Browsing by Subject "flexibility"

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Open Access
Commitment-Flexibility Trade-Off and Withdrawal Penalties
(Economic Research Initiatives at Duke (ERID), 2012-03-01) Ambrus, A; Egorov, G
Withdrawal penalties are common features of time deposit contracts offered by commercial banks, as well as individual retirement accounts and employer-sponsored plans. Moreover, there is a significant amount of early withdrawals from these accounts, despite the associated penalties, and empirical evidence shows that liquidity shocks of depositors are a major driving force of this. Using the consumption-savings model proposed by Amador, Werning and Angeletos in their 2006 Econometrica paper (henceforth AWA), in which individuals face the trade-off between flexibility and commitment, we show that withdrawal penalties can be part of the optimal contract, despite involving money-burning from an ex ante perspective. For the case of two states (which we interpret as “normal times” and a “negative liquidity shock”), we provide a full characterization of the optimal contract, and show that within the parameter region where the first best is unattainable, the likelihood that withdrawal penalties are part of the optimal contract is decreasing in the probability of a negative liquidity shock, increasing in the severity of the shock, and it is nonmonotonic in the magnitude of present bias. We also show that contracts with the same qualitative feature (withdrawal penalties for high types) arise in continuous state spaces, too. Our conclusions differ from AWA because the analysis in the latter implicitly assumes that the optimal contract is interior (the amount withdrawn from the savings account is strictly positive in each period in every state). We show that for any utility function consistent with their framework there is an open set of parameter values for which the optimal contract is a corner solution, inducing money burning in some states.
Open Access
Thinking about multiple identities boosts children's flexible thinking.
(Developmental science, 2019-05-30) Gaither, Sarah E; Fan, Samantha P; Kinzler, Katherine D
Studies of children's developing social identification often focus on individual forms of identity. Yet, everyone has multiple potential identities. Here we investigated whether making children aware of their multifaceted identities-effectively seeing themselves from multiple angles-would promote their flexible thinking. In Experiment 1, 6-7-year-old children (N = 48) were assigned to either a Multiple-Identities condition where they were led to consider their multiple identities (e.g., friend, neighbor) or to a Physical-Traits condition where they considered their multiple physical attributes (e.g., legs, arms). Children in the Multiple-Identity condition subsequently expressed greater flexibility at problem solving and categorization than children in the Physical-Traits condition. Experiment 2 (N = 72) replicated these findings with a new sample of 6-7 year-old children and demonstrated that a multiple-identity mindset must be self-relevant. Children who were led to think about another child's multiple identities did not express as much subsequent creative thinking as did children who thought about their own multiple identities. Experiment 3 (N = 76) showed that a multiple-identity framework may be particularly effective when the identities are presented via generic language suggesting that they are enduring traits (in this case, identities depicted as noun phrases rather than verbal phrases). These findings illustrate that something as simple as thinking about one's identity from multiple angles could serve as a tool to help reduce rigid thinking, which might increase open-mindedness in a society that is becoming increasingly diverse. This article is protected by copyright. All rights reserved.