Choices in the Lab and the Field: Two Applications of Behavioral Economics
This dissertation explores two applications of behavioral economics. The first chapter investigates whether the composition of a choice set alters the relative importance of different attributes. I derive the distinguishing predictions of several prominent theories of choice-set-dependent preferences, including the focusing model of Koszegi and Szeidl (2013), the salience theory of Bordalo, Gennaioli, and Shleifer (2013), 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: price increases that expand the range of prices in the choice set lead to more purchases, and increasing prices while holding price differences fixed induces substitution to higher-quality options. Structural estimates imply that most participants exhibit choice-set dependence consistent with relative thinking, albeit with substantial heterogeneity in the intensity of the effect. The consequences of this choice-set dependence are economically meaningful: my estimates imply that the average participant was willing to pay around a 20% premium relative to their intrinsic value due to the presence of seemingly irrelevant options in the choice set. The second chapter investigates how seemingly trivial components of the recertification process of the Supplemental Nutrition Assistance Program can impact program participation. We document low recertification rates, which we attribute partly to procedural issues associated with the recertification process. Current recipients, who must complete a caseworker interview by recertification month end, are 20 percent less likely to recertify when assigned an interview at the end rather than the beginning of the month. We provide evidence that a substantial fraction of recertification failures appear due to mistakes: the majority of these marginal cases successfully reapply to the program, with larger effects for higher need cases. We find that the data are most consistent with a model of inattention in which individuals are inattentive to, or unaware of, critical components of the rectification process. We estimate costs to participants and administrators created by rigid renewal deadlines.
Choice-Set-Dependent Preferences; Program Recertification; Structural Behavioral Economics; Supplemental Nutrition Assistance Program
Heffetz, Ori; Barseghyan, Levon
Ph. D., Economics
Doctor of Philosophy
dissertation or thesis