The Economics of Information, Deep Capture, and the Obesity Debate
In: American Journal of Agricultural Economics, Band 96, Heft 2, S. 533-541
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In: American Journal of Agricultural Economics, Band 96, Heft 2, S. 533-541
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In: The B.E. journal of theoretical economics, Band 9, Heft 1
ISSN: 1935-1704
It is often assumed (for analytical convenience, but also in accordance with common intuition) that consumer preferences are convex. In this paper, we consider circumstances under which such preferences are (or are not) optimal. In particular, we investigate a setting in which goods possess some hidden quality with known distribution, and the consumer chooses a bundle of goods that maximizes the probability that he receives some threshold level of this quality. We show that if the threshold is small relative to consumption levels, preferences will tend to be convex; whereas the opposite holds if the threshold is large. Our theory helps explain a broad spectrum of economic behavior (including, in particular, certain common commercial advertising strategies), suggesting that sensitivity to information about thresholds is deeply rooted in human psychology.
In: New Zealand economic papers, Band 56, Heft 1, S. 81-89
ISSN: 1943-4863
In: The B.E. journal of economic analysis & policy, Band 9, Heft 1
ISSN: 1935-1682
Abstract
Emerging evidence from neuroscience and clinical research suggests a novel hypothesis about tobacco use: consumers may choose to smoke, in part, as a "self-medicating" response to the presence of economic insecurity. To test this hypothesis, we examine the effect of economic insecurity (roughly, the risk of catastrophic income loss) on the smoking behavior of a sample of male working-age smokers from the 1979 National Longitudinal Survey of Youth (NLSY79). Using instrumental variables to control for unobserved heterogeneity, we find that economic insecurity has a large and statistically significant positive effect on the decision to continue or resume smoking. Our results indicate, for example, that a 1 percent increase in the probability of becoming unemployed causes an individual to be 2.4 percent more likely to continue smoking. We find that the explanatory power of economic insecurity in predicting tobacco use is comparable to (but distinct from) household income, a more commonly used metric.
In: Contemporary economic policy: a journal of Western Economic Association International, Band 26, Heft 1, S. 32-48
ISSN: 1465-7287
Theories of rational addiction posit that certain habit‐forming goods—characterized by an increasing marginal utility of consumption—generate predictable dynamic patterns of consumer behavior. It has been suggested that attendance at sporting events represents an example of such a good, as evidenced by the pricing strategies of commercial sports interests. In this essay, we provide new evidence in support of rational addiction for the case of Major League Baseball but fail to find such support in data from the Korean Professional Baseball League. We then review the scientific literature on sports fans from the perspective of human behavioral ecology and propose a theory of endogenous habit formation among sports fans that could explain our findings. (JEL C32, D83, D87, D91, L83)
In: IZA Discussion Paper No. 10954
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In: Pacific economic review, Band 17, Heft 5, S. 687-692
ISSN: 1468-0106
AbstractIt is well‐known that product differentiation eliminates the Bertrand paradox (i.e. marginal cost pricing under duopoly). While differentiation is often justified with reference to the consumer's 'preference for variety', the conditions under which such a preference is likely to arise are rarely considered. We investigate this question in a setting in which uncertainty about product quality can endogenously generate either convex or non‐convex preferences. We show that even when two goods are ex ante homogeneous, quality uncertainty can eliminate the Bertrand paradox.
In: WSU School of Economic Sciences Working Paper No. 2009-7
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Working paper
In: Australian Journal of Agricultural and Resource Economics, Band 63, Heft 4, S. 685-700
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