David C. John, Grace Enda, William G. Gale, J. Iwry
Navigating the retirement system is not easy for many workers, in the U.S. or abroad. Following several other countries, we advocate creating a retirement dashboard for the United States to help savers manage their retirement preparations. A dashboard would include an online registry letting each worker track their retirement accounts and benefits. It could also offer services such as recovering and consolidating lost accounts, projecting future income, or even providing or referring unbiased financial advice to users. A dashboard would need to overcome obstacles but could materially improve retirement prospects for many American workers.
{"title":"A Retirement Dashboard for the United States","authors":"David C. John, Grace Enda, William G. Gale, J. Iwry","doi":"10.2139/ssrn.3728261","DOIUrl":"https://doi.org/10.2139/ssrn.3728261","url":null,"abstract":"Navigating the retirement system is not easy for many workers, in the U.S. or abroad. Following several other countries, we advocate creating a retirement dashboard for the United States to help savers manage their retirement preparations. A dashboard would include an online registry letting each worker track their retirement accounts and benefits. It could also offer services such as recovering and consolidating lost accounts, projecting future income, or even providing or referring unbiased financial advice to users. A dashboard would need to overcome obstacles but could materially improve retirement prospects for many American workers.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"74 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121432316","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study considers an under-explored channel through which credit-constrained house- holds may smooth consumption – buying ahead. We employ a differences-in-differences-in- differences strategy and exploit variation from state tax laws introduced in different states in different years. Using toilet paper as an example of a widely bought, necessary and storable product, we compare how households’ purchasing behavior changes in response to transitory income from tax refunds. We find that households increase the amount of toilet paper purchased by around 20% in response to a state income tax refund, but do not increase the purchased quantity of perishables. The inter-purchase time for toilet paper also increases, ruling out that households are simply increasing consumption in response to more income. Finally, households increase expenditures on toilet paper only by 11%, indicating that they are saving per unit by buying in larger quantities. Buying ahead appears to allow households to smooth consumption by purchasing a stockpile of non-perishable, necessary goods that they can slowly consume over time.
{"title":"Buying Consumption Smoothing: Saving for the Future by Buying Ahead","authors":"J. Collins, Amrita Kulka","doi":"10.2139/ssrn.3713394","DOIUrl":"https://doi.org/10.2139/ssrn.3713394","url":null,"abstract":"This study considers an under-explored channel through which credit-constrained house- holds may smooth consumption – buying ahead. We employ a differences-in-differences-in- differences strategy and exploit variation from state tax laws introduced in different states in different years. Using toilet paper as an example of a widely bought, necessary and storable product, we compare how households’ purchasing behavior changes in response to transitory income from tax refunds. We find that households increase the amount of toilet paper purchased by around 20% in response to a state income tax refund, but do not increase the purchased quantity of perishables. The inter-purchase time for toilet paper also increases, ruling out that households are simply increasing consumption in response to more income. Finally, households increase expenditures on toilet paper only by 11%, indicating that they are saving per unit by buying in larger quantities. Buying ahead appears to allow households to smooth consumption by purchasing a stockpile of non-perishable, necessary goods that they can slowly consume over time.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129735473","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Firms often discourage certain categories of individuals from buying their products, in contrast with typical assumptions about profit maximization. This paper provides a potential rationale for such firm behavior: consumers seek to signal that they have “good” moral values to themselves and others by avoiding products popular among people with “bad” values. In laboratory experiments, I provide causal evidence that demand for a product is lower if its customer base consists of individuals with undesirable moral values. This effect occurs for both observable and unobservable consumption and for products that do not possess any inherent moral or undesirable qualities.
{"title":"Signaling Moral Values through Consumption","authors":"Florian H. Schneider","doi":"10.2139/ssrn.3710842","DOIUrl":"https://doi.org/10.2139/ssrn.3710842","url":null,"abstract":"Firms often discourage certain categories of individuals from buying their products, in contrast with typical assumptions about profit maximization. This paper provides a potential rationale for such firm behavior: consumers seek to signal that they have “good” moral values to themselves and others by avoiding products popular among people with “bad” values. In laboratory experiments, I provide causal evidence that demand for a product is lower if its customer base consists of individuals with undesirable moral values. This effect occurs for both observable and unobservable consumption and for products that do not possess any inherent moral or undesirable qualities.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"57 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132574425","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study a static self-control model in which an agent's preference, temptation ranking, and cost of self-control drive her choices among a finite set of options. We show that it is without loss to assume that the agent's temptation ranking is the opposite of her preference. We characterize the model by relaxing the Weak Axiom of Revealed Preference (WARP), and exploit WARP violations to identify the model's parameters.
