The thoughts and behaviors of financial market participants depend upon adopted cultural traits, including information signals, beliefs, strategies, and folk economic models. Financial traits compete to survive in the human population, and are modified in the process of being transmitted from one agent to another. These cultural evolutionary processes shape market outcomes, which in turn feed back into the success of competing traits. This evolutionary system is studied in an emerging paradigm, new evolutionary finance. In this paradigm, social transmission biases determine the evolution of financial traits in the investor population. It considers an enriched set of cultural traits, both selection on traits and mutation pressure, and market equilibrium at different frequencies. Other key ingredients of the paradigm include psychological bias, social network structure, information asymmetries, and institutional environment.
{"title":"Social Finance: Cultural Evolution, Transmission Bias and Market Dynamics","authors":"Erol Akçay, D. Hirshleifer","doi":"10.2139/ssrn.3677622","DOIUrl":"https://doi.org/10.2139/ssrn.3677622","url":null,"abstract":"The thoughts and behaviors of financial market participants depend upon adopted cultural traits, including information signals, beliefs, strategies, and folk economic models. Financial traits compete to survive in the human population, and are modified in the process of being transmitted from one agent to another. These cultural evolutionary processes shape market outcomes, which in turn feed back into the success of competing traits. This evolutionary system is studied in an emerging paradigm, new evolutionary finance. In this paradigm, social transmission biases determine the evolution of financial traits in the investor population. It considers an enriched set of cultural traits, both selection on traits and mutation pressure, and market equilibrium at different frequencies. Other key ingredients of the paradigm include psychological bias, social network structure, information asymmetries, and institutional environment.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"32 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126737702","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}
In fifteen European countries, China, and the US, stocks and business equity as a share of total household assets are represented by an increasing and convex function of income/wealth. A parsimonious model fitted to the data shows why background labor- income risk can explain much of this risk-taking pattern. Uncontrollable labor-income risk stresses middle-income households more because labor income is a larger fraction of their total lifetime resources compared with the rich. In response, middle-income households re-duce (controllable) financial risk. Richer households, having less pressure, can afford more risk-taking. The poor take low risk because they avoid jeopardizing their subsistence consumption.
{"title":"The Role of Labor-Income Risk in Household Risk-Taking?","authors":"Sylwia Hubar, Christos Koulovatianos, Jian Li","doi":"10.2139/ssrn.3660935","DOIUrl":"https://doi.org/10.2139/ssrn.3660935","url":null,"abstract":"In fifteen European countries, China, and the US, stocks and business equity as a share of total household assets are represented by an increasing and convex function of income/wealth. A parsimonious model fitted to the data shows why background labor- income risk can explain much of this risk-taking pattern. Uncontrollable labor-income risk stresses middle-income households more because labor income is a larger fraction of their total lifetime resources compared with the rich. In response, middle-income households re-duce (controllable) financial risk. Richer households, having less pressure, can afford more risk-taking. The poor take low risk because they avoid jeopardizing their subsistence consumption.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-07-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122442801","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}
A novel theory of time discounting is proposed in which future consumption is less valuable than present consumption because of waiting costs. Waiting is intermittent as individuals' attention is periodically distracted away from future gratifications. The more individuals expect to pay attention to the reward, the more they are impatient. The model revisits the fundamental link between short and long-term impatience and solves two behavioral anomalies: impatience over short durations and sub-additive discounting.
