This survey discusses behavioral and experimental macroeconomics emphasizing a complex systems perspective. The economy consists of boundedly rational heterogeneous agents who do not fully understand their complex environment and use simple decision heuristics. Central to our survey is the...

We consider a network market where firms can covertly extract additional revenues from consumers, which we refer to as “obfuscation”. We examine why even consumers who are aware of obfuscation (“sophisticates”) continue to stick to obfuscating networks. Depending on the relation between...

We investigate the extent to which misperceptions about the economy can become self-reinforcing and thereby contribute to time-varying macroeconomic dynamics. To do so, we build a New Keynesian model with long-horizon expectations and dynamic predictor selection. Because agents solve...

When financial securities are modeled as claims on stochastic processes, each trader's beliefs at time can be summarized by a subjective probability distribution . The dominant Rational Expectations approach typically treats as a singleton that correctly gauges risks. In reality, financial risks...

Modest differences in higher-order beliefs may have large price effects. We generalize a standard rational expectations equilibrium model with different information by allowing differences in higher-order beliefs. Investors have possibly different dogmatic beliefs about the mean, different...

In dynamic financial markets the stochastic supply of risky assets has a significant informational role. Contrary to static models, where it acts as “noise,” in dynamic markets stochastic supply contains information about risk premiums. Acquiring private dividend information helps investors...

I evaluate the accuracy of people's subjective probability expectations for using various health services. Subjective expectations closely reflect patterns of observed utilization, are predicted by the same covariates as observed utilization, and correlate with objective measures of risk. At the...

In a binary prediction market in which risk-neutral traders have heterogeneous prior beliefs and are allowed to invest a limited amount of money, the static rational expectations equilibrium price is demonstrated to underreact to information. This effect is consistent with a favorite-longshot...

In a model that encompasses a general equilibrium framework, we consider a monopolist (a producer) with subjective beliefs that endogenously hedges against fluctuations in input prices in a complete market. We allow for entries and Cournot competition in this economy, and we study the...

Followers of law, politics and business commonly relate stories of individuals who appear to predict an expected self-performance level below what they believe likely. Candidates, attorneys and firms sometimes seem to under-predict their own capacities. Insofar as individuals typically construct...