, focusing on individuals' perceptions and expectations of price changes and inflation, which can influence individuals' economic behaviour (e.g. spending and saving decisions).
Abstract: Drawing on relevant literature from a diverse range of academic disciplines we present a conceptual framework intended to further our understanding of perceptions and expectations of price changes and inflation. Based on this framework, we provide a detailed review of the literature and an analysis of open issues in current research. The review is primarily concerned with individuals’ perceptions and expectations of price changes and inflation, which can influence individuals’ economic behaviour (e.g. spending and saving decisions). The main insight from the review is that while consumers may have a limited ability to store and recall specific prices, and even succumb to a number of biases in the way in which they form perceptions and expectations of global price changes, they do seem to have some feel for, and ability to judge and forecast, inflation. How they achieve this, however, is still an open question, although plausible explanations have been proposed. While much important research has been undertaken and significant progress made in our understanding of the psychology of inflation, there remain many unanswered questions and interesting avenues for future research, which are discussed in the final part of the paper.

Journal ArticleDOI
TL;DR: The authors found that people did receive positive boosts for attending service, and these boosts appeared to be cumulative: the more they reported attending, the happier they were, and generalized these effects to other regular activities, demonstrating that people received boosts for exercise and yoga, and that these boosts too had a cumulative positive impact on well-being.
Abstract: Many studies have shown that few events in life have a lasting impact on subjective well-being because of people’s tendency to adapt quickly; worse, those events that do have a lasting impact tend to be negative. We suggest that while major events may not provide lasting increases in well-being, certain seemingly minor events – such as attending religious services or exercising – may do so by providing small but frequent boosts: if people engage in such behaviors with sufficient frequency, they may cumulatively experience enough boosts to attain higher well-being. In Study 1, we surveyed places of worship for 12 religions and found that people did receive positive boosts for attending service, and that these boosts appeared to be cumulative: the more they reported attending, the happier they were. In Study 2, we generalized these effects to other regular activities, demonstrating that people received boosts for exercise and yoga, and that these boosts too had a cumulative positive impact on well-being. We suggest that shifting focus from the impact of major life changes on well-being to the impact of seemingly minor repeated behaviors is crucial for understanding how best to improve well-being.

Journal ArticleDOI
TL;DR: This paper found that people tend to reject attractive mixed gambles when they are asked to decide whether to accept them, but tend to prefer these gambles over a sure payoff of 0 in a choice task.
Abstract: Previous studies of mixed gambles (gambles that yield gains and losses) reveal mixed results Whereas some studies show a tendency to reject highly attractive mixed gambles, other studies show indifference between mixed gambles with an expected value of 0 and the status quo The current paper presents three studies that explore this discrepancy The results highlight a strong sensitivity to the format and the context of the choice task People tend to reject attractive mixed gambles when they are asked to decide whether to accept them, but tend to prefer these gambles over a sure payoff of 0 in a choice task The tendency to reject mixed gambles is larger in a response to a hallway questionnaire than in the laboratory This pattern can be summarized with the assertion that people behave as if they use a “lemon avoidance heuristic” that can be described as an intuitive implementation of SPAM killer techniques

Journal ArticleDOI
TL;DR: In this paper, the authors studied the risk perceptions of individual investors by asking experimental questions to 2226 members of a consumer panel and analyzed their responses in order to find which risk measures they implicitly use.
Abstract: Risk perceptions of individual investors are studied by asking experimental questions to 2226 members of a consumer panel. Their responses are analyzed in order to find which risk measures they implicitly use. We find that most investors implicitly use more than one risk measure. For those investors who systematically perceive risk according to the same risk measure, semi-variance of returns is most popular. Semi-variance is similar to variance, but only negative deviations from the mean or another benchmark are taken into account. Stock investors implicitly choose for semi-variance as a risk measure, while bond investors favor probability of loss. Investors state that they consider the original investment to be the most important benchmark, followed by the risk-free rate of return, and the market return. However, their choices in the experimental questionnaire study reveal that the market return is the most important benchmark.

