This study offers a high-resolution model of nationwide water supply. The model is sufficiently detailed to represent all main water sources in an economy, the principal segments of the conveyance system, urban, industrial and agricultural demand regions, and various water types, including fresh, saline and recycled. Calibrated for Israeli 2010 data, we find that the optimal extraction of fresh water is only 2% larger than the total observed supply from those sources. However, for some specific sources, the deviation between optimal and observed quantities is significant. Assuming average constant recharge, the optimal aggregated desalination is 57% of the 2010 desalination capacity and only 33% of the present desalination capacity. Even with an assumed 40% decline in recharge (for example, due to climate change), the model uses only 50% of the present desalination capacity. This may suggest that the construction of desalination facilities in Israel, which began in 2005, could have been delayed. The model establishes a comprehensive system of pumping levies and user fees that support the optimal allocation. However, due to considerable scale economies, the average cost is almost 50% larger than the marginal cost. The implications are that the welfare cost of the recent Israeli Balanced Budget Water Economy legislation is more than 100 million USD per year, about 10% of the water economy share of the GDP.

Marketing tools that enable pre-purchase experience (e.g., product trials, sampling) are considered efficient means of reducing uncertainty and increasing demand for unfamiliar products. It is widely agreed that having more information improves the quality of choice, so demonstrations, sampling, and other experience-generating marketing tools are expected to increase consumers' welfare. The current paper challenges this concept by suggesting that experiencing some product types for a limited time might provide unrepresentative information, and thus might result in suboptimal choices. In three experiments, we evaluated the effect of potentially unrepresentative experience on consumer product acceptance. The results show that while experiencing products affects consumers even when it provides little information, the effect might be positive or negative, depending on the product value distribution. Specifically, short experience with the product increases the appeal of negatively skewed products, which appear appealing after a short, yet unrepresentative experience. Yet short experience impairs the appeal of positively skewed products, which appear unappealing given short or low-intensity experience. This pattern emerges even though the most likely result of a given sample is not a good predictor of the expected utility of the product. Theoretical and practical implications are discussed.

Previous studies imply that a positive regional fiscal shock, such as a resource boom, strengthens the desire for separation. In this paper we present a new and opposite perspective. We construct a model of endogenous fiscal decentralization that builds on two key notions: a trade-off between risk sharing and heterogeneity, and a positive association between resource booms and risk. The model shows that a resource windfall causes the nation to centralize as a mechanism to either share risk and/or prevent local capture, depending on the relative bargaining power of the central and regional governments. We provide cross country empirical evidence for the main hypotheses, finding that resource booms: (i) decrease the level of fiscal decentralization with no U-shaped patterns, (ii) cause the former due to risk sharing incentives primarily when regional governments are relatively strong, and (iii) have no effect on political decentralization.

When travelers book hotels online, they are typically provided with a list of relevant hotels. Although presenting hotels on the screen in a list format seems appropriate for organizing the information, it creates a new (spurious) attribute for them: their position on the list. We tested experimentally whether the hotel’s position on the list affects its likelihood of being selected. Results revealed a nonlinear effect of hotel position on the list on choice: hotels that were listed at the top and bottom of the list were more likely to be chosen than those listed in the middle. This study suggests that even trivial web design choices, such as the choice of presenting data in lists, might result in nontrivial consequences on the behavior of prospective customers.

Prior to 1996, Israelis in collective communities (kibbutzim) shared the costs of raising children equally. This article examines the impact of privatising costs of children on the fertility behaviour of young couples. Exploiting variation in parental cost-sharing across kibbutzim, we estimate that lifetime fertility declined by 0.65 children. We also examine the exit decisions of members, and find that couples were most likely to leave the kibbutz if they were either higher income or lower fertility. This pattern is also observed among Israeli emigrants, in which higher educated and lower fertility couples are more likely to leave Israel.

Natural resource abundance is a blessing for some countries, but a curse for others. We show that differences across countries in the degree of fiscal decentralization can contribute to this divergent outcome. Using a large panel of countries covering several decades and various fiscal decentralization and natural resource measures, we provide empirical support for the novel hypothesis. We also study a model that combines political and market mechanisms under a unified framework to illustrate how natural resource booms may create negative effects in fiscally decentralized nations.

While pricing decisions that are based on experience are quite common, e.g., setting a selling price for a used car, this type of decision has been surprisingly overlooked in psychology and decision research. Previous studies have focused on either choice decisions from experience, or pricing decisions from description. Those studies revealed that pricing involves cognitive mechanisms other than choice, while experience-based decisions involve mechanisms that differ from description-based ones. Thus, the mutual effect of pricing and experience on decision-making remains unclear. To test this effect, we experimentally compared real-money pricing decisions from experience with those from description, and with choices from experience. The results show that the mode of acquiring information affects pricing: the tendency to underprice high-probability prospects and overprice low-probability ones is diminished when pricing is based on experience rather than description. The findings further reveal attenuation of the tendency to underweight rare events, which underlies choices from experience, in pricing decisions from experience. The difference occurs because the response mode affects the search effort and decision strategy in decisions from experience.

Does advertising make markets more or less competitive? This paper lays out an econometric strategy for estimating the effect of advertising on prices that exploits seasonal demand and imperfect targeting of consumers. We find mostly negligible effects of advertising on prices at monthly frequency: among the 35 (of 131) product categories with sufficient advertising seasonality to justify second-stage estimation, only nine have a significant effect, and those are typically small. This finding is essentially the result of the much greater seasonality in advertising than price.