Summary While standard economic theory takes individual preferences as stable and “given”, i.e., independent of situational context, real-world preferences tend to vary with changing opportunity sets. This is exemplified by Aesop’s fable of the fox and the sour grapes. This phenomenon of...

This paper presents a model of smoking choice in which rationality is bounded by limitations in intertemporal computational abilities. The model is applied to the youth decision to initiate smoking. Lifetime smoking paths of representative smokers indicate that youths may experience a reduction...

Is it better to apply effort to increase personal consumption, or control what one wants? The model presented here provides a characterization of demand for self control, namely, its responsiveness to price and risk. Unlike most other models of self control, the model does not identify self...

Standard economic analysis assumes that people make choices that maximize their utility. Yet both popular discourse and other fields assume that people sometimes fail to make optimal choices and thus adversely affect their own happiness. Most social sciences thus frequently describe some...

Behavioral economics is influencing regulatory initiatives in many nations, including the United States and the United Kingdom. The role of behavioral economics is likely to increase in the next generation, especially in light of the growing interest in low-cost, choice-preserving regulatory...

Is nudging unethical? Is choice architecture a problem for a free society? This essay defends seven propositions: (1) It is pointless to object to choice architecture or nudging as such. Choice architecture cannot be avoided. Nature itself nudges; so does the weather; so do customs and...

Some people believe that nudges undermine human agency, but with appropriate nudges, neither agency nor consumer freedom is at risk. On the contrary, nudges can promote both goals. In some contexts, they are indispensable. There is no opposition between education on the one hand and nudges on...

We extend the swaps index of rationality, introduced by Apesteguia and Ballester (2015) for a finite set of alternatives, to the standard consumer choice setting with infinite commodity spaces. Applications include consumer demand from competitive budget sets and the state-space approach to...

Standard economic analysis assumes that people make choices that maximize their utility. Yet both popular discourse and other fields assume that people sometimes fail to make optimal choices and thus adversely affect their own happiness. Most social sciences thus frequently describe some...