Social psychologists have documented the false consensus effect, which refers to the tendency for people to overestimate their similarity to others. I model the false consensus effect by assuming that agents overestimate the correlation of their private signal errors. By modifying a simple...

We examine the welfare effects of regulation in a model where firms can shroud add-on costs, such as penalty fees for consumer financial products. In isolation, imposing price controls or disclosure mandates on such fees can increase or decrease welfare, even when these regulations have no...