UC Santa Barbara

This dissertation consists of three essays that investigate how the interaction of psychological and institutional factors shape individuals' daily decisions in the fields of labor economics and household finance. The essays use a combination of quasi-experimental and experimental approaches. The common theme under this research agenda is to first investigate the potential mechanisms for household behaviors that seem to be inconsistent with neoclassical theory and then use my findings to inform behaviorally motivated policy recommendations.

The first essay presents new evidence on how UI (Unemployment Insurance) benefit pay frequencies affect the job search behaviors of UI claimants in the United States. By exploiting quasi-experimental variations in states' benefit pay schedules, the essay find that switching from biweekly to weekly pay significantly increases UI claimants' unemployment durations. This observed effect can be partly rationalized by the more frequent end-of-the-month positive benefit shocks under weekly pay schedules. The essay concludes that the previously overlooked policy parameter, benefit pay frequency, has important effects on the job search behaviors of UI claimants.

The second essay, based on joint work with Hakan Ozyilmaz, studies the sources of suboptimal allocations observed in credit card repayments using a diagnostic laboratory experiment. The essay shows that optimization ability and limited attention are jointly insufficient to explain the puzzle. Moving beyond existing results, the essay documents that the inherent negative frame of the debt payment problem interferes with subjects' ability to optimize and hinders learning. The essays shows that subjects predominantly rely on the irrelevant balance information while forming their decisions, regardless of how vividly the balance information is displayed. Using additional treatments, The essay finds that the debt frame increases subjects' focus on the irrelevant balance information.

The third essay, based on a joint work with Jeffrey Cross, explores customers' preferences toward leaving integer tips in the context of taxi rides. With the advent of cashless payment systems, customers are increasingly being presented convenient, low-stake tip suggestions following purchases. Despite the rising frequency of these interactions, we still know little about the preferences underlying tipping behavior. Previous research, for example, has documented that customers tend to tip integer amounts, but has not been able to disentangle if this is due to smaller cognitive costs associated with tipping an integer amount or direct utility benefits from integer tips. Combining a theoretical model with plausibly exogenous variation in the occurrence of integer tip suggestions, the essay shows that customers' behaviors are consistent with a model where they experience direct utility benefits from giving integer tips. The essay estimates that this leads to a 0.6 percentage point increase in tip rates and an approximately 2.38 million dollars transfer from riders to drivers as a result of a 2012 rate fare change that increased the probability of integer tip suggestions.