Journal ArticleDOI
TL;DR: The authors explored the meaning and implications of the desire by workers for impact and found that this desire can make a firm in a competitive labor market face an upward-sloping supply curve of labor, lead workers with the same characteristics but at different firms to earn different wages, may alleviate the hold-up problem in firm-specific investment, can make it profitable for an employer to give workers autonomy in effort or task choice, and can propagate shocks to unemployment.
Abstract: This paper explores the meaning and implications of the desire by workers for impact. We find that this impact motive can make a firm in a competitive labor market face an upward-sloping supply curve of labor, lead workers with the same characteristics but at different firms to earn different wages, may alleviate the hold-up problem in firm-specific investment, can make it profitable for an employer to give workers autonomy in effort or task choice, and can propagate shocks to unemployment.

Journal ArticleDOI
TL;DR: Two studies confirmed the hypothesized interaction effects between recipients' regulatory focus and framing of information campaigns, with tax compliance being highest under conditions of regulatory fit.
Abstract: Information campaigns to increase tax compliance could be framed in different ways. They can either highlight the potential gains when tax compliance is high, or the potential losses when compliance is low. According to regulatory focus theory, such framing should be most effective when it is congruent with the promotion or prevention focus of its recipients. Two studies confirmed the hypothesized interaction effects between recipients' regulatory focus and framing of information campaigns, with tax compliance being highest under conditions of regulatory fit. To address taxpayers effectively, information campaigns by tax authorities should consider the positive and negative framing of information, and the moderating effect of recipients' regulatory focus.

Journal ArticleDOI
TL;DR: In this paper, a novel approach to measuring perceived inflation is developed, the Index of Perceived Inflation (IPI), which is derived from the time series for Germany from 1996 through 2005 and applied to the German data.
Abstract: After the introduction of Euro notes and coins in January 2002, throughout the Economic and Monetary Union member countries a substantial discrepancy was evident between inflation as measured by the official consumer price indices (CPI) and that perceived by the general public. The starting point of this paper is the German case. First, the public controversy in Germany after the Euro changeover is sketched. Then conventional approaches to perceived inflation are reviewed including the many studies published by the German Federal Statistical Office as well as the perceived inflation balance generated within the EU Consumer Survey. In the main part of the paper, a novel approach to measuring perceived inflation is developed, the Index of Perceived Inflation (IPI). First, the hypotheses underlying this index are presented. Then, the IPI is derived. In the forth section the IPI is applied to the German data. The IPI time series for Germany from 1996 through 2005 shows a particularly high perceived inflation around the introduction of Euro notes and coins. In the fifth section the hypotheses of inflation perception underlying the IPI are critically reviewed. The paper closes with a conclusion on the insights gained through computation of the IPI.

Journal ArticleDOI
TL;DR: The empirical results indicate that risk preference has a significant negative effect on alcohol consumption, with the prevalence and consumption among risk-tolerant individuals being 6-8% higher; this suggests that tax policies are as equally effective in deterring alcohol consumption among those who have a higher versus a lower propensity for alcohol use.
Abstract: Both economists and psychologists have studied the concept of risk preference. Economists categorize individuals as more or less risk-tolerant based on the marginal utility of income. Psychologists categorize individuals’ propensity towards risk based on harm avoidance, novelty seeking and reward dependence traits. The two concepts of risk are related, although the instruments used for empirical measurement are quite different. Psychologists have found risk preference to be an important determinant of alcohol consumption; however economists have not included risk preference in studies of alcohol demand. This is the first study to examine the effect of risk preference on alcohol consumption in the context of a demand function. The specifications employ multiple waves from the Panel Study of Income Dynamics (PSID) and the Health and Retirement Study (HRS), which permit the estimation of age-specific models based on nationally representative samples. Both of these data sets include a unique and consistent survey instrument designed to directly measure risk preference in accordance with the economist’s definition. This study estimates the direct impact of risk preference on alcohol demand and also explores how risk preference affects the price elasticity of demand. The empirical results indicate that risk preference has a significant negative effect on alcohol consumption, with the prevalence and consumption among risk-tolerant individuals being 6–8% higher. Furthermore, the tax elasticity is similar across both risk-averse and risk-tolerant individuals. This suggests that tax policies are as equally effective in deterring alcohol consumption among those who have a higher versus a lower propensity for alcohol use.

