Skip to Navigation

Behavioral Economics

New Awards Approved in Russell Sage Foundation’s Core Programs

July 8, 2015

Several new research projects in the Russell Sage Foundation’s core programs were funded at the Foundation’s June meeting of the Board of Trustees.

Awards approved in the Behavioral Economics program:

Mental Accounting and Fungibility of Money: Evidence from a Retail Panel
Jesse Shapiro (Harvard University) and Justine Hastings (Brown University)

Jesse Shapiro and Justine Hastings will complete a project that provide new tests of "mental accounting," or how households represent money in their financial decision-making. They will draw from unique panel data on seven years of customer purchases from a large grocery retailer in order to glean new insights into mental accounting through a real-world scenario.

Behavioral Biases and the Design of Student Loan Repayment Schemes
Lesley J. Turner, Kathleen Abraham, Emel Filiz-Ozbay, and Erkut Ozbay (University of Maryland)

Lesley J. Turner and colleagues will investigate the factors that affect students’ loan repayments, including the relationship between students’ expected earnings and their preference for income-based repayment plans, and whether students’ repayment behavior is affected by whether they voluntarily choose income-based plan or are instead assigned to one.

Quantal Response Equilibrium and the Limitations of Game Theory

February 18, 2015

This feature is part of an ongoing RSF blog series, Work in Progress, which highlights some of the ongoing research of our current class of Visiting Scholars.

During his time in residence at the Russell Sage Foundation, Thomas Palfrey (California Institute of Technology) is writing a book on Quantal Response Equilibrium (QRE) and its applications to the social sciences. Developed by Palfrey and Richard McKelvey, QRE is a game theory concept that is now one of the leading approaches to modeling bounded rationality—the idea that individuals’ rationality is limited by the information they have—in games.

In a new interview with the Foundation, Palfrey explained some of the basic applications of game theory to public policy, and the limitations of those approaches.

Q. What is Nash Equilibrium? How has it been applied to public policy, and what are its limitations?

Call for Papers in Behavioral Economics

December 17, 2014

On July 8-9, 2015, the Russell Sage Foundation will sponsor a Conference for Early-Career Behavioral Economists in Chicago. The goals of this conference are to allow early-career researchers to present research and receive feedback and to help develop a community of junior behavioral economists.

Any early-career behavioral economist can apply. This includes graduate students, postdoctoral fellows, and assistant professors who received their Ph.D. after Spring 2010. We expect to select about 20 presenters. Please submit an abstract of about 1000 words of the proposed paper and an abbreviated CV (5 pages maximum) by January 31, 2015, to If financial assistance is needed in order for you to participate, please provide details in a cover letter, including whether your university may provide funding to cover some of your expenses.

New Awards Approved in Core RSF Programs

November 19, 2014

Thirteen new research projects in the Russell Sage Foundation’s Behavioral Economics, Social Inequality, Immigration, and the Future of Work programs were recently funded at the Foundation’s November 2014 meeting of the Board of Trustees.

The Foundation’s Behavioral Economics program supports research that incorporates the insights of psychology and other social sciences into the study of economic behavior. The following projects were recently funded under the program:

Breaking Bad: Social Influence and the Path to Criminality in Juvenile Jails

August 15, 2014

In a new working paper supported by the Foundation, Megan Stevenson (University of California, Berkeley) investigates the extent to which peer influence in juvenile correctional facilities affects the rate at which youth offenders are reconvicted. Nationwide, between 40-45% of adults released from prison are incarcerated again within three years, with similar numbers for juveniles.

Though several previous studies have examined other societal factors that may lead to the high number of repeat offenders, there has been very little empirical research on whether the social experience of incarceration affects future criminal activity. As Stevenson states in her abstract:

Using detailed administrative data and quasi-random cohort-level variation, I find that exposure to high risk peers while in a juvenile correctional facility has a large impact on future crime. I consider three mechanisms to explain this effect: criminal skill transfer, the formation of criminal networks which persist after release, and the social contagion of crime-oriented attitudes and non-cognitive traits. I find evidence consistent with the social contagion mechanism in residential correctional facilities. Exposure to peers from unstable and/or abusive homes leads to increased aggression, impulsivity and anti-societal attitudes, as well as increased criminal activity.

Choosing Not to Choose

June 24, 2014

A new working paper by noted behavioral economics scholar Cass Sunstein, titled “Choosing Not to Choose,” is available for download from the Russell Sage Foundation. The abstract states:

Choice can be an extraordinary benefit or an immense burden. In some contexts, people choose not to choose, or would do so if they were asked. For example, many people prefer not to make choices about their health or retirement plans; they want to delegate those choices to a private or public institution that they trust (and may well be willing to pay a considerable amount for such delegations). This point suggests that however well-accepted, the line between active choosing and paternalism is often illusory. When private or public institutions override people’s desire not to choose, and insist on active choosing, they may well be behaving paternalistically, through a form of choice-requiring paternalism. Active choosing can be seen as a form of libertarian paternalism, and a frequently attractive one, if people are permitted to opt out of choosing in favor of a default (and in that sense not to choose); it is a form of nonlibertarian paternalism insofar as people are required to choose. For both ordinary people and private or public institutions, the ultimate judgment in favor of active choosing, or in favor of choosing not to choose, depends largely on the costs of decisions and the costs of errors.

