We study a two-player dynamic investment model with information externalities and provide necessary and sufficient conditions for a unique switching equilibrium. Within this setup, we ask whether policymakers should interfere when better informed agents make individual investment decisions. We...

We introduce cheap talk in a dynamic investment model with information externalities. We first show how social learning adversely affects the credibility of cheap talk messages. Next, we show how an informational cascade makes truth-telling incentive compatible. A separating equilibrium only...

We introduce cheap talk in a dynamic investment model with information externalities. We first show how social learning adversely affects the credibility of cheap talk messages. Next, we show how an informational cascade makes thruthtelling incentive compatible. A separating equilibrium only...

We explore the learning process and behavior of an individual with unrealistically high expectations (“overconfidence”) when outcomes also depend on an external fundamental that affects the optimal action. Moving beyond existing results in the literature, we show that the agent's beliefs...

We establish convergence of beliefs and actions in a class of one-dimensional learning settings in which the agent's model is misspecified, she chooses actions endogenously, and the actions affect how she misinterprets information. Our stochastic-approximation-based methods rely on two crucial...