UC San Diego

This dissertation is composed of three papers on distinct topics, each studying a different aspect of decision making. In chapter 1, we study why, even without material incentives for coordination or learning, social interactions influence individual decision making. Identifying why conformity arises absent explicit incentives faces the challenge that any rationalizing theory must rely on unobservable preferences or beliefs. Therefore, empirical distinction requires theories that make predictions beyond the basic dynamic of conformity. To that end, we propose and test a theory of self signaling in peer effects. The model generates (partial) conformity as a response to how others' choices inform one's own self-image. The mechanism of self-signaling for peer effects delivers unique, falsifiable predictions that we test experimentally. The theory predicts that the anticipation of learning others' choices and the garbling of information on others' choices will both deeply influence behavior. In two real-effort lab experiments we not only find treatment effects closely in line with the model's unique predictions, but also document the importance of self image in social comparisons.

In chapter 2, we attempt to identify present-biased procrastination in tax filing behavior. Our exercise uses dynamic discrete choice techniques to develop a counterfactual benchmark for filing behavior under the assumption of exponential discounting. Deviations between this counterfactual benchmark and actual behavior provide potential `missing-mass' evidence of present bias. In a sample of around 22,000 low-income tax filers we demonstrate substantial deviations between exponentially-predicted and realized behavior, particularly as the tax deadline approaches. Present-biased preferences not only provide qualitatively better in-sample fit than exponential discounting, but also have improved out-of-sample predictive power for responsiveness of filing times to the 2008 Economic Stimulus Act recovery payments. Additional experimental data from around 1100 individuals demonstrates a link between experimentally measured present bias and deviations from exponential discounting in tax filing behavior.

In chapter 3, we provide a universal condition for rationalizability by risk-averse expected utility preference in a demand-based framework with multiple commodities. Our test can be viewed as a natural counterpart of a classical test of expected utility, due to Fishburn (1975), in a demand setting.