I study a dynamic model of strategic reform decisions that potentially affect the stochastic evolution of a publicly observed economic variable. Policy makers maximize their evaluation by a boundedly rational public. Specifically, the public follows a rule that attributes recent changes to the...

In many economic, political, and social situations, circumstances change at random points in time, reacting is costly, and reactions appropriate to present circumstances may become inappropriate upon future changes, requiring further costly reaction. Waiting is informative if arrival of the next...

We analyze a notion of self-confirming equilibrium with non-neutral ambiguity attitudes that generalizes the traditional concept. We show that the set of equilibria expands as ambiguity aversion increases. The intuition is quite simple: by playing the same strategy in a stationary environment,...

Over the past decade there has been a surge of interest in "tail events," or rare, high-impact events. In this article, I start by summarizing some recent progress in our understanding of the psychology of tail events. I suggest that much of this progress has centered on the concept of...

An individual who takes an HIV test can be informed about their own status and risk. Similarly, when friends, family or neighbors learn of a person's HIV status, they may update their beliefs about HIV infection among people they know. Using an experiment conducted in rural Malawi which randomly...

We offer a theory of polarization as an optimal response to ambiguity. Suppose individual A's beliefs first-order stochastically dominate individual B's. They observe a common signal. They exhibit polarization if A's posterior dominates her prior and B's prior dominates her posterior. Given...

Consider an investor who fears ruin when facing investments that satisfy no-arbitrage. Before investing he can purchase information about the state of nature as an information structure. Given his prior, information structure α investment dominates information structure β if, whenever he...

Expected consumer's surplus rarely represents preferences over price lotteries. Still, I give sufficient conditions for policies which maximize aggregate expected surplus to be interim Pareto Optimal. Besides two standard partial equilibrium conditions, I assume that feasible prices satisfy a...

This article introduces a new approach to modeling the expanding universe of decision makers in the wake of growing awareness, and invokes the axiomatic approach to model the evolution of decision makers' beliefs as awareness grows. The expanding universe is accompanied by extension of the set...