{"title":"Intermittent Discounting","authors":"A. Direr","doi":"10.2139/ssrn.3412074","DOIUrl":"https://doi.org/10.2139/ssrn.3412074","url":null,"abstract":"A novel theory of time discounting is proposed in which future consumption is less valuable than present consumption because of waiting costs. Waiting is intermittent as individuals' attention is periodically distracted away from future gratifications. The more individuals expect to pay attention to the reward, the more they are impatient. The model revisits the fundamental link between short and long-term impatience and solves two behavioral anomalies: impatience over short durations and sub-additive discounting.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"62 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-07-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125406905","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 how shared experiences of political events can have a long-term effect on consumers' identity-driven brand choices, and how geopolitical conflicts can activate the effect. Our empirical strategy uses a generalized difference-in-differences design to exploit spatial variations in the intensity of China's Cultural Revolution (CR), a radical political movement during 1966-1976, and cohort variations in the number of impressionable years during CR. We observe over 11 million vehicle choices of individual Chinese consumers from 2012 to 2013. We find that the experience of CR increases the likelihood of choosing Chinese brands, controlling for location, birth-year cohort, and product attributes (e.g., price and class). Moreover, the effect is only significant after the China-Japan conflict in August-September 2012 activated Chinese national identity. The dynamics show the effect persisted throughout 2013 after the activation. Exploring heterogeneous effects, we find that the effects are stronger for more recognizable Chinese brands as well as more expensive models, and we rule out alternative mechanisms such as fear of violence.
{"title":"Experience and Identity-driven Consumer Choice: Evidence from China","authors":"Nan Chen, L. Huang, Z. Zhong","doi":"10.2139/ssrn.3656359","DOIUrl":"https://doi.org/10.2139/ssrn.3656359","url":null,"abstract":"We study how shared experiences of political events can have a long-term effect on consumers' identity-driven brand choices, and how geopolitical conflicts can activate the effect. Our empirical strategy uses a generalized difference-in-differences design to exploit spatial variations in the intensity of China's Cultural Revolution (CR), a radical political movement during 1966-1976, and cohort variations in the number of impressionable years during CR. We observe over 11 million vehicle choices of individual Chinese consumers from 2012 to 2013. We find that the experience of CR increases the likelihood of choosing Chinese brands, controlling for location, birth-year cohort, and product attributes (e.g., price and class). Moreover, the effect is only significant after the China-Japan conflict in August-September 2012 activated Chinese national identity. The dynamics show the effect persisted throughout 2013 after the activation. Exploring heterogeneous effects, we find that the effects are stronger for more recognizable Chinese brands as well as more expensive models, and we rule out alternative mechanisms such as fear of violence.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115471673","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}
Savings as a path to improved financial well-being is at the core of the Consumer Financial Protection Bureau’s Start Small, Save Up initiative. This report synthesizes the rigorous research of programs and strategies aiming to help consumers achieve greater savings. The goal of this review is to provide researchers, policymakers, and practitioners with a broad view of the savings-related research landscape and to help identify promising practices, as well as gaps where additional future research might be most useful. The research is organized into three broad categories, each identifying an avenue through which to increase consumers’ savings: savings products (providing a ready place to save), financial incentives (providing motivation to save), and behavioral and psychological approaches (providing a choice environment that facilitates saving).
{"title":"Evidence-Based Strategies to Build Emergency Savings","authors":"Cfpb Office of Research","doi":"10.2139/ssrn.3791458","DOIUrl":"https://doi.org/10.2139/ssrn.3791458","url":null,"abstract":"Savings as a path to improved financial well-being is at the core of the Consumer Financial Protection Bureau’s Start Small, Save Up initiative. This report synthesizes the rigorous research of programs and strategies aiming to help consumers achieve greater savings. The goal of this review is to provide researchers, policymakers, and practitioners with a broad view of the savings-related research landscape and to help identify promising practices, as well as gaps where additional future research might be most useful. The research is organized into three broad categories, each identifying an avenue through which to increase consumers’ savings: savings products (providing a ready place to save), financial incentives (providing motivation to save), and behavioral and psychological approaches (providing a choice environment that facilitates saving).","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130949727","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}
In this paper, we introduce a consumer choice model in which each consumer's utility is affected by the purchase probabilities of his/her neighbors in a network. Such a consumer choice model is a general model to characterize consumer choice under network effect. We first characterize the choice probabilities under such a choice model. Then we consider the associated personalized assortment optimization problem. Particularly, the seller is allowed to offer a personalized assortment to each consumer, and the consumer chooses among the products according to the proposed choice model. We show that the problem is NP-hard even if the consumers form a star network. Despite of the complexity of the problem, we show that if the consumers form a star network, then the optimal assortment to the central consumer cannot be strictly larger than that without network effects; and the optimal assortment to each peripheral consumer must be a revenue-ordered assortment that is a subset of the optimal assortment without network effect. We also present a condition when revenue-ordered assortments can achieve a provable performance. Then in view of the fact that each node in a network can represent a group of consumers, we propose a novel idea in which the sellers are allowed to offer "randomized assortments" to each node in the network. We show that allowing for randomized assortments may further increase the revenue, and under a mild condition, the optimal assortment for the central consumer must be a combination of two adjacent revenue-ordered assortments and thus efficient algorithm can be developed. Finally, we extend the results to directed acyclic graphs (DAGs), showing that a mixture of adjacent revenue-ordered assortments is optimal under certain conditions.
