This paper investigates whether the composition of a choice set alters the relative importance of different attributes. I derive distinguishing predictions of several prominent theories of choice-set-dependent preferences, including the focusing model of Kőszegi and Szeidl (2013), the salience theory of Bordalo, Gennaioli, and Shleifer (2013a), and the relative-thinking model of Bushong, Rabin, and Schwartzstein (2019). I test these predictions in a laboratory experiment in which I vary the prices of high- and low-quality variants of multiple products. The data provide clear evidence of choice-set dependence consistent with relative thinking: price increases that expand the range of prices in the choice set lead to more purchases. Structural estimates imply economically meaningful effect sizes: the average participant was willing to pay around 18% more when a seemingly irrelevant option is added to their choice set.
Program Recertification Costs: Evidence from SNAP (with Tatiana Homonoff) [pdf] [Conditionally Accepted at the American Economic Journal: Economic Policy]
Participants in means-tested programs must periodically document continued eligibility through a recertification process. We find evidence that the administrative burden associated with SNAP recertification leads to decreases in program participation. Cases assigned to later recertification interview dates, which leave less time to reschedule missed interviews, are over 20 percent less likely to recertify than cases assigned to interviews earlier in the month. Cases that fail due to later assignments lose an average of $600 in benefits in the following year. These losses are highly skewed: many cases quickly re-enroll, while one quarter remain off SNAP for over a year post-recertification.
Previous research in multiple judgment domains has found that nonlinear functions are typically processed less accurately than linear ones. This empirical regularity has potential implications for consumer choice, given that nonlinear functions (e.g. diminishing returns) are commonplace. In two experimental studies we measured precision and bias in consumers' ability to identify surpluses when returns to product attributes were nonlinear. We hypothesised that nonlinear functions would reduce precision and induce bias towards linearization of nonlinear relationships. Neither hypothesis was confirmed for monotonic nonlinearities. However, precision was greatly reduced for products with nonmonotonic attributes. Moreover, assessments of surplus were systematically and strongly biased, regardless of the shape of returns and despite feedback and incentives. The findings imply that consumers use a flexible but coarse mechanism to compare attributes against prices, with implications for the prevalence of costly mistakes.
Modeling Risk Aversion in Economics (with Ted O'Donoghue) Journal of Economic Perspectives, 2018, 32(2): 10-25.
Can Chocolate Cure Blindness? Investigating the Effect of Preference Strength and Incentives on the Incidence of Choice Blindness (with Feidhlim McGowan) Journal of Behavioral and Experimental Economics, 2016, 61(4): 1-11.
Choice Blindness in Financial Decision Making (with Owen McLaughlin) Judgement and Decision Making, 2013, 8(5): 561-572.