Human utility embodies a number of seemingly irrational aspects. The leading example in this paper is that utilities often depend on the presence of salient unchosen alternatives. Our focus is to understand why an evolutionary process might optimally lead to such seemingly dysfunctional features in our motivations and to derive implications for the nature of our utility functions. Journal of Ec...

We are the first paper to analyse and confirm the existence and extent of rational informational herding and rational informational contrarianism in a financial market experiment, and to compare and contrast these with the equivalent irrational phenomena. In our study, subjects generally behaved according to benchmark rationality. Moreover, traders who should herd or be contrarian in theory are...

Theoretically and experimentally, we generalize the analysis of acquiring a company (Samuelson and Bazerman 1985) by allowing for competition of both buyers and sellers. Näıvety of both is related to the idea that higher prices exclude lower qualities. While competition of näıve buyers increases prices, competition of näıve sellers promotes efficiency enhancing trade. Our predictions are tested...

We characterize the set of perfect Bayesian equilibria in symmetric separating strategies in Milgrom and Weber’s (1982) model of English auctions. There is a continuum of such equilibria. The equilibrium derived by Milgrom and Weber is that in which bids are maximal. Only in the case of pure private values does a restriction to weakly undominated strategies select a unique equilibrium. This has...

To investigate barriers to universal health insurance in developing countries, we designed a randomized experiment involving about 6,000 households Indonesia who are subject government program with weakly enforced mandate. Time-limited subsidies increased enrollment and attracted lower-cost enrollees, part by reducing the strategic timing of correspond needs. Registration assistance also enroll...

An information designer wishes to persuade agents invest in a project of unknown quality. To do so, she must induce investment and collect feedback from these investments. Motivated by data regulations simplicity concerns, our faces communication constraints. These constraints hinder her without benefiting the agents: they impose an upper bound on induced belief spread, limiting persuasion. Nev...

Given a scarcity of journal space, what is the optimal rule for whether an empirical finding should be published? Suppose publications inform public about policy-relevant state. Then journals publish extreme results, meaning ones that move beliefs sufficiently. This may take form one- or two-sided test comparing point estimate to prior mean, with critical values determined by cost-benefit analy...

This paper considers time exchanges via a common platform (e.g., markets for exchanging units, positions at education institutions, and tuition waivers). There are several problems associated with such markets, e.g., imbalanced outcomes, coordination problems, inefficiencies. We model as matching construct non-manipulable mechanism that selects an individually rational balanced allocation maxim...

This paper studies competition between firms when consumers observe a private signal of their preferences over products. Within the class structures that induce pure-strategy pricing equilibria, we derive are optimal for and those consumers. The firm-optimal policy amplifies underlying product differentiation, thereby relaxing competition, while ensuring purchase preferred product, maximizing t...

In an asset-pricing model, risk-averse agents need to forecast the conditional variance of a stock’s return. A near-rational restricted perceptions equilibrium exists in which agents believe prices follow a random walk with a conditional variance that is self-fulfilling. When agents estimate risk in realtime, recurrent bubbles and crashes can arise. These effects are stronger when agents allow ...