{"title":"Personalized Assortment Optimization under Consumer Choice Models with Local Network Effects","authors":"Tong Xie, Zizhuo Wang","doi":"10.2139/ssrn.3788880","DOIUrl":"https://doi.org/10.2139/ssrn.3788880","url":null,"abstract":"In this paper, we introduce a consumer choice model in which each consumer's utility is affected by the purchase probabilities of his/her neighbors in a network. Such a consumer choice model is a general model to characterize consumer choice under network effect. We first characterize the choice probabilities under such a choice model. Then we consider the associated personalized assortment optimization problem. Particularly, the seller is allowed to offer a personalized assortment to each consumer, and the consumer chooses among the products according to the proposed choice model. We show that the problem is NP-hard even if the consumers form a star network. Despite of the complexity of the problem, we show that if the consumers form a star network, then the optimal assortment to the central consumer cannot be strictly larger than that without network effects; and the optimal assortment to each peripheral consumer must be a revenue-ordered assortment that is a subset of the optimal assortment without network effect. We also present a condition when revenue-ordered assortments can achieve a provable performance. Then in view of the fact that each node in a network can represent a group of consumers, we propose a novel idea in which the sellers are allowed to offer \"randomized assortments\" to each node in the network. We show that allowing for randomized assortments may further increase the revenue, and under a mild condition, the optimal assortment for the central consumer must be a combination of two adjacent revenue-ordered assortments and thus efficient algorithm can be developed. Finally, we extend the results to directed acyclic graphs (DAGs), showing that a mixture of adjacent revenue-ordered assortments is optimal under certain conditions.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"137 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131526710","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}
The study aims to investigate the change in the habits of Super Market consumers regarding the realization of purchases from a distance, after the announcement of the measures for the protection of the citizens from the Coronavirus disease (COVID-19). Specifically, the article examines the attitude of Greek Super Market consumers towards distance shopping (on line or telephone sales), before and during the pandemic. The choice of this country is important given that the Super Market online stores in Greece are under development and the appearance of COVID-19 is expected to expand the sales channels (multichannel distribution) directly affecting the profitability of the specific sector. From the processing of the questionnaires of 230 customers who were asked before and during the pandemic, it emerged that a sharp change in social living conditions can significantly affect the selected consumer market channel.
{"title":"The Impact of the COVID-19 Disease on Distance Super-Market Sales","authors":"I. Lampropoulos, E. Aggelopoulos, E. Paraschi","doi":"10.2139/ssrn.3646042","DOIUrl":"https://doi.org/10.2139/ssrn.3646042","url":null,"abstract":"The study aims to investigate the change in the habits of Super Market consumers regarding the realization of purchases from a distance, after the announcement of the measures for the protection of the citizens from the Coronavirus disease (COVID-19). Specifically, the article examines the attitude of Greek Super Market consumers towards distance shopping (on line or telephone sales), before and during the pandemic. The choice of this country is important given that the Super Market online stores in Greece are under development and the appearance of COVID-19 is expected to expand the sales channels (multichannel distribution) directly affecting the profitability of the specific sector. From the processing of the questionnaires of 230 customers who were asked before and during the pandemic, it emerged that a sharp change in social living conditions can significantly affect the selected consumer market channel.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"81 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-07-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126012915","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}
Sam Bufe, S. Roll, O. Kondratjeva, B. Hardy, M. Grinstein‐Weiss
This paper investigates how saving the federal tax refund affects gig economy participation for low-income online tax filers in the six months following tax filing. Using longitudinal survey and administrative data, we leverage random assignment in a unique refund savings experiment as an instrument for refund savings. We find significant heterogeneity in estimated effects that are consistent with life cycle models on consumption and savings. Specifically, refund savings reduced the likelihood of low-income students working in the gig economy, but increased the likelihood of more economically vulnerable households working in the gig economy.
