Theories of choice, and their legal consequences, dramatically differ based on whether they are premised on rational or boundedly rational actors. This chapter describes the interactions between, and the regulatory implications of, three types of uncertainties that the selection of an adequate...

What are the effects of beliefs, sentiment, and uncertainty, over the business cycle? To answer this question, we develop a behavioral New Keynesian macroeconomic model, in which we relax the assumption of rational expectations. Agents are, instead, boundedly rational: they have a...

At least since Leonard Savage’s extension of von Neumann and Morgenstern’s expected utility, rational choice theory has been interpreted as a theory prescribing what individuals should do in any decision context, ranging from certainty to risk and uncertainty. After decades this received...