Journal ArticleDOI
TL;DR: This article found substantial support for loss realization aversion in real-estate transactions in the greater Helsinki area during 1987-2003 (about 80,000 apartment transactions with capital gains available), and a disproportionate number of sales occurred exactly at the original purchase price.
Abstract: Using data on all real estate transactions in the greater Helsinki area during 1987–2003 (about 80,000 apartment transactions with capital gains available), we find substantial support for loss realization aversion. Further, a disproportionate number of sales occurred exactly at the original purchase price. Reluctance to realize losses is weaker with pricier apartments, seasoned sellers, and apartments that are likely bought for investment purposes. Mortgage down payment requirements are unlikely to fully explain the results. On the whole the results are consistent with loss aversion and mental accounting.

Journal ArticleDOI
TL;DR: In this article, answers to survey questions and choices in a trust game are obtained from student sample pools from a variety of settings, including mail, classroom, and random lottery payments.
Abstract: This paper explores methods to study trust In a variety of settings, answers to survey questions and choices in a trust game are obtained from student sample pools Some subjects are approached by mail and execute their task at home whereas others participate in classroom experiments No differences between the results obtained by these methods are observed Furthermore, one additional group plays the trust game with purely hypothetical payments, and another receives random lottery payments This changes trust behavior dramatically, whereas trustworthiness is unaffected Subjects without any financial incentives exhibit less trust and their trust choices are significantly correlated with survey trust answers There is no such correlation for the corresponding choices with real payments

Journal ArticleDOI
TL;DR: In this article, the authors compare and contrast the validity and reliability of the Faber and O'Guinn compulsive buying scales within a nomological network within a clinical screener.
Abstract: The primary purpose of the present study is to compare and contrast the validity and reliability of the Faber and O’Guinn [Faber, R. J., & O’Guinn, T. C. (1992). A clinical screener for compulsive buying. Journal of Consumer Research, 19 , 459–469] and Edwards [Edwards, E. A. (1993). Development of a new scale for measuring compulsive buying behavior. Financial Counseling and Planning, 4 , 67–84] compulsive buying scales within a nomological network. Although both psychometric scales were designed to measure compulsive buying, the two instruments appear to be distinct in how they conceptualize the compulsive buying phenomenon. The seven-item compulsive buying scale developed by Faber and O’Guinn (1992) is the most commonly used scale for measuring compulsive buying. The Edwards scale in contrast is not as well-known. Empirical results of the present study suggest that the two compulsive buying scales may be capturing either separate constructs, or different dimensions of the same compulsive buying construct. Edwards (1993) compulsive buying scale, for instance, is correlated with materialism but not with attitudes toward money while the Faber and O’Guinn scale is not correlated with materialism but is correlated with attitudes toward money. The present study’s results suggest, among other things, that it does in fact appear to matter how compulsive buying is measured.

Journal ArticleDOI
TL;DR: Ehrlinger et al. as discussed by the authors proposed that the unskilled and unaware problem is a signal extraction problem that differs for the skilled and unskilled, and that unskilled face a tougher inference problem than the skilled.
Abstract: In a series of articles and manuscripts (e.g., [Kruger, J., & Dunning, D. (1999). Unskilled and unaware of it: How difficulties in recognizing one’s own incompetence lead to inflated self-assessment. Journal of Personality and Social Psychology, 77, 1121–1134; Dunning, D., Johnson, K., Ehrlinger, J., & Kruger, J. (2003). Why people fail to recognize their own incompetence. Current Directions in Psychological Science, 12, 83–87; Ehrlinger, J., Johnson, K., Banner, M., Kruger, J., & Dunning, D. (2008). Why the unskilled are unaware: Further exploration of (absent) self-insight among the incompetent. Organizational Behavior and Human Decision Processes, 105, 98–121.]), Dunning, Kruger and their collaborators argued that the unskilled lack the metacognitive ability to realize their incompetence. We propose that the alleged unskilled-and-unaware problem – rather than being one of biased judgements – is a signal extraction problem that differs for the skilled and the unskilled. Specifically, the unskilled face a tougher inference problem than the skilled.

