A choice function is sequentially rationalizable if there is an ordered collection of asymmetric binary relations that identifies the selected alternative in every choice problem. We propose a property, F-consistency, and show that it characterizes the notion of sequential rationalizability....

Discrete choice methods are often used for the estimation of time preferences. We show that these methods have pervasive problems when based on random utility models, for which cases our results establish that the probability of selecting a later option over an earlier one may be greater for...

Evidence showing that individual behavior often deviates from the classical principle of preference maximization has raised at least two important questions: (i) How serious are the deviations? and (ii) What is the best way to analyse choice behavior in order to extract information for the...

A modern economy is an intricately linked web of specialized production units, each relying on the flow of inputs from their suppliers to produce their own output which, in turn, is routed towards other downstream units. In this essay, I argue that this network perspective on production linkages...

The classic theory of fiscal federalism suggests that different people should have different governments. Yet, separate local governments with homogeneous constituents often end up doing poorly. This paper explains why and answers three questions: when regions are heterogeneous, what determines...

Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without...

We propose new methods for evaluating predictive densities in an environment where the estimation error of the parameters used to construct the densities is preserved asymptotically under the null hypothesis. The tests offer a simple way to evaluate the correct specification of predictive...

We propose a notion of r-rationality, a relative version of satisficing behavior based on the idea that, for any set of available alternatives, individuals choose one of their r-best according to a single preference order. We fully characterize the choice functions satisfying the condition for...

We take advantage of a natural experiment to provide new, credible evidence on the health consequences of scheduling births early for non-medical reasons. In May 2010, the Spanish government announced that a 2,500-euro universal “baby bonus” would stop being paid to babies born after...

We present a simple model of sovereign debt crises in which a country chooses its optimal mix of short and long-term debt contracts subject to standard contracting frictions: the country cannot commit to repay its debts nor to a specific path of future debt issues, and contracts cannot be made...