{"title":"Bad Temptation","authors":"D. Ravid, Kai Steverson","doi":"10.2139/ssrn.3127575","DOIUrl":"https://doi.org/10.2139/ssrn.3127575","url":null,"abstract":"We study a static self-control model in which an agent's preference, temptation ranking, and cost of self-control drive her choices among a finite set of options. We show that it is without loss to assume that the agent's temptation ranking is the opposite of her preference. We characterize the model by relaxing the Weak Axiom of Revealed Preference (WARP), and exploit WARP violations to identify the model's parameters.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121439660","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We embed an extension of the canonical epidemiology model in a New Keynesian model and analyze the role of monetary policy as a virus spreads and triggers a sizable recession. In our framework, consumption is less sensitive to real interest changes in a pandemic than in normal times because individuals have to balance the benefits of taking advantage of intertemporal substitution opportunities with the risk of becoming sick. Accommodative monetary policies such as forward guidance result in large increases in inflation but have only limited effects on real economic activity as long as the risk of infection is large. The optimal design of monetary policy hinges on how other tools used to limit virus spread, such as lockdowns, are deployed. If the lockdown policy is conducted optimally, monetary policy should focus on keeping inflation on target. However, if the lockdown policy is not optimal, the central bank faces a trade-off between its objective of stabilizing inflation and the necessity to minimize the inefficiencies associated with virus spread.
{"title":"The Limited Power of Monetary Policy in a Pandemic","authors":"Antoine Lepetit, Cristina Fuentes-Albero","doi":"10.2139/ssrn.3699708","DOIUrl":"https://doi.org/10.2139/ssrn.3699708","url":null,"abstract":"We embed an extension of the canonical epidemiology model in a New Keynesian model and analyze the role of monetary policy as a virus spreads and triggers a sizable recession. In our framework, consumption is less sensitive to real interest changes in a pandemic than in normal times because individuals have to balance the benefits of taking advantage of intertemporal substitution opportunities with the risk of becoming sick. Accommodative monetary policies such as forward guidance result in large increases in inflation but have only limited effects on real economic activity as long as the risk of infection is large. The optimal design of monetary policy hinges on how other tools used to limit virus spread, such as lockdowns, are deployed. If the lockdown policy is conducted optimally, monetary policy should focus on keeping inflation on target. However, if the lockdown policy is not optimal, the central bank faces a trade-off between its objective of stabilizing inflation and the necessity to minimize the inefficiencies associated with virus spread.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121882565","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Motivated by the growing significance of contingent free shipping (CFS) policies in the e-commerce industry, we investigate the optimal CFS and pricing decisions for online retailers. Under a CFS policy, consumers enjoy free shipping for orders exceeding a certain threshold value; otherwise, they are charged a flat fee for orders below this threshold. We adopt a utility-based model to capture consumers’ behavior of purchasing additional items to qualify for free shipping under a CFS policy and analyze its impact on policy structure and consumer surplus. We characterize the retailer’s optimal pricing and CFS policy as functions of consumer mix. When consumer heterogeneity is large enough, the optimal policy induces some consumers to top up and may allow some others to ship for free. In this case, the retailer can charge a high profit margin. Otherwise, a top-up option is unnecessary and a flat-rate shipping fee policy is optimal. Moreover, while the optimal policy never induces all consumers to top up when they are rational, it is possible to do so when consumers associate a psychological disutility with the shipping fee. Surprisingly, the total consumer surplus under the optimal policy may increase in the latter case. Lastly, we show that a subscription program, in addition to the CFS policy, can improve profits when consumers’ order size and frequency are negatively correlated. We find that consumer heterogeneity explains the existence of different forms of shipping policy in reality. The CFS policy is a more effective discrimination mechanism in extracting consumer surplus compared to the flat-rate shipping fee policy. The retailer should utilize the CFS policy especially when consumer heterogeneity is significant. Our findings reveal important insights regarding the impact of consumers’ top-up behavior on a retailer’s optimal operational and marketing decisions.