Journal ArticleDOI
TL;DR: In this article, Tversky et al. proposed that uncertainty reduces the perceived intensity of losses slightly less than it reduces the intensity of gains, and they examined whether this difference would be more pronounced for prevention focus concerns with obligations (oughts) and security than for promotion focus concern with aspirations (ideals) and advancement.
Abstract: Prospect theory [Tversky, A., & Kahneman, D. (1992). Advances in prospect theory: Cumulative representation of uncertainty. Journal of Risk and Uncertainty, 5 , 297–323] proposes that uncertainty reduces the perceived intensity of losses slightly less than it reduces the perceived intensity of gains. We examined whether this difference would be more pronounced for prevention focus concerns with obligations (oughts) and security than for promotion focus concerns with aspirations (ideals) and advancement. Study 1 manipulated regulatory focus and Studies 2 and 3 assessed individual differences in chronic regulatory focus. The studies applied a psychophysical method to examine discounting over uncertainty. Studies 1 and 2 examined hedonic intensity of pleasure of anticipating gains and pain of anticipating losses. Study 3 examined motivational intensity to approach gains or to avoid losses. All three studies found that in a prevention focus, more than in a promotion focus, negative prospects were discounted over uncertainty more than positive prospects. We discuss the relevance of motivation to positive/negative asymmetries.

Journal ArticleDOI
TL;DR: In this paper, a set completion model is presented to explain how set completion motivates collecting behavior, which sheds light on collecting for both financial and non-financial reasons, and how manufacturers of collectibles can use this behavior for commercial exploitation.
Abstract: Collecting is a complex behavior that has been studied from a variety of different perspectives. Art objects, stamps, coins, and other established collectibles markets, have been shown over the years to provide some degree of return to the collector in the economics literature. Wonderment over the success of certain collectibles such as Swatch watches and Beanie Babies has received much attention in the popular press. But how does one rationally explain the collecting of matchbook covers, Cracker Jacks toys, belt buckles, salt cellars, Aunt Jemima, etc.? Collecting in the absence of financial gain has received little attention in the economics literature. In the social psychology literature, many individuals are understood to have a natural desire to collect things for various reasons. Financial gain is only one of those reasons. Set completion is another. The reasons for collecting are not always mutually exclusive. For example, a complete set may be worth more in the secondary market, if one exists, than the sum of the individual pieces. This reflects the value of the rarest pieces and the opportunity costs of obtaining them. The model presented in this study explains how set completion motivates collecting behavior, which sheds light on collecting for both financial and nonfinancial reasons. The model accommodates both collectors and noncollectors and illustrates how consumption behavior may vary accordingly. Insight into how manufacturers of collectibles can use this behavior for commercial exploitation is explored.

Journal ArticleDOI
TL;DR: In this paper, the authors show that consumers tend to underestimate the value of a policy with a deductible and that the degree of underestimation increases with the size of the deductible, and they hypothesize that this tendency is caused by the anchoring heuristic.
Abstract: One of the most intriguing questions in insurance is the preference of consumers for low or zero deductible insurance policies. This stands in sharp contrast to a theorem proved by Mossin [Mossin, J. (1968). Aspects of rational insurance purchasing. Journal of Political Economy, 76 , 553–568], that under quite common assumptions when the price of insurance is higher than its actuarial value, then full coverage is not optimal. We show in a series of experiments that amateur subjects tend to underestimate the value of a policy with a deductible and that the degree of underestimation increases with the size of the deductible. We hypothesize that this tendency is caused by the anchoring heuristic. In particular, in pricing a policy with a deductible subjects first consider the price of a full-coverage policy. Then they anchor on the size of the deductible and subtract it from the price of the full-coverage policy. However, they do not adjust the price enough upward to take into account the fact that there is only a small chance that the deductible will be applied toward their payments. We also show that professionals in the field of insurance are less prone to such a bias. This implies that a policy with a deductible priced according to the true expected payments may seem “overpriced” to the insured and therefore may not be purchased. Since the values of full-coverage policies are not underestimated the insured may find them as relatively better “deals”.

