Understanding the structure of time preferences allows for accurate predictions of the effects of changing intertemporal incentives. Behavioral models of present bias are used to rationalize field data seemingly at odds with exponential discounting, leveraging additional degrees of freedom to improve in-sample fit. Largely lacking to date are the critical out-of-sample tests necessary to ensure predictive accuracy. This paper contrasts exponential discounting with present-biased procrastination for around 22,000 tax filers, advancing the literature in this domain by providing novel out-of-sample tests for both theories. Present bias provides qualitatively better in-sample fit, matching substantial increases in filing probability as the tax deadline approaches. Present bias also has improved out-of-sample predictive power for responsiveness to the 2008 Stimulus Act, and experimental data demonstrate a link between present bias and filing times. Without present bias, predicted responses to changed incentives are inaccurate, demonstrating its necessity in research and policy applications.

© The Author(s) 2019. We consider how the outcome of bargaining varies with changes in the trade-off between equality, efficiency, and total-earnings maximization.We observe that subjects avoid an equal-earning outcome if it is Pareto inefficient; a large proportion of bargaining pairs avoids an equal and Pareto efficient outcome in favor of one giving unequal and total-earnings maximizing payoffs, and this proportion increases when unequal outcomes imply larger earnings to one of the players, even though this also implies higher inequality; finally, we document a compromise effect that violates the independence of irrelevant alternatives condition. (JEL: C70, C72, C92)

We consider optimal pricing policies for airlines when passengers are uncertain at the time of ticketing of their eventual willingness to pay for air travel. Auctions at the time of departure efficiently allocate space and a profit maximizing airline can capitalize on these gains by overbooking flights and repurchasing excess tickets from those passengers whose realized value is low. Nevertheless profit maximization entails distortions away from the efficient allocation. Under regularity conditions, we show that the optimal mechanism can be implemented by a modified double auction. In order to encourage early booking, passengers who purchase late are disadvantaged. In order to capture the information rents of passengers with high expected values, ticket repurchases at the time of departure are at a subsidized price, sometimes leading to unused capacity. (JEL: D42, D44, D82)

This paper studies a model where student effort and talent interact with parental and teachers' investments, as well as with school system resources. The model is rich, yet sufficiently stylized to provide novel implications. It can show, for example, that an improvement in parental outside options will reduce parental and school effort, which are partially compensated through school resources. In this way, by incorporating the behavioral responses of parents, teachers and policymakers, the paper provides a rationale for the existing ambiguous empirical evidence on the effect of school resources. The paper also provides a novel microfoundation for peer effects, with empirical implications for welfare and different education policies.