This paper reformulates and simplifies a recent model by Heidhues and Kőszegi (The impact of consumer loss aversion on pricing, Mimeo, <CitationRef CitationID="CR5">2005</CitationRef>), which in turn is based on a behavioral model due to Kőszegi and Rabin (Q J Econ 121:1133–1166, <CitationRef CitationID="CR11">2006</CitationRef>). The model analyzes optimal pricing when...</citationref></citationref>

We analyze a simple model of an asset market, in which a large rational trader interacts with “noise speculators” who seek short-run speculative gains, and become active following a prolonged episode of mispricing relative to the asset’s fundamental value. The model gives rise to price...

I revisit the model of market competition with boundedly rational consumers due to Spiegler (2006), in which firms compete in price distributions and consumers use a naive sampling procedure to evaluate them. I assume that firms can assign weight to arbitrarily low prices, and consumers have a...

I study a dynamic model of strategic reform decisions that potentially affect the stochastic evolution of a publicly observed economic variable. Policy makers maximize their evaluation by a boundedly rational public. Specifically, the public follows a rule that attributes recent changes to the...

The public faces a choice between two alternatives: the status quo and a comprehensive reform proposal that departs from the status quo in several dimensions. Deliberation over the problem takes the form of a public multi-issue debate. The reformists argue that the proposed reform satisfies...

In standard contract-theoretic models, the underlying assumption is that agent types differ in their preference or cost parameters, and the principal's objective is to design contracts in order to screen this type. We study a contract-theoretic model in which the heterogeneity among agent types...

I explore the idea that people care about the justifiability of their decisions in the context of two-person extensive games. Each player justifies his strategy s with a belief b of the opponent's strategy which is consistent with the play path and maximally plausible (according to some...

Conventional economic theory assumes that consumers are fully rational, that they have well-defined preferences and easily understand the market environment. Yet, in fact, consumers may have inconsistent, context-dependent preferences, or simply not enough brain-power to evaluate and compare...

I present a simple framework for modeling two-firm market competition when consumer choice is "frame-dependent", and firms use costless "marketing messages" to influence the consumer's frame. This framework embeds several recent models in the "behavioral industrial organization" literature. I...