scholarly journals Long‐Term Contracting With Time‐Inconsistent Agents

Econometrica ◽  
2021 ◽  
Vol 89 (2) ◽  
pp. 793-824
Author(s):  
Daniel Gottlieb ◽  
Xingtan Zhang
Keyword(s):  
Bargaining Power ◽  
Welfare Loss ◽  
Present Bias ◽  
Exclusive Contracts ◽  
Risk Neutral ◽  
Time Inconsistent

We study contracts between naive present‐biased consumers and risk‐neutral firms. We show that the welfare loss from present bias vanishes as the contracting horizon grows. This is true both when bargaining power is on the consumers' and on the firms' side, when consumers cannot commit to long‐term contracts, and when firms do not know the consumers' naiveté. However, the welfare loss from present bias does not vanish when firms do not know the consumers' present bias or when they cannot offer exclusive contracts.

scholarly journals Consumption Threshold at Which Virtue Products Become Vice Products: The Case of Beer

Foods ◽  
2021 ◽  
Vol 10 (8) ◽  
pp. 1688
Author(s):  
Enar Ruiz-Conde ◽  
Francisco Mas-Ruiz ◽  
Josefa Parreño-Selva
Keyword(s):  
Survey Data ◽  
Health Benefit ◽  
Time Inconsistent

Relative vices and virtues have traditionally been defined according to time-inconsistent preferences. Vice products exchange small immediate rewards (e.g., pleasure) for larger delayed costs (e.g., health), while virtue products exchange small immediate costs for larger delayed rewards. This definition can be criticized because there is evidence that small amounts of beer (or chocolate) convey a long-term health benefit, whereas large quantities impose a delayed cost. Thus, we assume that virtue products can become vice products when consumption is above a certain threshold. Survey data identifies alcoholic beer as a product that gives immediate rewards and does not impose a delayed cost. Our analysis reveals a consumption threshold that supports our assumptions.

scholarly journals Optimal Risk Budgeting under a Finite Investment Horizon

Risks ◽  
2019 ◽  
Vol 7 (3) ◽  
pp. 86
Author(s):  
Marcos López de Prado ◽  
Ralph Vince ◽  
Qiji Jim Zhu
Keyword(s):  
Quantitative Methods ◽  
Optimal Portfolio ◽  
Investment Horizon ◽  
Risk Averse ◽  
Growth Optimal Portfolio ◽  
Risk Budgeting ◽  
Risk Parity ◽  
Risk Neutral ◽  
Mean Variance

The Growth-Optimal Portfolio (GOP) theory determines the path of bet sizes that maximize long-term wealth. This multi-horizon goal makes it more appealing among practitioners than myopic approaches, like Markowitz’s mean-variance or risk parity. The GOP literature typically considers risk-neutral investors with an infinite investment horizon. In this paper, we compute the optimal bet sizes in the more realistic setting of risk-averse investors with finite investment horizons. We find that, under this more realistic setting, the optimal bet sizes are considerably smaller than previously suggested by the GOP literature. We also develop quantitative methods for determining the risk-adjusted growth allocations (or risk budgeting) for a given finite investment horizon.

Does the Bargaining Power of Vertical Parties Improve or Worsen the Effect of Family Influence on Long-Term Performance?

2020 ◽  
pp. 154-184
Author(s):  
Rubén Martínez-Alonso ◽  
María J. Martínez-Romero ◽  
Julio Diéguez-Soto ◽  
Alfonso A. Rojo-Ramírez
Keyword(s):  
Environmental Factor ◽  
Bargaining Power ◽  
Manufacturing Firms ◽  
Family Influence ◽  
Negative Effect ◽  
Long Term Performance ◽  
Term Performance ◽  
Moderating Role

Grounding in the socioemotional wealth approach, this chapter explores the effect of family influence on long-term performance. Moreover, this study also examines the moderating role of the bargaining power of vertical parties, namely supplier (SBP) and customer (CBP) bargaining power, on the preceding relationship. By utilising a panel dataset of 3,118 observations of Spanish private manufacturing firms in the 2007–2016 period, the chapter finds that family influence negatively impacts long-term performance. The findings also reveal that CBP mitigates the negative effect of family influence on long-term performance. In this light, CBP is found to be a potential environmental factor that enables family influenced firms enhancing their long-term performance.

An analytical approach for behavioral portfolio model with time discounting preference

2018 ◽  
Vol 52 (3) ◽  
pp. 691-712
Author(s):  
Guang Yang ◽  
Xinwang Liu ◽  
Jindong Qin ◽  
Ahmed Khan
Keyword(s):  
Portfolio Selection ◽  
Investment Strategy ◽  
Cumulative Prospect Theory ◽  
Investment Strategies ◽  
Short Term ◽  
Time Discounting ◽  
Present Bias ◽  
Proposed Model ◽  
Portfolio Selection Model

This paper presents a behavioral portfolio selection model with time discounting preference. Firstly, we discuss the portfolio selection problem and then modify this model based on cumulative prospect theory (CPT) as well as considering investors’ time discounting preference in psychology. Furthermore, an analytical solution with satisfying behavior is given for our proposed model, the results show that when investors’ goals are very ambitious, they put a high proportion of their wealth in long-term goals and adopt aggressive investment strategies with high leverage to reach short-term goals and the overall investment strategy also displays high leverage. Finally, numerical analysis is given and it is shown that investor who tends to future bias performs adequate confidence and patience whereas investor with present bias is apt to the immediate interests.

6. Taking time

2017 ◽  
pp. 67-81
Author(s):  
Michelle Baddeley
Keyword(s):  
Life Cycle ◽  
Mental Accounting ◽  
Time Inconsistency ◽  
Self Control ◽  
Best Interests ◽  
Policy Makers ◽  
Present Bias ◽  
Life Cycle Models ◽  
Over Time

Often our everyday decisions unfold over time and what we want today is not always consistent with what we might want tomorrow. Understanding why many people do not behave in a way that is consistent with their own long-term best interests is a key challenge for behavioural economists and policy-makers. ‘Taking time’ explains how humans (and animals) suffer from present bias: we have a disproportionate preference for smaller, immediate rewards over delayed, larger rewards—a reflection of underlying time inconsistency. It considers the intertemporal tussle between our patient and impatient selves, pre-commitment strategies, and self-control. The behavioural life cycle models of choice bracketing, framing, and mental accounting are also discussed.

scholarly journals Exclusive Contracts and Bargaining Power

2016 ◽  
Author(s):  
Hiroshi Kitamura ◽  
Noriaki Matsushima ◽  
Misato Sato
Keyword(s):  
Bargaining Power ◽  
Exclusive Contracts

scholarly journals Exclusive contracts and bargaining power

2017 ◽  
Vol 151 ◽  
pp. 1-3 ◽  
Author(s):  
Hiroshi Kitamura ◽  
Noriaki Matsushima ◽  
Misato Sato
Keyword(s):  
Bargaining Power ◽  
Exclusive Contracts
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