Economic theory presumes that individuals respond to true marginal prices when deciding on the amount of goods and services they buy and many other economic decisions. However, learning about these marginal prices is often costly in terms of search time, cognitive effort or monetary outlays....

In this paper, we study an imperfect monitoring model of duopoly under similar settings as in Green and Porter (1984), but here firms do not know the demand parameters and learn about them over time through the price signals. We investigate how a deviation from rational expectations affects the...

Often, individuals must choose among discrete alternatives with imperfect information about their values, such as selecting a job candidate, a vehicle or a university. Before choosing, they may have an opportunity to study the options, but doing so is costly. This costly information acquisition...

Optimal actions of an agent facing a Shannon capacity constraint on the translation of an uncertain signal into an action can easily turn out to be discretely distributed, even when the objective function and the initial distribution of uncertainty contain no discrete elements. We show this...

We identify the causal effect of cognitive abilities on economic behavior in an experimental setting. Using a forecasting task with varying cognitive load, we identify the causal effect of working memory on subjects' forecasting performance, while also accounting for the effect of other...

We present a two-stage coordination game in which early choices of experts with special interests are observed by followers who move in the second stage. We show that the equilibrium outcome is biased toward the experts' interests even though followers know the distribution of expert interests...

We link two important ideas: attention is scarce and a lack of information about an individual drives discrimination in selection decisions. We model how knowledge of ethnicity influences allocation of attention to available information about an applicant. When only a small share of applicants...

In the paper, I examine free entry in homogeneous product markets and its social efficiency. Previous research on free entry in homogeneous product markets has shown that under Cournot oligopoly with fixed setup costs the free entry equilibrium always delivers excessive entry. In contrast, I...