Behavioral economics aspires to replace the agents of neoclassical economics with living, breathing human beings. Here, the author argues that behavioral economics, like its neoclassical counterpart, often neglects the role of active sense-making that motivates and guides much human behavior....

Behavioral economics characterizes decision-makers using psychologically-informed models. Cognitive science produces psychologically-informed models. Why don't these disciplines talk more? Here, the author presents several arguments for why cognitive science should inform behavioral economics -...

Suppose that a group of agents having divergent expectations can share risks efficiently. We examine how this group should behave collectively to manage these risks. We show that the beliefs of the representative agent is in general a function of the group.s wealth level, or equivalently, that...

We study the political economy of redistribution over a broad class of decision rules. Since the core is generically non-unique, we suggest a simple and elegant procedure to select a robust equilibrium. Our selected policy depends on the full income profile, and in particular, on the preferences...

We study a dynamic corporate investment problem where decisions have to be made collectively by a group of agents holding heterogeneous beliefs and adhering to a "utilitarian" governance mechanism in which each agent has a given influence in the decision. In this setting we show that: (i) group...

Research on collective provision of private goods has focused on distributional considerations. This paper studies a class of problems of decision under uncertainty in which an efficiency argument for collective choice emerges from the mathematics of aggregating individual payoffs. Consider...

Inequality and democracy are far more compatible empirically than predicted by social conflict theory. This paper speaks to this puzzle, identifying the scope conditions under which democratization induces greater redistribution. Because autocrats sometimes have incentives to expropriate...

This paper analyzes a model in which two groups compete with each other for a prize in every time period. We assume that there is a status quo bias: Yesterday's winner is in a stronger position than the other group, if there is a fight today. Hence, a change of the status quo has long term...

Modern strategic decision theory focuses on those actions taken by senior executives (on behalf of the owners) that commit substantial resources, set precedents, and create waves of less important decisions. This chapter explores key behavioral assumptions that dispute the notion that strategic...

We experimentally study unanimity and majority voting rules in multilateral bargaining environments with stochastic future surplus. In these settings, reaching agreement when expected future surplus is sufficiently higher than the current surplus is inefficient. Theoretically, such...