We experimentally study how people form predictive models of simple data generating processes (DGPs), by showing subjects data sets and asking them to predict future outputs. We find that subjects: (i) often fail to predict in this task, indicating a failure to form a model, (ii) often cannot...

Differences in cognitive sophistication and effort are at the root of behavioral heterogeneity in economics. To explain this heterogeneity, behavioral models assume that certain choices indicate higher cognitive effort. A fundamental problem with this approach is that observing a choice does not...

We designed four observational learning experiments to identify the key channels that, along with Bayes-rational inferences, drive herd behavior. In Experiment 1, unobserved, whose actions remain private, learn from the public actions made in turn by subjects endowed with private signals of...