This paper addresses the role of non-binding goals to attenuate time inconsistency. Present-biased agents have linear reference-dependent preferences and endogenously set a goal that is the reference point. They face an infinite horizon, optimal stopping problem in continuous time. When there is...

This paper offers an information-based model of social interaction, and analyzes optimal investment and pricing of services that facilitate interaction in a duopoly. Agents have uncertainty over their preferences but are aware that they are correlated with others’, so there exists an incentive...

This paper develops a theoretical model of consumer demand for an energy conservation program that involves non-binding, self-set goals. We present evidence from a Northern Illinois goal-setting program, aimed at reducing residential electricity consumption, which is difficult to reconcile with...

The large inflow of investment capital to commodity futures markets in the past decade has generated a heated debate about whether financialization distorts commodity prices. Rather than focusing on the opposing views concerning whether investment flows caused a price bubble, we critically...

type="main" <title type="main">ABSTRACT</title> <p>Many believe that compensation, misaligned from shareholders’ value due to managerial entrenchment, caused financial firms to take risks before the financial crisis of 2008. We argue that, even in a classical principal-agent setting without entrenchment and with exogenous...</p>