Welcome | B. Douglas Bernheim (original) (raw)

Evaluating Deliberative Competence: A Simple Method with an Application to Financial Choice

Working Paper, March 2021

We introduce a method for experimentally evaluating interventions designed to improve the quality of choices in settings where people imperfectly comprehend consequences. Among other virtues, our method yields an intuitive sufficient statistic for welfare that admits formal interpretations even when consumers suffer from biases outside the scope of analysis. We use it to study a financial education intervention, which we find improves the quality of decisions only when it incorporates practice and feedback, contrary to the implications of analyses based on conventional efficacy metrics.

Interpreting the Will of the People: A Positive Analysis of Ordinal Preference Aggregation

Coauthors: Sandro Ambuehl

Working Paper, September 2021

We investigate how individuals think groups should aggregate members’ ordinal preferences – that is, how they interpret “the will of the people.” In an experiment, we elicit revealed attitudes toward ordinal preference aggregation and classify subjects according to the rules they apparently deploy. Majoritarianism is rare. Instead, people employ rules that place greater weight on compromise options. The classification’s fit is excellent, and clustering analysis reveals that it does not omit important rules.

What Motivates Paternalism? An Experimental Study

Coauthors: Sandro Ambuehl, Axel Ockenfels

American Economic Review 111(3), 2021, 787-830

A Theory of Chosen Preferences

Coauthors: Luca Braghieri, Alejandro Martinez-Marquina, David Zuckerman

American Economic Review 111(2), 2021, 720-754

We propose and develop a dynamic theory of endogenous preference formation in which people adopt worldviews that shape their judgments about their experiences. The framework highlights the role of mindset flexibility, a trait that determines the relative weights the decision-maker places on her current and anticipated worldviews when evaluating future outcomes. The theory generates rich behavioral dynamics, thereby illuminating a wide range of applications and providing potential explanations for a variety of observed phenomena.

Optimal Default Options: The Case for Opt-Out Minimization

Coauthors: Jonas Mueller-Gastell

Working Paper, December 2020

We examine the desirability of opt-out minimization, a well-known and simple rule of thumb for setting default options such as passively selected contribution rates in employee-directed pension plans. Existing results suggest that this strategy is welfare-optimal only under highly restrictive assumptions. In this paper, we dispense with those assumptions and demonstrate far more generally that opt-out minimization is approximately optimal. Our main results require only a small number of weak regularity conditions.

On the Empirical Validity of Cumulative Prospect Theory: Experimental Evidence of Rank-Independent Probability Weighting,

Coauthors: Charles Sprenger

Econometrica 88(4), 2020, 1363-1409

Cumulative Prospect Theory (CPT), the leading behavioral account of decisionmaking under uncertainty, avoids the dominance violations implicit in Prospect Theory (PT) by assuming that the probability weight applied to a given outcome depends on its ranking. We devise a simple and direct nonparametric method for measuring the change in relative probability weights resulting from a change in payoff ranks. We find no evidence that these weights are even modestly sensitive to ranks.

Coauthors: James Andreoni, Deniz Aydin, Blake Barton, Jeffrey Naecker

Journal of Political Economy 128(5), 2020, 1673-1711

In settings with uncertainty, tension exists between ex ante and ex post notions of fairness. Subjects in an experiment most commonly select the ex ante fair alternative ex ante and switch to the ex post fair alternative ex post. One potential explanation embraces consequentialism and construes reversals as time inconsistent. Another abandons consequentialism in favor of deontological (rule-based) ethics and thereby avoids the implication that revisions imply inconsistency. We test these explanations by examining contingent planning and the demand for commitment.