Journal ArticleDOI
TL;DR: In this article, the authors developed and administered an experiment, using college students as subjects, to test whether tax refunds administered as one lump-sum will be saved (vs. spent) more than tax refunds of the same amount refunded monthly through revised income tax withholding tables.
Abstract: The empirical evidence surrounding whether federal income tax refunds predominantly stimulate consumer spending or saving remains contradictory. This study is an attempt to combine income tax research findings with research on mental accounting and with the effects of estimated tax payments timing. The authors developed and administered an experiment, using college students as subjects, to test whether tax refunds administered as one lump-sum will be saved (vs. spent) more than tax refunds of the same amount refunded monthly through revised income tax withholding tables. The study also explores the types of saving and spending that result from refunds under both timing patterns. A within subjects experiment of student spending was used, and ANOVA results confirm that a refund delivered in monthly amounts (for example, by changing the federal income tax withholding tables) stimulated current spending more than if the same yearly total tax reduction was delivered in one lump-sum. The findings also suggest that the lump-sum distribution conversely will stimulate private saving more than a monthly distribution will. The study also explores other specific savings and spending tendencies, including the payment of credit cards vs. investments in securities, and the amount spent on durable goods vs. monthly expenditures across several monthly and yearly distributions. It is important to know if and how the timing of refunds affects savings and spending tendencies because tax cuts are often debated on the political stage as a means to stimulate spending, and the timing of the refund might change how effectively a tax cut meets that goal.

Journal ArticleDOI
TL;DR: Shani et al. as mentioned in this paper found that regret leads to post-decision information search and that regret is lessaversive than uncertain ignorance, even when one finds out that one had missed a superior opportunity.
Abstract: Recent decision-making research established that the experience of regret leads to post-decision information search [Shani, Y., & Zeelenberg, M. (2007). When and why do we want to know? How experienced regret promotes post-decision information search. Journal of Behavioral Decision Making, 20 , 207–222]. It has been argued that people search information in hope to alleviate their negative feelings by excluding the possibility that unfavorable decision was made. Paradoxically, by seeking information people expose themselves to information that may confirm their negative feelings. The willingness to seek out potentially painful information was examined in three studies. Experiment 1 demonstrated that the tendency to seek definite knowledge about the attractiveness of a forgone opportunity is mediated by the emotional discomfort associated with remaining ignorant, and influenced by the probability that the search will uncover aversive information. This finding was replicated in Experiment 2 in a lab setting. Experiment 3 demonstrated that definite knowledge is less-aversive than uncertain ignorance, even when one finds out that one had missed a superior opportunity.

Journal ArticleDOI
TL;DR: In this article, the authors follow up on Trope and Liberman's proposal and demonstrate how construal level theory can account for a wide range of economic behaviors such as predicting the choices of others, advice giving, saving for retirement, and the failure to annuitize assets at retirement.
Abstract: According to construal level theory (CLT) [Trope, Y., & Liberman, N. (2003). Temporal construal. Physical Review, 110 , 403–421], psychological representation of information depends on “psychological distance”, that is, on whether the relevant information refers to the near or distant psychological space. While CLT was originally developed to account for intertemporal choice, Trope and Liberman proposed that it could account for other dimensions of psychological distance such as social distance. We follow up on Trope and Liberman’s proposal and demonstrate how CLT accounts for a wide range of economic behaviors such as predicting the choices of others, advice giving, saving for retirement, and the failure to annuitize assets at retirement. By explaining how CLT can account for these various economic behaviors and suggesting novel predictions, we hope to stimulate researchers to investigate further the role of psychological distance in economic behavior.

Journal ArticleDOI
TL;DR: In this paper, a hedonic price model of willingness to pay (WTP) for superstition in Hong Kong license-plate auctions is proposed, and consumers' responses to nuanced cues that exploit well-known local cultural sensitivities.
Abstract: We estimate a hedonic price model of willingness to pay (WTP) for superstition. The model explains WTP measured by winning bids in Hong Kong license-plate auctions through numeric and alpha-numeric sequences catering to culturally-sensitive superstitions, tempered by self-expression, economic and auction-specific considerations. The paper adds to the extant literature on three dimensions. First, we focus on a commodity that is a necessary accessory with no intrinsic value, known to be available in unlimited supply at a production cost substantially less than the buyer’s WTP. Second, we show differentiated responses by consumers to nuanced cues that exploit well-known local cultural sensitivities. Finally, we incorporate macroeconomic and auction-specific variables to elicit their impact on consumer preferences and behavior within our culturally-sensitive context. Our results suggest quantifiable differences in consumer responses to psychologically-nuanced cultural cues, which management can exploit to its competitive advantage. This evidence is relevant and timely, given the rising corporate interest in serving the vast and growing consumer market in China.