We study a model of Bayesian persuasion in which Receiver has limited information-processing capacity, or attention, and must exert costly effort to process Sender's signals. Receiver is rationally inattentive (Sims (2003)): attention costs are proportional to the mutual information (expected...

At the conclusion of 2017, to the dismay of journalists, pundits, and academics, large numbers of adolescents began consuming Tide Pods, a form of laundry detergent that is candy-like in appearance. This paper argues that purposeful consumption of laundry detergent may in fact be individually...

The rational addiction model is usually tested by estimating a linear second-order difference Euler equation, which may produce unreliable estimates. We show that a linear first-order difference equation is a better alternative. This empirical specification is appropriate under the reasonable...

As expectations are driven by information, its selection is central in explaining common knowledge building and unraveling in financial markets. This paper addresses this information selection problem by proposing imitation as a key mechanism to explain opinion dynamics. Behavioral and cognitive...

Behavioral law and economics applies the conceptual tools of behavioral economics to the analysis of legal problems and legal intervention. These models, and the experiments to test them, assume an institution free state of nature. In modern societies, the law's subjects never see this state of...

This paper investigates an empirical puzzle in technology adoption: the observation that farmers in Sub-Saharan Africa who have successfully adopted modern agricultural inputs on their farms tend to spread synergistic inputs across plots rather than combining them. Existing theories are unable...

Persistence risk is an endogenous source of risk that arises when a rational agent learns about the length of business cycles. Persistence risk is positive during recessions and negative during expansions. This asymmetry, which solely results from learning about persistence, causes expected...

We extend the model of Anufriev and Bottazzi (2010) to the case with many assets. We show that under the procedural equilibrium, all assets with nonzero aggregate demand must have the same price returns. Heterogeneity in price returns appears when some assets face zero demand. In this case, the...