Decision Making & Negotiations

The authors examine how consumers respond to pseudo-free offers--offers that are presented to consumers as free but that require consumers to make a nonmonetary payment (such as completing a survey or providing personal information) in order to receive the "free" good or service. Across six studies, the authors find that consumers are generally just as likely to accept pseudo-free offers (with nonmonetary costs) as comparable truly free offers (with no costs), as long as the costs of the pseudo-free offers are below some threshold.

The most effective behavioral policies are often also the most contentious. Psychologically informed interventions that promote non-deliberative behaviors ("nudges") are often more effective than "traditional" policies (like informational and educational campaigns) that target more deliberative processes. Yet, precisely because of their deliberative nature, people are often said to prefer the latter over the former.

We study the relationship between capacity and performance for a service firm with spatial operations, in the sense that requests arrive with origin-destination pairs. An example of such a system is a ride-hailing platform in which each customer arrives in the system with the need to travel from an origin to a destination. We propose a state-dependent queueing model that captures spatial frictions as well as spatial economies of scale through the service rate.

Originators produce higher quality assets at a private cost. These assets can either be bought by informed intermediaries or sold in a pool with low quality assets. Savings gluts diminish origination incentives because they compress the spread between the price paid for high quality assets and the price paid for the pool. The narrowing of the spreads relaxes borrowing constraints, which results in higher leverage. Thus savings gluts generate financial fragility — the sensitivity of financial intermediaries' equity to unforeseen contingencies.

Using a novel sample of professional asset managers, we document positive incremental alpha on newly purchased stocks that decays over twelve months. While managers are successful forecasters at these short-to-medium horizons, their average holding period is substantially longer (2.2 years). Both slow alpha decay and the horizon mismatch can be explained by strategic trading behavior.

Exploiting variation in the timing of resets of adjustable rate mortgages (ARMs), we find that a sizable decline in mortgage payments (up to 50%) induces a significant increase in car purchases (up to 35%). This effect is attenuated by voluntary deleveraging. Borrowers with lower incomes and housing wealth have significantly higher marginal propensity to consume. Areas with a larger share of ARMs were more responsive to lower interest rates and saw a relative decline in defaults and an increase in house prices, car purchases, and employment.

Intertemporal choice impacts many important outcomes, such as decisions about health, education, wealth, and the environment. However, the psychological processes underlying decisions involving outcomes at different points in time remain unclear, limiting opportunities to intervene and improve people’s patience. This research examines information-search strategies used during intertemporal choice and their impact on decisions. In experiment 1, we demonstrate that search strategies vary substantially across individuals.

Although choosing from large assortments has often been found to be demotivating, a robust finding in the marketing literature is that consumers generally prefer larger product assortments. Standard explanations for this preference for larger assortments have focused on reason-based considerations revolving around large assortments enabling potentially “better” choices. This paper offers a different and novel, affect-based explanation.

We examine the relation between shareholder activism and voluntary disclosure. An important consequence of voluntary disclosure is less adverse selection in the capital markets. One class of traders that finds less adverse selection unprofitable is activist investors who target mispriced firms whose valuations they can improve. Consistent with this idea, we find that managers issue earnings and sales forecasts more frequently when their firm is more at risk of attack by activist investors, and that these additional disclosures reduce the likelihood of becoming an activist's target.