Micro data on inflation expectations has two important properties: (i) there is substantial heterogeneity in inflation expectations across households, and (ii) the average inflation expectation responds slowly to shocks to actual inflation. This paper studies the effect of dispersed inflation...

Decision-makers often face limited liability and thus know that their loss will be bounded. We study how limited liability affects the behavior of an agent who chooses how much information to acquire and process in order to take a good decision. We find that an agent facing limited liability...