Noted Behavioral Economics Scholar Cass R. Sunstein to Join RSF as Summer 2014 Visiting Scholar

June 9, 2014

Cass R. Sunstein, the Robert Walmsley University Professor and Felix Frankfurter Professor of Law at Harvard Law School, will join the Russell Sage Foundation as a Visiting Scholar for Summer 2014, starting on Monday, June 9.

Sunstein is a member of the Foundation’s Behavioral Economics Roundtable, an initiative that gathers prominent scholars in the field to support and promote new research in behavioral economics. With RSF trustee Richard H. Thaler, he co-authored the 2009 book Nudge: Improving Decisions About Health, Wealth, and Happiness, a New York Times bestseller that examines the way that people make decisions and shows how sensible “choice architecture” can successfully nudge people toward the best ones.

Sunstein served as Administrator of the White House Office of Information and Regulatory Affairs from 2009 to 2012. His other books include, most recently, Conspiracy Theories and Other Dangerous Ideas and Why Nudge?: The Politics of Libertarian Paternalism (2014).

During his time in residence at the Foundation, Sunstein will work on his next book manuscript, titled Choosing Not to Choose.

Fairness and Punishment Across Human Societies

May 6, 2014

Experimenting with Social Norms, edited by Jean Ensminger and Joseph Henrich, compiles and synthesizes a rich combination of experimental and ethnographic findings from an international team of anthropologists and economists aimed at investigating the tensions between cooperation and self-interest across diverse human societies. How do societies manage to solve problems collectively, enticing individuals to forego their own narrow short-term economic interests in a way that benefits the whole group, and fosters mutually beneficial exchange? And furthermore, how does the decision to subordinate one’s self-interests for the larger group—or what Ensminger and Henrich call prosocial behavior—vary among different societies based on locally acquired social norms and motivations?

Using experimental economics games, this team examined levels of fairness, cooperation, and norms for punishing those who violate expectations of equality across a diverse swath of societies, from hunter-gatherers in Tanzania to a small town in rural Missouri. The researchers employed the following games to assess each group’s level of prosociality:

Dictator Game
Two players from the same community, interacting anonymously, are given a sum of money equivalent to one day’s wages to split. Player 1, assigned to be the “dictator,” decides how to allocate the money between the two players. Both players receive the actual amounts of money that Player 1 “dictates.” In Europe and the U.S. a fifty-fifty split is considered a “fair” outcome.

Ultimatum Game
This version of the dictator game adds an ultimatum: Though Player 1 decides how to allocate the money, Player 2 may reject the offer—in which case, neither party receives anything. The behavior of Player 1 in this scenario has elements of both fairness and strategy, while the behavior of Player 2 in this game captures the price that people are willing to pay to punish Player 1 for what they perceive to be an unfair offer. The willingness to punish an anonymous partner for unfairness, at a personal monetary cost, can be interpreted as prosocial behavior because this punishment may alter Player 1’s future interactions with other group members.

Third-Party Punishment Game
In this experiment, two people play the Dictator Game with the addition of a third anonymous player— endowed with an amount of money equivalent to half the amount given to the first two players—who has the option of using any part of his or her money to punish Player 1 for making an unfair offer to Player 2. Unlike the Ultimatum Game, in the Third-Party Punishment Game, the person paying a price to do the punishing is not the injured party.

New Report: The Case of Conspicuous Consumption

December 5, 2013

With each passing Thanksgiving, retailers inaugurate the holiday season with increasingly larger displays and deals. The past few years have seen the introduction of “Cyber Monday” as an extension of Black Friday, as well as longer lines and more advertisements in the lead-up to the notorious weekend of steep discounts. This year, several major retailers including Walmart and Best Buy opted not to wait until the day after Thanksgiving to begin their sales, and instead kicked off Black Friday on Thanksgiving afternoon.

As we head full-force into the holidays, a new report by Ricardo Perez-Truglia, funded by the Russell Sage Foundation, provides some timely and valuable insight into conspicuous consumption in the U.S. A Ph.D. candidate in Harvard’s Department of Economics, Perez-Truglia argues that people use conspicuous consumption of market goods (such as clothing and jewelry) to signal their wealth and thereby increase the probability of obtaining non-market goods (such as admiration). The report abstract states:

Perez-Truglia is the first to exploit this relationship to measure the market value of those non-market goods by using a revealed-preference approach. He estimates a signaling model using nationally representative data on consumption in the U.S. He then uses this model to obtain welfare implications and perform a counterfactual analysis. His estimates suggest that for each dollar spent on clothing and cars, the average household obtains approximately 35 cents in net benefits from non-market goods.

RSF Behavioral Economics Roundtable Member Colin Camerer Named 2013 MacArthur Fellow

September 25, 2013

Colin Camerer, Robert Kirby Professor of Behavioral Economics at the California Institute of Technology, has been named one of the MacArthur Foundation’s 2013 Fellows. Camerer is a founding member of the Russell Sage Foundation's Behavioral Economics Roundtable as well as a former RSF Visiting Scholar.
The Roundtable is one of the major activities of the Russell Sage Foundation’s Behavioral Economics research program. Made up of 28 prominent behavioral economists, including Camerer, the Roundtable currently sponsors three main activities: a small grants program for younger scholars undertaking behaviorally oriented research; a two-week summer workshop taught by Roundtable members for graduate students and junior faculty interested in entering this new interdisciplinary field; and a book series in a behavioral economics, of which Camerer is co-editor. Camerer is the author of Behavioral Game Theory and the co-editor of Advances in Behavioral Economics, both co-published with Princeton University Press.

Syndicate content