Under Review

Traditional expected utility models do not allow cognitive load to influence economic behavior. However, dual-self models of impulse control predict that states of high cognitive load lead to suboptimal outcomes. This paper develops a model which captures the comparative statics of dual-self models while also keeping the familiarity of the standard expected utility model. The predictions of the model are tested in a laboratory experiment. The results suggest that subjects perform worse under high cognitive load than low cognitive load, that increases to reward do not mitigate the effects of cognitive load, and that the order in which subjects encounter the different treatments affects performance. The results also show that subjects undervalue the product of their own mental effort under high levels of cognitive load as captured by comparisons between willingness to pay for effort reducing suggestions and their actual performance in the experiment.

Works in Progress

Consumption theory states that if total lifecycle income remains constant, consumption will be flat regardless of whether the income profile is upward or downward sloping. However, in experimental literature deviations from optimal consumption are larger in lifecycles with upward sloping income profiles than downward. This has come to be referred to as ``debt aversion''. Through use of increasing and decreasing income profiles with the same expected total income and same expected total life time utility in a treatment, consumption behavior under borrowing and saving regimes are able to be compared directly. In the experiment, we allow for lengthening of the lifecycle and adding of borrowing constraints. It is found that there are modest reductions in deviations from optimal behavior when in the presence of a borrowing constraint, and that its effects are largest in the longer of the two lifecycle types. This indicates that loss aversion and risk aversion are alleviated by borrowing constraints.
       2. Duffy, J. and Ralston, J. Innovate vs. Imitate: Theory and Evidence

Agents and firms must exert effort to maximize their utility or profit. Often, they must explore the strategy space to find their optimal outcome. Or, if they find exploration to be too costly, they may copy the most successful strategy from someone else. This is observed in a firm’s research and development decisions, an individual’s habit setting patterns, and when individuals encounter novel settings. We formulate a novel model of sequential innovation versus imitation decisions made by individuals and implement it in the laboratory. We analyze the effects of complete versus incomplete information of payoff structure and static versus dynamic reward structure on termination of innovation. Among other things, these results help characterize whether subjects make decisions using expected utility maximization or expected regret minimization. 

       3. Ralston, J. 
Impact of Objective and Cooperative Feedback on Performance in Group Competitions