Story-telling helps to define the human experience. Do people also use narratives to make sense of, and to act on, financial information? Three studies demonstrate that people's investment predictions and choices instead are by narrative thinking. Whereas neoclassical financial theory maintains...

In this article, we test whether an isolated information campaign can deter criminals by appealing to their apprehension risk perception. A randomized trial was conducted around 154 high crime housing blocks in Bogotá. With support of the Colombian Police, half of the blocks were exposed to a...

This paper offers a simple but powerful model of wishful thinking, cognitive dissonance, and related biases. Choices maximize subjective expected utility, but beliefs depend on the decision maker's interests as well as on relevant information. Simplifying assumptions yield a representation in...

This paper offers a simple but powerful model of wishful thinking, cognitive dissonance, and related biases. Choices maximize subjective expected utility, but beliefs depend on the decision maker's interests as well as on relevant information. Simplifying assumptions yield a representation in...

Uno de los aspectos de la pobreza que no ha sido explorado empíricamente es aquel que tiene que ver con las aspiraciones económicas, entendidas como el deseo o la pretensión de un mayor ingreso futuro. Mediante modelos probit ordenados y estimación por máxima verosimilitud se busca...

We study the bilateral trade problem put forward by Myerson and Satterthwaite (1983) under the assumption that agents are loss-averse, using the model developed by Kőszegi and Rabin (2006, 2007). We show that the endowment effect increases the sellers information rent, and that the attachment...

The rational expectations hypothesis is one of the cornerstones of current economic theorizing. This review discusses a number of experiments that focus on expectation formation by human subjects in a number of learning-to-forecast experiments and analyzes the implications for the rational...

We present a model of stereotypes in which a decision maker assessing a group recalls only that group's most representative or distinctive types relative to other groups. Because stereotypes highlight differences between groups, and neglect likely common types, they are especially inaccurate...

This study sheds new light on the question of whether or not sentiment surveys, and the expectations derived from them, are relevant to forecasting economic growth and stock returns, and whether they contain information that is orthogonal to macroeconomic and financial data. I examine 16...

For decades, the academic literature has focused on three survey measures of expected inflation: the Livingston Survey, the Survey of Professional Forecasters, and the Michigan Survey. While these measures have been useful in developing models of forecasting inflation, the data are low frequency...