This paper introduces a tractable, structural model of subjective beliefs. Since agents that plan for the future care … overestimate the return of their investment and underdiversify. In general equilibrium, agents' prior beliefs are endogenously … and overoptimistic, and consume more than implied by rational beliefs early in life. Third, in choosing when to undertake …

Economic Behavior), but allow a player to hold inaccurate beliefs about the behavior of her opponent. Each model involves two …