The use of coarse categories is prevalent in various situations and has been linked to biased economic outcomes, ranging from discrimination against minorities to empirical anomalies in financial markets. In this paper we study economic rationales for categorizing coarsely. We think of the way...

We consider a simple dynamic model of environmental taxation that exhibits time inconsistency. There are two categories of firms, Believers, who take the tax announcements made by the Regulator to face value, and Non-Believers, who perfectly anticipate the Regulator's decisions, albeit at a...

Traditionally, economists make a sharp distinction between stated and revealed preferences, viewing the latter as more fully meeting the assumptions of economic analysis. Here, we consider one form of empirical evidence regarding this belief: the consistency of choices in stated and revealed...

The economic concept of the second-best involves the idea that multiple simultaneous deviations from a hypothetical first-best optimum may be optimal once the first-best itself can no longer be achieved, since one distortion may partially compensate for another. Within an evolutionary framework,...

Using the techniques of revealed preference analysis, we study a two-stage model of choice behavior. In the first stage, the decision maker maximizes a menu-dependent binary relation encoding preferences that are imperfectly perceived. In the second, a menu-independent binary relation is...

We consider two-stage "shortlisting procedures" in which the menu of alternatives is first pruned by some process or criterion and then a binary relation is maximized. Given a particular first-stage process, our main result supplies a necessary and sufficient condition for choice data to be...

Many Social Interactions display either or both of the following well documented phenomena. People tend to interact with similar others (homophily). And they tend to treat others more favorably if they are perceived to share the same identity (in-group bias). While both phenomena involve some...