The notion of bounded rationality has received a considerable attention in the midst of debate over the usefulness of various macroeconomic models. In this paper we empirically seek to analyze the baseline New-Keynesian model with heterogeneous agents who may adopt various heuristics used to...

This paper studies the volatility implications of anticipated cost-push shocks (i.e. news shocks) in a New Keynesian model under optimal unrestricted monetary policy with forward-looking rational expectations (RE) and backward-looking boundedly rational expectations (BRE). If the degree of...

Becker and Murphy (1988) constructed, in a well-known paper, a model of rational addiction in which people solve a dynamic optimization problem, choose an optimal timepath of drug consumption and thereby maximize lifetime utility. The model leads to the hypothesis that future consumption is a...

In this paper, we present a spatial model of the public provision of the performing arts. Agents behave boundedly rational. Art directors set performance quality according to their aspiration levels. While taking into account the spatial distribution of the population, administrative directors...

I study the predictability of the EC’s merger decision procedure before and after the 2004 merger policy reform based on a dataset covering all affected markets of mergers with an official decision documented by DG Comp between 1990 and 2014. Using the highly flexible, non-parametric random...

We express the idea of classical competition in a statistical equilibrium model, where the tendency for competition to equalize profit rates results in an exponential power (or Subbotin) distribution. The model supports and extends recent evidence on the Laplace distribution of growth rates in...