Many information structures generate correlated rather than mutually independent signals, the news media being a prime example. This paper shows experimentally that in such contexts many people neglect these correlations in the updating process and treat correlated information as independent. In...

The Peter Principle states that, after a promotion, the observed output of promotedemployees tends to fall. Lazear (2004) models this principle as resulting from a regression tothe mean of the transitory component of ability...

This paper uses matched employer-employee panel data to show that individual jobsatisfaction is higher when other workers in the same establishment are better-paid. Thisruns contrary to a large literature which has found evidence of income comparisons insubjective well-being...

In a simple conceptual framework, we organize a multitude of phenomena related to the (mis)prediction of utility. Consequences in terms of distorted choices and lower wellbeing emerge if people have to trade-off between alternatives that are characterized by attributes satisfying extrinsic...