Assistant Professor of Economics

Contact

Mailing Address

Campus Box 1133
1 Brookings Drive
St. Louis, MO  63130

Office Phone

+1-314-935-9542

Email

pnatenzon@wustl.edu

Research Interests:

Economic Theory
Decision Theory
Behavioral Economics

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Publications

Random Choice and Learning.
Journal of Political Economy, Vol. 127, No. 1, (February, 2019), 419–457.

Subjective Ambiguity and Preference for Flexibility, with Leandro Gorno.
Journal of Economic Behavior & Organization, Vol. 154, (October, 2018), 24–32.

Random Choice as Behavioral Optimization, with Faruk Gul and Wolfgang Pesendorfer.
Econometrica, Vol. 82, No. 5 (September, 2014), 1873–1912.

Working Papers

Random Evolving Lotteries and Intrinsic Preference for Information

With Faruk Gul and Wolfgang Pesendorfer. Forthcoming in Econometrica.

We introduce random evolving lotteries to study preference for non-instrumental information. Each period, the agent enjoys a flow payoff from holding a lottery that will resolve at the terminal date. We provide a representation theorem for non-separable risk-consumption preferences and use it to characterize agents’ attitude to non-instrumental information. To address applications, we characterize peak-trough utilities that aggregate trajectories of flow utilities linearly but, in addition, put weight on the best (peak) and worst (trough) lotteries along each path. We show that the model is consistent with recent experimental evidence on attitudes to information, including a preference for gradual arrival of good news and the ostrich effect, i.e., decision makers’ tendency to prefer information after good news to information after bad news.

The Thrill of Gradual Learning

With Faruk Gul, Erkut Ozbay, and Wolfgang Pesendorfer.

We report on an experiment that shows subjects prefer a gradual resolution of uncertainty when information about winning yields decisive bad news but inconclusive good news. This behavior is difficult to reconcile with existing theories of choice under uncertainty, including the Kreps-Porteus model. We show how the behavioral patterns uncovered by our experiment can be understood as arising from subjects’ special emphasis on their best (peak) and worst (trough) experiences along the realized path of uncertainty.

Moderate Expected Utility

With Junnan He.

Accounting for product differentiation is a key concern in the analysis of consumer demand: any consumer who abandons their first choice after a price increase is more likely to substitute it with options that are “close” in characteristics to the original choice than with more “distant” options. We provide a behavioral foundation for using a distance metric to measure product differentiation in discrete choice. This approach is captured by a simple formula in the moderate utility model. We identify a single, directly testable property that characterizes the model: choices are moderately transitive. We show that the model allows the analyst to accommodate well-known failures of strong transitivity, while retaining significantly more empirical bite than weak transitivity, achieving a useful compromise. Extending the analysis to the domain of risky choice, we introduce and characterize the moderate expected utility model, and we show how the analyst can measure both differentiation and utility from observed choice behavior.

Preference Reversal or Limited Sampling? Maybe túngara frogs are rational after all.

Lea and Ryan (Science, Reports, 28 August 2015, p. 964) interpret mate choice data collected from frogs in the laboratory as being incompatible with rational choice models currently used in sexual selection theory. A close look at their data supports the hypothesis that some options offered in the lab are easier to compare than others. If we take into account that some pairs of options are easier to compare, and that frogs operate under conditions of uncertainty, we can restore rationality to túngara frogs.

Work in Progress

Optimal Decoys

With Carl Sanders.

A rational decision maker with imperfect information about the value of options takes their varying degrees of comparability into account in order to maximize the expected value of her choice. From the point of view of the analyst, the resulting choice behavior is context-dependent and incompatible with standard discrete choice estimation tools. We use the Bayesian probit model to measure preferences, information precision, and comparability using the context-dependent choice data from Soltani, De Martino and Camerer (2012). We provide novel comparative statics for discrete choice analysis in multi-attribute settings by relating these measurements to the observable characteristics of the options. We analyze the data for 21 subjects at the aggregate and individual levels, and provide novel welfare statements that incorporate the decision maker’s operational risk at the individual level.

Media