A standard model of addictive process is Becker and Murphy's rational addiction' model, which has the key empirical prediction that the current consumption of addictive goods should respond to future prices, and the key normative prediction that the optimal government regulation of addictive...

The traditional normative analysis of government policy towards addictive bads is carried out in the context of a 'rational addiction' model, whereby the only role for government is in correcting the external costs of consumption of such goods. But available evidence is at least as consistent,...

This article explores some conceptual issues in the study of well-being using the traditional economic approach of inferring preferences solely from choice behavior. We argue that choice behavior alone can never reveal which situations make people better off, even with unlimited data and under...

We develop a model that fleshes out, extends, and modifies existing models of reference dependent preferences and loss aversion while accommodating most of the evidence motivating these models. Our approach makes reference-dependent theory more broadly applicable by avoiding some of the ways...

We develop a model that fleshes out, extends, and modifies existing models of reference dependent preferences and loss aversion while accomodating most of the evidence motivating these models. Our approach makes reference-dependent theory more broadly applicable by avoiding some of the ways that...

We present a theory of individual choice in which the decisionmaker focuses more on, and hence weights more heavily, attributes on which the options in her consideration set are more different. Consistent with evidence on salience in monetary choices, our model predicts that the decisionmaker is...

It is widely known that loss aversion leads individuals to dislike risk, and as has been argued by many researchers, in many instances this creates an incentive for firms to shield consumers and employees against economic risks. Complementing previous research, we show that consumer loss...

We study the properties of a profit-maximizing monopolist's optimal price distribution when selling to a loss-averse consumer, where (following Koszegi and Rabin (2006)) we assume that the consumer's reference point is her recent rational expectations about the purchase. If it is close to...

We develop a rational dynamic model in which people are loss averse over changes in beliefs about present and future consumption. Because changes in wealth are news about future consumption, preferences over money are reference-dependent. If news resonates more when about imminent consumption...