We consider the notions of static and dynamic reasonableness of requests by an authority in a trust game experiment. The authority, modeled as the experimenter, systematically varies the experimental norm of what is expected from trustees to return to trustors, both in terms of the level of each request and in terms of the sequence of the requests. Static reasonableness matters in a self-biased way, in the sense that low requests justify returning less, but high requests tend to be ignored. (...) Dynamic reasonableness also matters, in the sense that, if requests keep increasing, trustees return less compared to the same requests presented in random or decreasing order. Requests never systematically increase trustworthiness but may decrease it. (shrink)

This paper presents a very simple model in which situational cues associated with a particular consumption good compel an agent—who may have otherwise been “thinking about” something else—to consider the decision to consume that good. Within this framework, it is shown how an endowment effect and a present bias can arise through a common mechanism. The analysis points to a novel, contributing role for inattention in understanding both of these behavioral anomalies while also speaking to evidence that they are often (...) cue-induced. (shrink)

Several experimental studies have reported that an otherwise robust regularity—the disparity between Willingness-To-Accept and Willingness-To-Pay—tends to be greatly reduced in repeated markets, posing a serious challenge to existing reference-dependent and reference-independent models alike. This article offers a new account of the evidence, based on the assumptions that individuals are affected by good and bad deals relative to the expected transaction price (price sensitivity), with bad deals having a larger impact on their utility (`bad-deal’ aversion). These features of preferences explain the (...) existing evidence better than alternative approaches, including the most recent developments of loss aversion models. (shrink)