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...

This paper explores a general model of the evolution and adaption of hedonic utility. It is shown that optimal utility will be increasing strongly in regions where choices have to be made often and decision mistakes have a severe impact on fitness. Several applications are suggested. In the...

We develop a rational dynamic model in which people are loss averse over changes in beliefs about present and future consumption. Because changes in wealth are news about future consumption, preferences over money are reference-dependent. If news resonates more when about imminent consumption...

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...

Revealed preference theory offers a criterion for decision-making quality: if decisions are high quality then there exists a utility function the choices maximize. We conduct a large-scale experiment to test for consistency with utility maximization. Consistency scores vary markedly within and...

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...