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Abstract:
In this paper, we provide a conceptual framework for understanding the phenomenon of exclusive dealing, and we explore the motivations for and effects of its use. For a broad class of models, we characterize the outcome of a contracting game in which manufacturers may employ exclusive dealing provisions in their contracts. We then apply this characterization to a sequence of specialized settings. We demonstrate that exclusionary contractual provisions may be irrelevant, anticompetitive, or efficiency-enhancing, depending upon the setting. More specifically, we exhibit the potential for anticompetitive effects in non-coincident markets (that is, markets other than the ones in which exclusive dealing is practiced), and we explore the potential for the enhancement of efficiency in a setting where common representation gives rise to incentive conflicts. In each instance, we describe the manner in which equilibrium outcomes would be altered by a ban on exclusive dealing. We demonstrate that a ban may have surprisingly subtle and unintended effects.

Abstract:
In this paper, we provide a conceptual framework for understanding the phenomenon of exclusive dealing, and we explore the motivations for and effects of its use. For a broad class of models, we characterize the outcome of a contracting game in which manufacturers may employ exclusive dealing provisions in their contracts. We then apply this characterization to a sequence of specialized settings. We demonstrate that exclusionary contractual provisions may be irrelevant, anticompetitive or efficiency-enhancing, depending upon the setting. More specifically, we exhibit the potential for anticompetitive effects in non-coincident markets (that is, markets other than the ones in which exclusive dealing is practiced), and we explore the potential for the enhancement of efficiency in a setting where common representation gives rise to incentive conflicts. In each instance, we describe the manner in which equilibrium outcomes would be altered by a ban on exclusive dealing. We demonstrate that a ban may have surprisingly subtle and unintended effects.

Abstract:
This paper undertakes a review of the existing academic work on tax incentives and personal saving. Its central conclusions are as follows. First, the traditional life cycle hypothesis has had an excessive influence on the design and conceptualization of empirical investigations concerning taxation and saving. Second, there is little reason to believe that households increase their saving significantly in response to a generic increase in the after-tax rate of return. Third, the literature on the relation between Individual Retirement Accounts (IRAs) and personal saving is inconclusive. Fourth, one can be moderately confident that, all else equal, eligibility for a 401(k) plan significantly stimulates personal saving. Fifth, tax incentives probably have important effects on personal saving through "third party" or institutional channels. Sixth, there is, overall, considerable uncertainty about the effects of policies designed to promote saving, particularly in cases where these policies have the potential to induce significant institutional change (such as a consumption tax).

Abstract:
We explore signaling behavior in settings with a discriminating signal and several costly nondiscriminating ( money burning ) activities. In settings where informed parties have many options for burning money, existing theory provides no basis for selecting one nondiscriminating activity over another. When senders have private information about the costs of these activities, each sender's indifference is resolved, the taxation of a nondiscriminating signal is Pareto improving, and the use of the taxed activity becomes more widespread as the tax rate rises. We apply this analysis to the theory of dividend signaling. The central testable implication of the model is verified empirically.

Abstract:
In recent years, the United States has witnessed significant growth in programs of financial and retirement education in the workplace. This phenomenon provides an opportunity to assess the effects of targeted education programs on financial choices. This paper uses a novel household survey to develop econometric evidence on the efficacy of employer-based financial education. While our primary focus concerns the effects of these programs on saving (both in general and for the purposes of retirement), we also examine a number of collateral issues. These include the circumstances under which employers offer, and employees participate in, financial education programs, and the effects of these programs on sources of information and advice concerning retirement planning. Our findings indicate that employer-based retirement education strongly influences household financial behavior.

Abstract:
In recent years, the United States has witnessed significant growth in programs of financial and retirement education in the workplace. This phenomenon provides an opportunity to assess the effects of targeted education programs on financial choices. This paper uses a novel household survey to develop econometric evidence on the efficacy of employer-based financial education. While our primary focus concerns the effects of these programs on saving (both in general and for the purposes of retirement), we also examine a number of collateral issues. These include the circumstances under which employers offer, and employees participate in, financial education programs, and the effects of these programs on sources of information and advice concerning retirement planning. Our findings indicate that employer-based retirement education strongly influences household financial behavior.

