We review how realistic frictions in information and/or rationality arrest general equilibrium (GE) feedbacks. In one specification, we maintain rational expectations but remove common knowledge of aggregate shocks. In another, we replace rational expectations with Level-k Thinking or a smooth...

A number of consequences emerge. (i) Fiscal stimulus or \helicopter drops of money" are powerful and, indeed, pull the economy out of the zero lower bound. More generally, the model allows for the joint analysis of optimal monetary and fiscal policy. (ii) The Taylor principle is strongly...

This paper concerns the prescriptive function of decision analysis. I suppose that an agent must choose an action yielding welfare that varies with the state of nature. The agent has a welfare function and beliefs, but he does not know the actual state of nature. It is often argued that such an...

Previous empirical studies of information cascades use either naturally occurring data or laboratory experiments with student subjects. We combine attractive elements from each of these lines of research by observing market professionals from the Chicago Board of Trade (CBOT) in a controlled...

Most economic analyses presume that there are limited differences in the prior beliefs of individuals, as assumption most often justified by the argument that sufficient common experiences and observations will eliminate disagreements. We investigate this claim using a simple model of Bayesian...

We consider a stationary setting featuring forward-looking behavior, higher-order uncertainty, and learning. We obtain an observational equivalence result that recasts the aggregate dynamics of this setting as that of a representative-agent model featuring two distortions: myopia in the sense of...

We study patterns of behavior in bilateral bargaining situations using a rich, new dataset describing over 88 million listings from eBay's Best Offer platform, with back-and-forth bargaining occurring in over 25 million of these listings. We document patterns of behavior and relate them to...

We propose a model to study when an intermediate action can serve as a "stepping stone" that enables the elimination of a harmful norm. While the intermediate action may facilitate the first "step", it may also become a new norm. We derive intuitive conditions for stepping stones, which depend...

Strategic models of legislative bargaining predict that proposers can extract high shares of economic surplus by identifying and exploiting weak coalition partners. However, strength and weakness can be difficult to assess even with relatively simple bargaining protocols. We evaluate...

Tokens offer convenience in digital networks and earn rewards when staked for consensus generation or economic activities. In our continuous-time model, agents dynamically allocate wealth over on-platform transactions and staking. Aggregate staking ratio crucially shapes platform productivity,...