This paper investigates collective denial and willful blindness in groups, organizations and markets. Agents with anticipatory preferences, linked through an interaction structure, choose how to interpret and recall public signals about future prospects. Wishful thinking (denial of bad news) is...

A long-standing puzzle is how overconfidence can persist in settings characterized by repeated feedback. This paper studies managers who participate repeatedly in a high-powered tournament incentive system, learning relative performance each time. Using reduced form and structural methods we...

Instrumental variable estimation requires untestable exclusion restrictions. With policy effects on individual outcomes, there is typically a time interval between the moment the agent realizes that he may be exposed to the policy and the actual exposure or the announcement of the actual...

We analyze the offering, asking, and granting of help or other benefits as a three-stage game with bilateral private information between a person in need of help and a potential help-giver. Asking entails the risk of rejection, which can be painful: since unawareness of the need can no longer be...

In his classic article "An Essay on Bargaining" Schelling (1956) argues that ignorance might actually be strength rather than weakness. We test and confirm Schelling's conjecture in a simple take-it-or-leave bargaining experiment where the proposer can choose between two possible offers. Option...

In many markets, sellers advertise their good with an asking price. This is a price at which the seller is willing to take his good off the market and trade immediately, though it is understood that a buyer can submit an offer below the asking price and that this offer may be accepted if the...

This paper studies the design of optimal contracts in dynamic environments where agents learn by doing. We derive a condition under which contracts are fully incentive compatible. A closed-form solution is obtained when agents have CARA utility. It shows that human capital accumulation...

This paper extends the job market signaling model of Spence (1973) by allowing firms to learn the ability of their employees over time. Contrary to the model without employer learning, we find that the Intuitive Criterion does not always select a unique separating equilibrium. When the Intuitive...

This chapter surveys recent literature on social networks and labour markets, with a specific focus on developing countries. It reviews existing research, in particular, on the use of social networks for hiring and the consequences of networks for on-the-job outcomes, including emerging...

We analyze a long-term contracting problem involving common uncertainty about a parameter capturing the productivity of the relationship, and featuring a hidden action for the agent. We develop an approach that works for any utility function when the parameter and noise are normally distributed...