{"title":"Does Savings Affect Participation in the Gig Economy? Evidence from a Tax Refund Field Experiment","authors":"Sam Bufe, S. Roll, O. Kondratjeva, B. Hardy, M. Grinstein‐Weiss","doi":"10.2139/ssrn.3627499","DOIUrl":"https://doi.org/10.2139/ssrn.3627499","url":null,"abstract":"This paper investigates how saving the federal tax refund affects gig economy participation for<br>low-income online tax filers in the six months following tax filing. Using longitudinal survey<br>and administrative data, we leverage random assignment in a unique refund savings experiment<br>as an instrument for refund savings. We find significant heterogeneity in estimated effects that<br>are consistent with life cycle models on consumption and savings. Specifically, refund savings<br>reduced the likelihood of low-income students working in the gig economy, but increased the<br>likelihood of more economically vulnerable households working in the gig economy.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133808472","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}
In this short note we develop a model for discounting. A focus of the model is the discounting, when discount factors cannot be derived from market products. That is, a risk-neutralizing trading strategy cannot be performed. This is the case, when one is in need of a risk-free (default-free) discounting, but default protection on funding providers is not traded. For this case, we introduce a default compensation factor ($exp(+tilde{lambda} T)$) that describes the present value of a strategy to compensate for default (like buying default protection would do). In a second part, we introduce a model, where the survival probability depends on the required notional. This model is different from the classical modelling of a time-dependent survival probability ($exp(-lambda T)$). The model especially allows that large liquidity requirements are instantly more likely do default than small ones. Combined the two approaches build a framework in which discounting (valuation) is non-linear. The framework can lead to the effect that discount-factors for very large liquidity requirements or projects are an increasing function of time.
{"title":"Non-Linear Discounting and Default Compensation: Valuation of Non-Replicable Value and Damage: When the Social Discount Rate may Become Negative","authors":"Christian P. Fries","doi":"10.2139/ssrn.3650355","DOIUrl":"https://doi.org/10.2139/ssrn.3650355","url":null,"abstract":"In this short note we develop a model for discounting. A focus of the model is the discounting, when discount factors cannot be derived from market products. That is, a risk-neutralizing trading strategy cannot be performed. This is the case, when one is in need of a risk-free (default-free) discounting, but default protection on funding providers is not traded. For this case, we introduce a default compensation factor ($exp(+tilde{lambda} T)$) that describes the present value of a strategy to compensate for default (like buying default protection would do). In a second part, we introduce a model, where the survival probability depends on the required notional. This model is different from the classical modelling of a time-dependent survival probability ($exp(-lambda T)$). The model especially allows that large liquidity requirements are instantly more likely do default than small ones. Combined the two approaches build a framework in which discounting (valuation) is non-linear. The framework can lead to the effect that discount-factors for very large liquidity requirements or projects are an increasing function of time.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"207 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114973346","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}
Using a representative sample of actual payments made by adult U.S. consumers, this article analyzes the composition of payment methods consumers use to pay for goods and services. Consumer spending is divided into 21 main merchant categories. Results show the distributions of electronic, card, and paper payment methods and the degree of payment concentration for each merchant category.
{"title":"How Merchants Get Paid","authors":"Oz Shy","doi":"10.2139/ssrn.3618759","DOIUrl":"https://doi.org/10.2139/ssrn.3618759","url":null,"abstract":"Using a representative sample of actual payments made by adult U.S. consumers, this article analyzes the composition of payment methods consumers use to pay for goods and services. Consumer spending is divided into 21 main merchant categories. Results show the distributions of electronic, card, and paper payment methods and the degree of payment concentration for each merchant category.","PeriodicalId":176300,"journal":{"name":"Microeconomics: Intertemporal Consumer Choice & Savings eJournal","volume":"38 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127394442","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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