We propose a theory of reputation to explain how investors rationally respond to mutual fund star ratings. A fund's performance is determined by its information advantage, which can be acquired but decays stochastically. Investors form beliefs about whether the fund is informed based on its past...

This paper nests a continuous-time learning model Jovanovic (1984) into a directed on-the-job search framework. We prove that the socially efficient allocation is separable, i.e., the workers' value functions and optimal controls are independent of both the distribution of workers across their...

This paper studies the role of observational learning in search markets where buyers do not take the list price as a take-it-or-leave-it offer. Using a unique data from the Beijing housing market, we estimate a structural model in which buyers infer a seller’s reservation value from the...