Abstract:
Household survey data consistently depict large variations in saving and wealth among households with similar socio-economic characteristics. Within the context of the life cycle hypothesis, families with identical lifetime resources might choose to accumulate different levels of wealth for a variety of reasons, including variation in time preference rates risk tolerance, exposure to uncertainty, relative tastes for work and leisure at advanced ages income replacement rates, and so forth. These factors can be divided into a small number of classes, each with a distinctive implication concerning the relation between accumulated wealth and the shape of the consumption profile. By examining this relation empirically for the presence or absence of these particular explanations for differences in wealth. Using the Panel Study of Income Dynamics and the Consumer Expenditure Survey little support for life cycle models that rely on the above factors to explain wealth variation. The data are, however, consistent with "rule of thumb" or "mental accounting" theories of wealth accumulation.

Abstract:
Household survey data consistently depict large variations in saving and wealth, even among households with similar socio-economic characteristics. Within the context of the life cycle hypothesis, families with identical lifetime resources might choose to accumulate different levels of wealth for a variety of reasons, including variation in time preference rates, risk tolerance, exposure to uncertainty, relative tastes for work and leisure at advanced ages, income replacement rates, and so forth. These factors can be divided into a small number of classes, each with a distinctive implication concerning the relation between accumulated wealth and the shape of the consumption profile. By examining this relation empirically, one can test for the presence or absence of particular factors. Using the Panel Study of Income Dynamics and the Consumer Expenditure Survey, we find very little support for life cycle models that rely on the above factors to explain wealth variation. The data are, however, consistent with "rule of thumb" or "mental accounting" theories of wealth accumulation.

Abstract:
This paper has two goals. First, we discuss several emerging approaches to applied welfare analysis under non-standard ("behavioral") assumptions concerning consumer choice. This provides a foundation for Behavioral Public Economics. Second, we illustrate applications of these approaches by surveying behavioral studies of policy problems involving saving, addiction, and public goods. We argue that the literature on behavioral public economics, though in its infancy, has already fundamentally changed our understanding of public policy in each of these domains.

Abstract:
Interest in behavioral economics has grown in recent years, stimulated largely by accumulating evidence that the standard model of consumer decision-making provides an inadequate positive description of human behavior. Behavioral models are increasingly finding their way into policy evaluation, which inevitably involves welfare analysis. No consensus concerning the appropriate standards and criteria for behavioral welfare analysis has yet emerged.

This paper summarizes our effort to develop a unified framework for behavioral welfare economics (for a detailed discussion see Bernheim and Rangel [2007]) - one that can be viewed as a natural extension of standard welfare economics. Standard welfare analysis is based on choice, not on utility or preferences. In its simplest form, it instructs the planner to respect the choices an individual would make for himself. The guiding normative principle is an extension of the libertarian deference to freedom of choice, which takes the view that it is better to give a person the thing he would choose for himself rather than something that someone else would choose for him. We show that it is possible to extend the standard choice-theoretic approach to welfare analysis to situations where individuals make inconsistent choices, which are prevalent in behavioral economics.

Abstract:
In this survey, I summarize and evaluate the extant literature concerning taxation and personal saving. I describe the theoretical models that economists have used to depict saving decisions, and I explore the positive and normative implications of these models. The central positive question is whether and to what extent specific public policies raise or lower the rate of saving. The central normative question is whether and to what extent it is desirable to tax the economic returns to saving. I also examine empirical evidence on the saving effects of various tax policies. This evidence includes econometric studies of the generic relation between saving and the after-tax rate of return, as well as analyses of responses to the economic incentives that are imbedded in tax-deferred retirement accounts. Finally, I also discuss several indirect channels through which tax policy may affect household saving by altering the behavior of third parties, such as employers.

Abstract:
Using the 1995 Survey of Consumer Finances and an elaborate life-cycle model, we quantify the potential financial impact of each individual's death on his or her survivors, and we measure the degree to which life insurance moderates these consequences. Life insurance is essentially uncorrelated with financial vulnerability at every stage of the life cycle. As a result, the impact of insurance among at-risk households is modest, and substantial uninsured vulnerabilities are widespread, particularly among younger couples. Roughly two-thirds of poverty among surviving women and more than one-third of poverty among surviving men results from a failure to insure survivors against an undiminished living standard. We also identify a systematic gender bias: for any given level of financial vulnerability, couples provide significantly more protection for wives than for husbands.

