The effect of behavioral biases on asset markets and energy consumption

Chapter 1 presents a theoretical model of asset bubbles. In the model, agents trade a dividend-producing asset over potentially infinite periods. The crucial assumption is that in addition to utility from wealth, agents receive a loss-averse reference utility that is based on how their wealth changes in each period relative to that of other agents in the model. The primary result is that asset bubbles (and reverse-bubbles) form in equilibrium in this environment, regardless of whether there is a finite or infinite number of periods. Characteristics and comparative statics of the equilibrium prices are discussed. Finally, applying this model to a specific finite period case, I show that the model can explain the bubbles that are commonly seen in experimental asset markets.;Chapter 2 presents an experiment which shows that students use less energy when given a list of only four energy conservation tips than when given a list of 20 tips (an 8% extra decrease in electricity use with the short list). In addition, it shows that having a competition decreases energy use by around 3%. Findings on energy use feedback during the competition are also reported.;In Chapter 3, I report empirical findings that environmental enforcement activity by non-governmental organizations (NGOs) has increased over the last 10 years relative to the EPA, that the NGOs monitor a higher proportion of big firms than the EPA does, and that news coverage on environmental monitoring by NGOs is biased towards enforcement actions against big firms, as measured by total readership of a news story. I propose that because environmental groups rely on private donations to fund their activities, they have incentives to regulate bigger firms if those firms are more likely to be reported in the news. I then present a game theoretic model based on these empirical findings, and discuss the social welfare implications. I find that the Sierra Club only increases social welfare when it has enough funding to shift the regime from one type of equilibrium to another, better equilibrium.