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We study the impact of market incompleteness and bounded rationality on the effectiveness of make-up strategies. To do so, we simulate a heterogeneous-agent New Keynesian (HANK) model with reflective expectations and an occasionally-binding effective lower bound (ELB) on the policy rate. Our...
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We study the welfare performance of various simple monetary policy rules under bounded rationality (BR) along the lines of Gabaix (2020) in a New Keynesian model with sticky wages and an effective lower bound (ELB) on interest rates. Policy strategies with a strong history dependence lose their...
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Consider a game where Alice generates an integer and Bob wins if he can factor that integer. Traditional game theory …
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"This paper proposes a model in which the decision maker builds an optimally simplified representation of the world … maximization problems. The agent's choice of a representation of the world features a quadratic proxy for the benefits of thinking … the world. This model yields a tractable procedure, which embeds the traditional rational agent as a particular case, and …
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