Abstract:
In evaluating the existing theory and evidence on Ricardian equivalence, it is essential to distinguish between the short run effects of government borrowing (primarily the potential for stimulating aggregate demand) and the long run effects (primarily the potential for depressing capital accumulation). I argue that the theoretical case for long run neutrality is extremely weak, in that it depends upon improbable assumptions that are either directly or indirectly falsified through empirical observation. In contrast, the approximate validity of short run neutrality depends primarily upon assumptions that have at least an aura of plausibility. Nevertheless, even in this case behavioral evidence weighs heavily against the Ricardian view. Efforts to measure the economic effects of deficits directly through aggregate data confront a number of problems which, taken together, may well be insuperable. It is therefore not at all surprising that this evidence has, by itself, proven inconclusive. Overall, the existing body of theory and evidence establishes a significant likelihood that deficits have large effects on current consumption, and there is good reason to believe that this would drive up interest rates. In addition, I find a complete lack of either evidence or coherent theoretical argument to dispute the view that sustained deficits significantly depress capital accumulation in the long run.

Abstract:
This paper discusses several competing proposals for general normative frameworks that would encompass non-standard models of choice. Most existing proposals equate welfare with well-being. Some assume that well-being flows from the achievement of well-defined objectives, and that those objectives also guide choices; the trick is to formulate a framework in which less-than-completely coherent choice patterns reveal the unobserved objectives. Others are predicated on the contention that well-being, and hence welfare, is directly measurable. Both of those approaches encounter serious conceptual difficulties. An alternative approach, developed by Bernheim and Rangel [2009], defines welfare directly in terms of choice. It entails a generalized welfare criterion that respects choice directly, without requiring any rationalization involving potentially unverifiable assumptions concerning underlying objectives and their relationships to choice. Because useful behavioral theories generally envision a substantial degree of underlying coherence in behavior, that criterion leads to a rich and tractable normative framework.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Abstract:
We examine the effects of education on financial decision-making skills by identifying an interesting source of variation in pertinent training. During the 1990s, an increasing number of individuals were exposed to programs of financial education provided by their employers. If, as some have argued, low saving frequently results from a failure to appreciate economic vulnerabilities, then education of this form could prove to have a powerful effect on rates of behavior. The current paper undertakes an analysis of these programs using a previously unexploited survey of employers. We find that both participation in and contributions to voluntary savings plans are significantly higher when employers offer retirement seminars. The effect is typically much stronger for non-highly compensated employees than for highly compensated employees. The frequency of seminars emerges as a particularly important correlate of behavior. We are unable to detect any effects of written materials, such as newsletters and summary plan descriptions, regardless of frequency. We also present evidence on other determinants of plan activity.

Abstract:
Over the last forty years, the majority of states have adopted consumer education policies, and a sizable minority have specifically mandated that high school students receive instruction on topics related to household financial decision-making (budgeting so forth). In this paper, we attempt to determine whether the curricula arising from these mandates have had any discernable effect on adult decisions regarding saving. Using a unique household survey, we exploit the variation in requirements both across states and over time to identify the effects of interest. The evidence indicates that mandates have significantly raised both exposure to financial curricula and subsequent asset accumulation once exposed students reached adulthood. These effects appear to have been gradual rather than immediate -- a probable reflection of implementation lags.

Abstract:
We propose a broad generalization of standard choice-theoretic welfare economics that encompasses a wide variety of non-standard behavioral models. Our approach exploits the coherent aspects of choice which those positive models typically attempt to capture. It replaces the standard revealed preference relation with an unambiguous choice relation: roughly, x is (strictly) unambiguously chosen over y (written xP*y) if y is never chosen when x is available. Under weak assumptions, P* is acyclic and therefore suitable for welfare analysis; it is also the most discerning welfare criterion that never overrules choice. The resulting framework generates natural counterparts for the standard tools of applied welfare economics, and is easily applied in the context of specific behavioral theories, with novel implications. Though not universally discerning, it lends itself to principled refinements.

