Trendsetters wish to be perceived as the type that defines normative behavior. Incorporating norm formation in Bernheim (1994)’s model yields equilibria with social considerations concentrating behavior, allowing multiple conformist pools. Refinements link each pooling equilibrium to a unique...

Under reduced-form learning, agents are endowed with an aggregate model, and rational expectations are then replaced with subjective expectations. This paper demonstrates that the reduced-form learning approach may be arbitrary in that a particular representation of aggregate dynamics has...

“Overbidding” with respect to risk-neutral Nash predictions in first-price auction experiments has been consistently reported in the literature. One possible explanation for overbidding is that participants in these experiments do not have a clear perception of probabilities, which causes...

Paying an insurance premium but not needing to claim is sometimes viewed as pouring money down the drain. Aversion to the perceived waste may lead to the rejection of fair insurance. Although policies paying rebates if no claim is made are not attractive to expected utility maximisers, this...

We show that a non-Bayesian learning procedure leads to very permissive implementation results concerning the efficient allocation of resources in a dynamic environment where impatient, privately informed agents arrive over time, and where the designer gradually learns about the distribution of...

This paper focuses on the size of the borrower group in group lending. We show that, when social ties in a community enhance borrowers’ incentives to exert effort, a profit-maximizing financier chooses a group of limited size. Borrowers that would be fundable under moral hazard but have...

We reappraise the robustness of sunspot effects in overlapping-generations models. Azariadis’s well-known example economies have stationary, deterministic fundamentals (preferences, technologies, and endowments), yet sunspots affect multiple equilibria. And those equilibria are robust to...

The paper shows that producer-owned firms are more efficient in quality provision than investor-owned firms if input quality is observable, while they are less efficient when the input quality is unobservable and the size of the organization is large.

Aversion to lying has been consistently observed in sender–receiver games. Women have demonstrated greater aversion to lying for a small monetary benefit in these games than men. We test the robustness of this gender difference in a sender–receiver game with larger stakes. We find no...