Laboratory experiments are a widely used methodology for advancing causal knowledge in the physical and life sciences. With the exception of psychology, the adoption of laboratory experiments has been much slower in the social sciences, although during the last two decades, the use of lab...

The Homo economicus of traditional economics is far from being completely self-interested, rational, or as individualistic as he is purported to be; he will haggle to death over price but will not take what he wants by force. Implicitly, he is assumed to behave ruthlessly within a welldefined...

A general framework is described specifying how boundedly rational decision makers generate their choices. Starting from a Master Module which keeps an inventory of previously successful and unsuccessful routines several submodules can be called forth which either allow one to adjust behavior...

How do voters allocate costly attention to alternative political issues? And how does selective ignorance of voters interact with policy design by politicians? We address these questions by developing a model of electoral competition with rationally inattentive voters. Rational inattention...

Most economic models are based on the self-interest hypothesis that assumes that all people are exclusively motivated by their material self-interest. In recent years experimental economists have gathered overwhelming evidence that systematically refutes the self-interest hypothesis and suggests...

We study optimal selling strategies of a seller who is poorly informed about the buyer’s value for the object. When the maxmin seller only knows that the mean of the distribution of the buyer's valuations belongs to some interval then nature can keep him to payoff zero no matter how much...

Using a novel dataset that contains qualitative firm survey data on sales forecasts as well as balance-sheet data on realized sales, we document that only major forecast errors are predictable and display autocorrelation. This result is a particular violation of the Full Information Rational...

This paper presents novel evidence for the prevalence of deviations from rational behavior in human decision making – and for the corresponding causes and consequences. The analysis is based on move-by-move data from chess tournaments and an identification strategy that compares behavior of...

We examine the various senses in which economist use the term "rationality" and then outline some of the commonly drawn implications and auxiliary assumptions. Finally, we confront the implications with the empirical evidence, drawing on the insights from the exciting new field of behavioral...

We consider a neoclassical economy where households derive utility from holding wealth. We show that, under some conditions, there can be rational bubbles. Hence, we provide a microfoundation for bubbles that relies on a frictionless infinite-horizon economy without any heterogeneity across...