Abstract:
We propose an economic theory of addiction based on the premise that cognitive mechanisms such as attention affect behavior independently of preferences. We argue that the theory is consistent with foundational evidence (e.g. from neuroscience and psychology) concerning the nature of decision-making and addiction. The model is analytically tractable, and it accounts for a broad range of stylized facts concerning addiction. It also generates a plausible qualitative mapping from the characteristics of substances into consumption patterns, thereby providing a basis for empirical tests. Finally, the theory provides a clear standard for evaluating social welfare, and it has a number of striking policy implications.

Abstract:
This study examines the adequacy of life insurance among married American couples approaching retirement. It improves upon previous work in two ways. First, it is based on recent, high quality data (the 1992 Health and Retirement Survey with matched Social Security earnings histories). Second, it employs new financial planning software to evaluate the life insurance needs of each household. This software embodies an elaborate life- cycle planning model that accounts for a broad array of demographic, economic, and financial characteristics. We find that a sizable minority of couples in the HRS sample are significantly underinsured. Almost one third of wives and more than 10 percent of husbands would have suffered living standard reductions of 20 percent or more had their spouses died in 1992. Underinsurance tends to be more common among low income households, couples with asymmetric earnings, younger households, couples with dependent children, and non-whites. In general, households with greater vulnerabilities do not appear to compensate adequately for these vulnerabilities through greater life insurance holdings. Among some groups, the frequency of underinsurance exceeds two-thirds, and the frequency of severe underinsurance (a reduction in living standard of 40 percent or greater) exceeds one-quarter.

Abstract:
This paper evaluates the prospects for the emerging field of neuroeconomics to shed light on traditional positive and normative economic questions. It argues that the potential for meaningful contributions, though often misunderstood and frequently overstated, is nevertheless present.

Abstract:
Sales commissions for residential real estate brokers historically average nearly six percent of a home's closing price. Do brokers add sufficient value to justify those commissions? We address this question using a unique data set pertaining to sales of faculty and staff homes on the Stanford University campus. We find no evidence that the use of a broker leads to higher average selling prices, or that it significantly alters average initial asking prices. However, those who use brokers sell their houses more quickly.

Abstract:
We examine a model of conspicuous consumption and explore the nature of competition in markets for conspicuous goods. We assume that, in addition to intrinsic utility, individuals seek status, and that perceptions of wealth affect status. Under identifiable conditions, the model generates Veblen effects: utility is positively related to the price of the good consumed. Equilibria are then characterized by the existence of "budget' brands (which are sold at a price equal to marginal cost), as well as 'luxury" brands (which are sold at a price above marginal cost, despite the fact that producers are perfectly competitive). Luxury brands are not intrinsically superior to budget brands but are purchased by consumers who seek to signal high levels of wealth. Within the context of this model, an appropriately designed luxury tax is a non-distortionary tax on pure profits.

Abstract:
The introduction of memory imperfections into models of economic decision making creates a natural role for anticipatory emotions. Their combination has striking behavioural implications. The paper first shows that agents can rationally select apparently dominated strategies. We consider Newcomb's Paradox and the Prisoners' Dilemma. We provide a resolution for Newcomb's Paradox and argue it requires the decision maker to ascribe only a tiny weight to anticipatory emotions. For some ranges of parameters, it is possible to obtain cooperation in the Prisoners' Dilemma with probability arbitrarily close to unity. The second half of the paper provides a theory of reminders.

Abstract:
No abstract is available for this paper.

Abstract:
No abstract is available for this paper.

Abstract:
In the United States, more than two-thirds of decedents with multichild families divide their estates exactly equally among their children. In contrast, gifts given before death are usually unequal. These findings challenge the validity of existing theories regarding the determination of intergenerational transfers. In this paper, we develop a theory that accounts for this puzzle based on the notion that the division of bequests provides a signal about a parent's altruistic preferences. The theory can also explain the norm of unigeniture, which prevails in other societies.

Abstract:
In the United States, more than two-thirds of decedents with multichild families divide their estates exactly equally among their children. In contrast, intra vivos gifts are usually unequal. These findings challenge the validity of existing theories regarding the determination of intergenerational transfers. In this paper, we develop a theory that accounts for this puzzle, based on the notion that the division of bequests provides a signal about a parent's altruistic preferences. The theory can also explain the norm of unigeniture, which prevails in other societies.

