We present a theory to explain government procrastination as a consequence of presentbias resulting from the political uncertainty in a two-party political system. We show that under a two-party political system the party in office tends to be present-biased. This may lead to inefficient procrastination of socially beneficial projects that carry upfront costs but yield long-term benefits. Howev...

We show that there can be significant difference between risk preferences of individual investors and aggregate preferences toward risk in the economy. To demonstrate this, we investigate aggregate properties of an economy where all investors have convex utility functions corresponding to risk seeking behavior. In the case of risk seeking individual agents with identical initial endowments, ass...

Relational Contracts, Taxation and the Household This paper applies the theory of relational contracts to make precise the idea that because households are engaged in a repeated non-cooperative game, Pareto efficient outcomes can be supported by self interest, given the specific pattern of specialisation and exchange which exists in the household. The household’s choice of a particular solution...

There are many situations in which a customer’s proclivity to buy the product of any firm depends not only on the classical attributes of the product such as its price and quality, but also on who else is buying the same product. We model these situations as games in which firms compete for customers located in a “social network”. Nash Equilibrium (NE) in pure strategies exist in general. In th...

This study deals with comparative statics of the consumer’s demand. According to Lancaster [1966, Journal of Political Economy ], a utility function should be defined on the set of all characteristics that affect well-being of the consumer and these characteristics should be derived by consuming commodities. We show the sufficient condition for monotone comparative statics of the demand for cha...

Non-unitary Models of Household Behavior: A Survey of the Literature This article considers non-unitary models of household behavior. These models suppose explicitly that households consist of a number of different members with preferences that are different from each other. They can be split up into two principal categories: cooperative (or collective) models, in which the allocations are supp...

Advertising must compete for the attention of prospective consumers, and attention is a scarce resource. "Junk" mail, "spam" e-mail, telemarketing ’phone calls, and advertising messages generally have the common feature that both sides of the market (advertisers and prospective customers) need to apply effort to generate a transaction. Message recipients supply attention according to expected c...

I characterize the class of (possibly incomplete) preference relations over lotteries which can be represented by a compact set of (continuous) expected utility functions that preserve both indifferences and strict preferences. This finding contrasts with the representation theorem of Dubra, Maccheroni and Ok (2004) which typically delivers some functions which do not respect strict preferences...

Contraction Consistent Stochastic Choice Correspondence We model a general choice environment via probabilistic choice correspondences, with (possibly) incomplete domain and infinite universal set of alternatives. We offer a consistency restriction regarding choice when the feasible set contracts. This condition, ‘contraction consistency’, subsumes earlier notions such as Chernoff’s Condition, ...