Quarterly Journal of Economics articles from May 1997

Quarterly Journal of Economics archives from May 1997

Money illusion.
May 1, 1997... "A nickel ain't worth a dime anymore" [Yogi Berra]. We have standardized every other unit in commerce except the most important and universal unit of all, the unit of purchasing power. What business man would consent for a moment to make a...

Back to Bentham? Explorations of experienced utility.
May 1, 1997... INTRODUCTION The concept of utility has carried two quite different meanings in its long history. As Bentham [1789] used it, utility refers to pleasure and pain, the "sovereign masters" that "point out what we ought to do, as well as determine...

Labor supply of New York City cabdrivers: one day at a time.
May 1, 1997... I. INTRODUCTION Dynamic models of labor supply predict that work hours should respond positively to transitory positive wage changes, as workers intertemporally substitute labor and leisure, working more when wages are high and consuming more...

Golden eggs and hyperbolic discounting.
May 1, 1997... I. INTRODUCTION "Use whatever means possible to remove a set amount of money from your bank account each month before you have a chance to spend it" - advice in New York Times "Your Money" column [1993]. Many people place a premium on the...

A test of the theory of reference-dependent preferences.
May 1, 1997... In conventional consumer theory each individual's choices are determined by a preference ordering over consumption bundles; this ordering is independent of the individual's endowment. However, a number of recent papers have suggested that...

Measuring players' losses in experimental games.
May 1, 1997... I. INTRODUCTION Some observations in experimental games clearly involve "losses," in that they are not consistent with the hypotheses that players understand the structure of the game and act to maximize the payoff function specified by the...

Preference parameters and behavioral heterogeneity: an experimental approach in the health and retirement study.
May 1, 1997... I. INTRODUCTION A recurrent theme in Amos Tversky's remarkable output is the description of individual preferences and their relation to choice behavior. In particular, Tversky's work is concerned with achieving a better match between theory...

The evolution of bargaining behavior.
May 1, 1997... There's no art To find the mind's construction in the face [Shakespeare, Macbeth, Act 1, scene iv, line 11]. The sophisticated negotiator may find it difficult to seem as obstinate as a truly obstinate man. [Schelling 1956, p. 282]. I....

What makes markets allocationally efficient?
May 1, 1997... I. INTRODUCTION Allocative efficiency is the ratio of the actual to the potential gains from trade, which are equal to the sum of Marshallian consumer and producer surplus.(1) Allocative efficiency is high if the consumers who value a good the...

An experiment on risk taking and evaluation periods.
May 1, 1997... I. INTRODUCTION Recently, Benartzi and Thaler [1995] put forward an explanation for the equity premium puzzle. This puzzle refers to the fact that over the last century the risk-return relationship has been so much more favorable for stocks...

The effect of myopia and loss aversion on risk taking: an experimental test.
May 1, 1997... In an innovative paper Mehra and Prescott [1985] announced the existence of a new anomaly that they dubbed the equity premium puzzle. The equity premium is defined as the difference in returns between equities (stocks) and a risk-free asset such...