Abstract:
Proposals to alter the estate tax are contentious and have been debated largely in an empirical vacuum. This paper examines time series and cross-sectional variation to identify the effects of gift and estate taxation on the timing of private transfers. The analysis is based on data from the 1989, 1992, 1995, and 1998 waves of the Surveys of Consumer Finances. Legislative activity during this period reduced the tax disadvantage of bequests relative to gifts. Moreover, the magnitude of this reduction differed systematically across identifiable household categories. We find that households experiencing larger declines in the expected tax disadvantages of bequests substantially reduced inter vivos transfers relative to households experiencing small declines in the tax disadvantages of bequests. This implies that the timing of transfers is highly responsive to applicable gift and estate tax rates. These conclusions are based both on simple comparisons of the probability of giving across different time periods and groups, and on empirical specifications that control for a variety of potentially confounding factors, such as systematic changes in the fraction of wealth attributable to unrealized capital gains. The results also provide evidence of a systematic bequest motive for some high-wealth households.

Abstract:
No abstract is available for this paper.

Abstract:
In this paper, I employ data drawn from the Social Security Administration's Retirement History Survey (RHS) to study the accuracy of expectations concerning the timing of retirement. The RHS is ideally suited for this purpose, in that it collects information on retirement plans, and follows respondents through time so that one can identify actual dates of retirement. The data are consistent with the view that, when asked to report an expected date of retirement, individuals name the most likely date (i.e. a mode, rather than a mean). Furthermore, these forecasts are highly accurate. There is very little evidence that individuals' expectations were systematically biased during periods in which Congress legislated large real increases in social security benefits. This suggests either that the benefit increases were anticipated, or that unanticipated changes in benefits have little effect on retirement. The paper also describes differences in the accuracy of expectations by population subgroup.

Abstract:
No abstract is available for this paper.

Abstract:
This paper suggests that the nature of the funding of defined benefit pension plans may be an important reason why personal saving has not responded positively to the high real interest rates and tax incentives to encourage saving and investment of the last few years. From a firm's standpoint, funding the promised pension is a target, and higher rates of return permit reaching that target with lower contributions. According to the Flow of Funds Accounts of the Federal Reserve System between 1982 and 1984, net pension contributions declined from 6.02 percent of disposable personal income to 4.02 percent.

The paper presents empirical information regarding pension contributions, unfunded liabilities, interest rates, and recent developments in pension funding. It specifies the target saving model of pension funding and derives the theoretical elasticity of pension contributions to changes in interest rates. It then investigates this elasticity with aggregate time series econometrics. In general, the estimated elasticities are consistent with the theory and indicate that one percentage point rise in real interest rates would, in the long run, reduce pension contributions between 20 and 30 percent. Such a large negative elasticity for such an important source of loanable funds in the economy suggests that the pensions funding mechanism should be taken into account in designing policies to increase the economy's saving and investment.

Abstract:
We examine democratic policy-making in a simple institution with real-time agenda setting. Individuals are recognized sequentially. Once recognized, an individual makes a proposal, which is immediately put to a vote. If a proposal passes, it supercedes all previously passed proposals. The policy that emerges from this process is implemented. For some familiar classes of policy spaces with rich distributional politics, we show that the last proposer is effectively a dictator under a variety of natural conditions. Most notably, this occurs whenever a sufficient number of individuals have opportunities to make proposals. Thus, under reasonably general assumptions, control of the final proposal with real-time agenda setting confers as much power as control of the entire agenda.

Abstract:
Although recent research suggests that intergenerational transfers play an important role in aggregate capital accumulation, our understanding of bequest motives remains incomplete. We develop a simple model of"exchange-motivated" bequests, in which a testator influences the decisions ofhis beneficiaries by holding wealth in bequeathable forms and by conditioning the division of bequests on the beneficiaries` actions. The model generates falsifiable empirical predictions which are inconsistent with other theories of intergenerational transfers. We present econometric and other evidence which strongly suggests that bequests are often used as a means of payment for services rendered by beneficiaries.

