We introduce a new solution concept for games in extensive form with perfect information, valuation equilibrium, which is based on a partition of each player's moves into similarity classes. A valuation of a player is a real-valued function on the set of her similarity classes. In this...

In the models of Young (1993a,b), boundedly rational individuals are recurrently matched to play a game, and they play myopic best replies to the recent history of play. It could therefore be an advantage to instead play a myopic best reply to the myopic best reply, something boundedly rational...

This paper studies a new aspect of firms’ expectation formation by asking whether expectations primarily reflect aggregate, industry-wide information (e.g., industry trends) or disaggregate information (e.g., firm-specific information). First, we show that disaggregate information is strongly...

We propose a simple model of expectation formation with three distinct deviations from fully rational expectations. In particular, forecasters' expectations are sticky, extrapolate the most recent news about the current period, and depend on the lagged consensus forecast about the period being...

This paper provides novel information on the propagation of the pandemic-induced real shock to firms' financial conditions. It uses firm-level survey data from end February to early April 2020 for a large sample of euro area SMEs and large firms. Firms' expectations on the availability of credit...

We propose a simple model of expectation formation with three distinct deviations from fully rational expectations. In particular, forecasters' expectations are sticky, extrapolate the most recent news about the current period, and depend on the lagged consensus forecast about the period being...

This paper studies how managers plan under uncertainty. In a new survey panel on German manufacturing firms, we show that uncertainty reflects change: Planning incorporates higher subjective uncertainty about future sales growth when the firm has just experienced unusual growth, and more so if...

This paper provides survey evidence on firms’ subjective uncertainty about future sales growth from a new representative panel data set of the German manufacturing sector. The main finding is that uncertainty reflects change: firms report more subjective uncertainty after either high or low...