The Price of Uncertainty in Present-Biased Planning

The tendency to overestimate immediate utility is a common cognitive bias. As a result people behave inconsistently over time and fail
to reach long-term goals. Behavioral economics tries to help affected individuals
by implementing external incentives. However, designing robust
incentives is often difficult due to imperfect knowledge of the parameter
β ∈ (0, 1] quantifying a person’s present bias. Using the graphical model
of Kleinberg and Oren [8], we approach this problem from an algorithmic
perspective. Based on the assumption that the only information about
β is its membership in some set B ⊂ (0, 1], we distinguish between two
models of uncertainty: one in which β is fixed and one in which it varies
over time. As our main result we show that the conceptual loss of effi-
ciency incurred by incentives in the form of penalty fees is at most 2
in the former and 1 + max B/ min B in the latter model. We also give
asymptotically matching lower bounds and approximation algorithms

Inattentive Consumers in Markets for Services

In an experiment on markets for services, we find that consumers are likely to stick to default tariffs and achieve suboptimal outcomes. We find that inattention to the task of choosing a better tariff is likely to be a substantial problem in addition to any task and tariff complexity effect. The institutional setup on which we primarily model our experiment is the UK electricity and gas markets, and our conclusion is that the new measures by the UK regulator Ofgem to improve consumer outcomes are likely to be of limited impact

Illegal immigration and media exposure: evidence on individual attitudes

Illegal immigration has been the focus of much debate in receiving countries, but little is known about the drivers of individual attitudes towards illegal immigrants. To study this question, we use the CCES survey, which was carried out in 2006 in the USA. We find evidence that—in addition to standard labor market and welfare state considerations—media exposure is significantly correlated with public opinion on illegal immigration. Controlling for education, income, ideology, and other socio-demographic characteristics, individuals watching Fox News are 9 percentage points more likely than CBS viewers to oppose the legalization of undocumented immigrants. We find an effect of the same size and direction for CNN viewers, whereas individuals watching PBS are instead more likely to support legalization. Ideological self-selection into different news programs plays an important role, but cannot entirely explain the correlation between media exposure and attitudes about illegal immigration