Perhaps the most powerful form of framing arises through reference dependence, wherein choices are made recognizing the starting point or a goal. In labor economics, for example, a form of reference dependence, income targeting, has been argued to represent a serious challenge to traditional...

A commonly held view is that laboratory experiments provide researchers with more "control" than natural field experiments, and that this advantage is to be balanced against the disadvantage that laboratory experiments are less generalizable. This paper presents a simple model that explores...

Previous empirical studies of information cascades use either naturally occurring data or laboratory experiments with student subjects. We combine attractive elements from each of these lines of research by observing market professionals from the Chicago Board of Trade (CBOT) in a controlled...

Whether rationality of economic behavior increases with expected payoffs and decreases with the cognitive cost it takes to formulate an optimal strategy remains an open question. We explore these issues with field data, using individual bids from sealed-bid auctions in which we sold nearly...

Auction theory has recently revealed that multi-unit uniform-price auctions, such as those used by the U.S. Treasury for debt sales, entail demand-reduction incentives that can cause inefficient allocations. Recent experimental results show that bidders do indeed strategically reduce their bids...

Expected utility theory, prospect theory, and most other models of risky choice are based on the fundamental premise that individuals choose among risky prospects by balancing the value of the possible consequences. These models, therefore, require that the value of a risky prospect lie between...

My coauthors and I reply to the comments of Daniel Levin on our paper "Demand Reduction in Multiunit Auctions: Evidence from a Sportscard Field Experiment." In his comment, Levin presents new theory and proposes a new equilibrium to explain annomalies reported in our earlier sportscard auction,...

Assumptions of individual rationality and preference stability provide the foundation for a convenient and tractable modeling approach. While both of these assumptions have come under scrutiny in distinct literatures, the two lines of research remain disjointed. This study begins by explicitly...

Public policy decision making often requires balancing the benefits of a policy with the costs. While regulators in the United States and abroad rely heavily on benefit-cost analysis, critics contend that hypothetical bias precludes one of the most popular benefit estimation...