Abstract:
No abstract is available for this paper.

Abstract:
Recent work demonstrates that dynastic assumptions guarantee the irrelevance of all redistributional polices, distortionary taxes, and prices--the neutrality of fiscal policy (Ricardian equivalence) is only the "tip of the iceberg." In this paper, we investigate the possibility of reinstating approximate Ricardian equivalence. by introducing a small amount of friction in intergenerational links. If Ricardian equivalence depends upon significantly shorter chains of links than do these stronger neutrality results, then friction my dissipate the effects that generate strong neutrality, without significantly affecting the Ricardian result. Although this intuition turns out to be essentially correct, we show that models with small amounts of friction have other untenable implications. We conclude that the theoretical case for Ricardian equivalence remains tenuous.

Abstract:
No abstract is available for this paper.

Abstract:
This paper presents a computable general equilibrium model that stimulates the effects on employment, output, wages, and economic efficiency of introducing comparable worth into the U.S. economy. The model calculates economy-wide aggregate impacts and disaggregated results for individuals grouped by sex, marital status, and education.

The effects depend on the hiring rules that would accompany comparable worth, the source of existing male-female wage differentials, the extent of coverage of comparable worth, the intra-household behavior of married couples, and demand and supply elasticities. If, after comparable worth is introduced, employers are constrained to employ men and women in historical proportions, the adverse effects on aggregate employment, output, and efficiency would be much larger than if they employment constraint is based on applicant proportions. If existing wage gaps are the result of sex differences in productivity, the adverse effects of comparable worth are relatively large; but if they are the result of discrimination, the efficiency losses are much smaller. If only part of the economy is subject to comparable worth, the efficiency loss is reduced under the productivity gap assumption, but increased if the wage gap is the result of discrimination.

The redistributive effects of comparable worth on married men and women are sensitive to assumptions about intra-household behavior and the size of the gains from marriage. By contrast, unmarried women appear to benefit from comparable worth under most sets of assumptions while unmarried men lose.

Abstract:
No abstract is available for this paper.

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No abstract is available for this paper.

Abstract:
No abstract is available for this paper.

Abstract:
In this paper, we examine several aspects of saving and dissaving after retirement. First, we argue that existing evidence on bequeathable age-wealth profiles is suspect, and provide new evidence based on longitudinal data indicating that significant dissaving may occur,particularly among single individuals and early retirees. Second, we argue that, in the presence of annuities, estimates of dissaving should be adjusted by including the simple discounted value of benefits in total wealth. Such adjustments reveal relatively little dissaving among any group of retirees. Finally, we test the pure life cycle hypothesis by observing the behavioral response of rates of accumulation to involuntary annuitization, and find empirical refutation of life cycle implications.

Abstract:
We examine the effects of education on financial decision-making skills by identifying an interesting source of variation in pertinent training. During the 1990s, an increasing number of individuals were exposed to programs of financial education provided by their employers. If, as some have argued, low saving frequently results from a failure to appreciate economic vulnerabilities, then education of this form could prove to have a powerful effect on behavior. The current article undertakes an analysis of these programs using a previously unexploited survey of employers. We find that both participation in and contributions to voluntary savings plans are significantly higher when employers offer retirement seminars. The effect is typically much stronger for nonhighly compensated employees than for highly compensated employees. The frequency of seminars emerges as a particularly important correlate of behavior. We are unable to detect any effects of written materials, such as newsletters and summary plan descriptions, regardless of frequency. We also present evidence on other determinants of plan activity.

Abstract:
We define and explore the notion of a Dynamic Condorcet Winner (DCW), which extends the notion of a Condorcet winner to dynamic settings. We show that, for every DCW, every member of a large class of dynamic majoritarian games has an equivalent equilibrium, and that other equilibria are not similarly portable across this class of games. Existence of DCWs is guaranteed when members of the community are sufficiently patient. We characterize sustainable and unsustainable outcomes, study the effects of changes in the discount factor, investigate efficiency properties, and explore the potential for achieving renegotiation-proof outcomes. We apply this solution concept to a standard one-dimensional choice problem wherein agents have single-peaked preferences, as well as to one involving the division of a fixed aggregate pay-off.