{"title":"Designing Shipping Policies with Top-up Options to Qualify for Free Delivery","authors":"Guang Li, Lifei Sheng, Dongyuan Zhan","doi":"10.2139/ssrn.3690456","DOIUrl":"https://doi.org/10.2139/ssrn.3690456","url":null,"abstract":"Motivated by the growing significance of contingent free shipping (CFS) policies in the e-commerce industry, we investigate the optimal CFS and pricing decisions for online retailers. Under a CFS policy, consumers enjoy free shipping for orders exceeding a certain threshold value; otherwise, they are charged a flat fee for orders below this threshold. We adopt a utility-based model to capture consumers’ behavior of purchasing additional items to qualify for free shipping under a CFS policy and analyze its impact on policy structure and consumer surplus. We characterize the retailer’s optimal pricing and CFS policy as functions of consumer mix. When consumer heterogeneity is large enough, the optimal policy induces some consumers to top up and may allow some others to ship for free. In this case, the retailer can charge a high profit margin. Otherwise, a top-up option is unnecessary and a flat-rate shipping fee policy is optimal. Moreover, while the optimal policy never induces all consumers to top up when they are rational, it is possible to do so when consumers associate a psychological disutility with the shipping fee. Surprisingly, the total consumer surplus under the optimal policy may increase in the latter case. Lastly, we show that a subscription program, in addition to the CFS policy, can improve profits when consumers’ order size and frequency are negatively correlated. We find that consumer heterogeneity explains the existence of different forms of shipping policy in reality. The CFS policy is a more effective discrimination mechanism in extracting consumer surplus compared to the flat-rate shipping fee policy. The retailer should utilize the CFS policy especially when consumer heterogeneity is significant. Our findings reveal important insights regarding the impact of consumers’ top-up behavior on a retailer’s optimal operational and marketing decisions.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132396717","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Newspapers are increasingly reliant on subscription revenue as advertising spend shifts to online platforms. Many newspapers have implemented paywalls in an attempt to boost subscription revenue. We study whether and how paywalls can help newspapers boost subscription revenue by retaining existing subscribers. Most major newspapers offer free access to paywalled content to subscribers to the print edition, which may help the newspaper retain subscribers by making their subscriptions more valuable. We leverage variation in whether and when existing subscribers activated access to the paywall of a top 30 North American newspaper. Our identification strategy accounts for self-selection in subscribers’ decisions to activate paywall access. We find that a subscriber’s activation of digital access decreases the risk of her canceling her subscription by about 31% and increases her subscription revenue by 7%–12%. In other words, digital activation improves subscriber retention and the associated subscription revenue. This suggests a crosschannel spillover in which the online product (the paywalled website) increases customers’ valuation for the offline product (the printed newspaper). Our results have implications not only for the newspaper industry but also for firms in other industries that offer subscribers to one product free or subsidized access to a complementary product. This paper was accepted by Kartik Hosanagar, information systems.
{"title":"Spillovers from Online Engagement: How A Newspaper Subscriber's Activation of Digital Paywall Access Affects Her Retention and Subscription Revenue","authors":"Adithya Pattabhiramaiah, Eric Overby, Lizhen Xu","doi":"10.2139/ssrn.3694089","DOIUrl":"https://doi.org/10.2139/ssrn.3694089","url":null,"abstract":"Newspapers are increasingly reliant on subscription revenue as advertising spend shifts to online platforms. Many newspapers have implemented paywalls in an attempt to boost subscription revenue. We study whether and how paywalls can help newspapers boost subscription revenue by retaining existing subscribers. Most major newspapers offer free access to paywalled content to subscribers to the print edition, which may help the newspaper retain subscribers by making their subscriptions more valuable. We leverage variation in whether and when existing subscribers activated access to the paywall of a top 30 North American newspaper. Our identification strategy accounts for self-selection in subscribers’ decisions to activate paywall access. We find that a subscriber’s activation of digital access decreases the risk of her canceling her subscription by about 31% and increases her subscription revenue by 7%–12%. In other words, digital activation improves subscriber retention and the associated subscription revenue. This suggests a crosschannel spillover in which the online product (the paywalled website) increases customers’ valuation for the offline product (the printed newspaper). Our results have implications not only for the newspaper industry but also for firms in other industries that offer subscribers to one product free or subsidized access to a complementary product. This paper was accepted by Kartik Hosanagar, information systems.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"152 ","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131520374","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies a welfare maximization problem with heterogeneous agents. A social planner designs a menu of choices for agents who misperceive either the properties of options or their own preferences. When agents misperceive the true properties of alternatives, it is optimal to limit a menu when the probability of a mistaken choice is moderately high. Additionally, it could be optimal to construct the menu with more distinct alternatives. However, when agents misperceive their own tastes, it is optimal to limit choice only when agents choose randomly, and to propose alternatives that are more similar when there is a greater probability of agents making a mistake.
