This paper studies how people make inference about a state of the world when the information structure includes additional, payoff-irrelevant states. For example, learning about effort from observed performance may require accounting for the otherwise irrelevant role of luck. This creates an...

Empirical evidence suggests consumers rely on their shopping experiences to form beliefs about inflation. In other words, they "learn by shopping". I introduce this empirical observation as an informational friction in the New Keynesian model and use it to study its consequences for the...