I'll have what she's having: (Social) Perceptions of default options and implications for marketing and decision making

The power that default options have in shaping choice has been well established, yet relatively little is known about how decision makers experience and interpret such preselected options. Research suggests that individuals assume defaults represent a recommended course of action, yet the basis for this recommendation is unclear. Across two experimental studies, we explored consumer theories of default recommendations, examining spontaneous and experimentally manipulated perceptions of the basis of the default, and the impact on decision making across different contexts. Evidence across diverse populations and tasks shows that options were retained to a greater extent when represented as the default, consistent with classic default effects. Furthermore, a significant default effect emerged when the decision context was framed as complex. In line with research on social influence, defaults were most effective when they were presumed to reflect the most popular option (regardless of context). Interestingly, participants rated defaults as being more likely to represent the most popular option, regardless of decision context or default explanation provided to them. These findings highlight the importance of understanding the contexts in which default choices are relied upon and how those defaults are perceived by decision makers.     

Measuring a contract's breadth: A text analysis

We use a computational linguistic algorithm to measure the topics covered in teacher contracts. Topic modeling metrics are used to assess a contract's expansiveness. Our topic, diversity measurement, is then related to the prevalence of support staff. If more specialized services are provided, then contracts should be broader as they cover more employment relationships. We confirm a strong, statistically significant relationship and, thus, have a valid measurement of contract breadth.     

Assessing banks’ resilience: A complementary approach to stress testing using fair values from banks’ financial statements

For more than a decade, supervisory banking authorities in Europe and the United States have sought to assess the resilience of banks to adverse economic episodes to safeguard the financial system's stability. They rely on regulatory capital measures like Common Equity Tier 1 (CET1) relative to risk-weighted assets in the aftermath of potential economic crises. We propose a new measure of banks' resilience based on financial statements. The fair value margin (FVM) is estimated as the difference between the fair value of assets and the book value of liabilities, scaled by the book value of equity. We find that FVM is positively associated with the surplus or shortfall of CET1 resulting from the stress testing results from 2014, 2016 and 2018. To corroborate the relevance of FVM for supervisory authorities, we compare the ability of the loan component of FVM to predict future credit losses with the capital surplus/shortfall metric derived from the stress test. The findings indicate that the fair value of loans predicts net charge-offs better than stress test outcomes. Therefore, we suggest that FVM could be used as a readily available and relatively low-cost tool to assess bank resilience, thus complementing the stress test exercises.     

VACCINE HESITANCY,PASSPORTS, AND THE DEMAND FOR VACCINATION

Vaccine hesitancy is modeled as an endogenous decision within a behavioral epidemiological model with endogenous agent activity. It is shown that policy interventions that directly target costs associated with vaccine adoption may counter vaccine hesitancy whereas those that manipulate the utility of unvaccinated agents will either lead to the same or lower rates of vaccine adoption. This latter effect arises with vaccine passports whose effects are mitigated in equilibrium by reductions in viral/disease prevalence that themselves reduce the demand for vaccination.     

Ease of doing business and investment among West African countries

This study assessed the link between ease of doing business (EBD) and investment among 11 selected countries in West Africa covering 2006–2020. The study used the fixed-effects estimator, the random-effects estimator, the augmented mean-group method, and the Half-Panel Jackknife Wald-type test. The study found a bidirectional relationship between the EBD and foreign direct investment (FDI) and a unidirectional relationship running from EBD to domestic investment. The findings further revealed that the EBD and national income have a strong influence in determining the level of domestic investment and FDI inflows, and that some indicators of EBD, such as the procedure for starting a business, access to credit facilities, tax, and security threats, discourage domestic investment and FDI inflows, in contrast to the influence of obtaining electricity and national income on investment. The study suggests that West African governments reduce taxes, ease the procedures and costs of starting a business and dealing with construction permits, and increase the availability of credit facilities at lower interest rates to promote investment in the region.     

New contracts and dismissal threats from highly drafted rookies: What motivates NFL quarterbacks?

The authors examined whether incumbent starting quarterbacks in the National Football League (NFL) performed better after their teams drafted another quarterback in the first round of the preceding draft. There was some evidence that quarterbacks exhibited slightly improved performance under these conditions. However, the impact on performance was small. There was little evidence of opportunistic behavior by quarterbacks, but quarterbacks may perform slightly better in the first year of a new contract. The authors conclude that quarterbacks are already exerting at or near their maximum effort level and thus their performances are unlikely to be greatly impacted by dismissal threats or contract details.     

A dynamic segmentation of U.S. women during the COVID-19 pandemic

The coronavirus disease 2019 (COVID-19) pandemic has had a vast, but uneven, influence on consumers. Diversity in consumer reactions, and the extent to which those reactions lead to lasting preference and lifestyle changes, present challenges for implementing effective marketing strategies during a period of societal crisis. To address this, we conducted a dynamic segmentation analysis involving over 14,000 U.S. women by assessing relevant psychological, experiential, and other personal factors at multiple time points during the pandemic. This analysis identified seven unique consumer segments who varied in their current and future degree of change, and who indicated responsiveness to specific forms of brand and advertising content. This seven-segment clustering was highly stable over time, suggesting that certain segmentation approaches hold continuing value for marketers even as widespread events like pandemics evolve.     

Epstein-Zin utility maximization on a random horizon

This paper solves the consumption-investment problem under Epstein-Zin preferences on a random horizon. In an incomplete market, we take the random horizon to be a stopping time adapted to the market filtration, generated by all observable, but not necessarily tradable, state processes. Contrary to prior studies, we do not impose any fixed upper bound for the random horizon, allowing for truly unbounded ones. Focusing on the empirically relevant case where the risk aversion and the elasticity of intertemporal substitution are both larger than one, we characterize the optimal consumption and investment strategies using backward stochastic differential equations with superlinear growth on unbounded random horizons. This characterization, compared with the classical fixed-horizon result, involves an additional stochastic process that serves to capture the randomness of the horizon. As demonstrated in two concrete examples, changing from a fixed horizon to a random one drastically alters the optimal strategies.