{"title":"Optimal Menu when Agents Make Mistakes","authors":"Sergei Mikhalishchev","doi":"10.2139/ssrn.3702259","DOIUrl":"https://doi.org/10.2139/ssrn.3702259","url":null,"abstract":"This paper studies a welfare maximization problem with heterogeneous agents. A social planner designs a menu of choices for agents who misperceive either the properties of options or their own preferences. When agents misperceive the true properties of alternatives, it is optimal to limit a menu when the probability of a mistaken choice is moderately high. Additionally, it could be optimal to construct the menu with more distinct alternatives. However, when agents misperceive their own tastes, it is optimal to limit choice only when agents choose randomly, and to propose alternatives that are more similar when there is a greater probability of agents making a mistake.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129371104","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Research has shown that procrastination has signicant adverse effects on individuals, including lower savings and poorer health. Procrastination is typically modeled as resulting from present bias. In this paper we study an alternative: excessively optimistic beliefs about future demands on an individual's time. The models can be distinguished by how individuals respond to information on their past choices. Experimental results refute the hypothesis that present bias is the sole source of dynamic inconsistency, but they are consistent with optimism. These findings offer an explanation for low takeup of commitment and suggest that personalized information on past choices can mitigate procrastination.
{"title":"Why Do We Procrastinate? Present Bias and Optimism","authors":"Zachary Breig, M. Gibson, J. Shrader","doi":"10.2139/ssrn.3445511","DOIUrl":"https://doi.org/10.2139/ssrn.3445511","url":null,"abstract":"Research has shown that procrastination has signicant adverse effects on individuals, including lower savings and poorer health. Procrastination is typically modeled as resulting from present bias. In this paper we study an alternative: excessively optimistic beliefs about future demands on an individual's time. The models can be distinguished by how individuals respond to information on their past choices. Experimental results refute the hypothesis that present bias is the sole source of dynamic inconsistency, but they are consistent with optimism. These findings offer an explanation for low takeup of commitment and suggest that personalized information on past choices can mitigate procrastination.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-08-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126693552","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
As advocates of financial literacy education, it is a hard pill to swallow when data show little impact on financial behaviours. Unfortunately, our expectations that university students with higher levels of financial literacy have reduced money management stress and good behaviours, leading to higher levels of financial wellbeing, were expunged. We did find, however, that being older and having higher levels of income contributed most significantly and consistently to explaining financial wellbeing. Proponents of financial literacy education should not lose hope but recognise limits to transferring knowledge and set goals based on evidence of what works.
{"title":"Does Financial Literacy Reduce Money Stress?","authors":"Tracey West, Michelle Cull, Dianna Johnson","doi":"10.2139/ssrn.3671178","DOIUrl":"https://doi.org/10.2139/ssrn.3671178","url":null,"abstract":"As advocates of financial literacy education, it is a hard pill to swallow when data show little impact on financial behaviours. Unfortunately, our expectations that university students with higher levels of financial literacy have reduced money management stress and good behaviours, leading to higher levels of financial wellbeing, were expunged. We did find, however, that being older and having higher levels of income contributed most significantly and consistently to explaining financial wellbeing. Proponents of financial literacy education should not lose hope but recognise limits to transferring knowledge and set goals based on evidence of what works.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-08-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133249954","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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