530 Evans Hall
Berkeley, CA 94720
Institutional Affiliation: UC Berkeley
NBER Working Papers and Publications
|August 2019||Rules of Thumb and Attention Elasticities: Evidence from Under- and Overreaction to Taxes|
with Dmitry Taubinsky: w26180
This paper develops a methodology for testing whether attention costs are a source of consumers' misreaction to opaque prices. We show that costly attention models make a series of predictions about how individual differences in misreaction respond to stakes. We then test and confirm these predictions in an experiment on consumers’ online shopping decisions in the presence of shrouded sales taxes that are exogenously varied within consumer over time. The empirical results point to a model in which consumers use heterogeneous rules of thumb to compute the opaque tax when the stakes are low, but use costly mental effort to increase their accuracy when the stakes increase. In particular, some consumers systematically underreact to sales taxes while others systematically overreact. But when th...
|March 2019||The Deadweight Loss of Social Recognition|
with Luigi Butera, Robert Metcalfe, Dmitry Taubinsky: w25637
A growing body of empirical work shows that social recognition of individuals' behavior can meaningfully influence individuals’ choices. This paper studies whether social recognition is a socially efficient lever for influencing individuals’ choices. Because social recognition generates utility from esteem to some but disutility from shame to others, it can be either positive-sum, zero-sum, or negative-sum. This depends on whether the social recognition utility function is convex, linear, or concave, respectively. We develop a new revealed preferences methodology to investigate this question, which we deploy in a field experiment on promoting attendance to the YMCA of the Triangle Area. We find that social recognition increases YMCA attendance by 17-23% over a one-month period in our exper...