Inadequate financial literacy and overconfidence in financial knowledge, coupled with the use of mobile payments (MPs), may contribute to harmful financial behaviors. While the relationship between financial knowledge confidence and financial behaviors is well documented, there is limited...

Understanding disparities in contest success is central to explaining how competition shapes the distribution of rewards, influence, or market shares. We introduce the Proportional Play Equilibrium (PPE), a boundedly rational alternative to Nash Equilibrium (NE) grounded in the Illusion of...

People often form mental models based on incomplete information, revising them as new relevant data becomes available. In this paper, we experimentally investigate how individuals update their models when data on predictive variables are gradually revealed. We find that people's models tend to...

The behavioral theory of the firm explains how firms react to performance feedback, yet little is known about how firms integrate backward-looking feedback with forward-looking assessments of market opportunity. This study proposes and tests a retrenchment model grounded in SWOT-based behavioral...

The Triple Helix model argues for the need to increase entrepreneurial activity among academics, with support from the government and industry. It is widely used but often relies on assumptions of rational coordination and overlooks how real-world decision-making is shaped by bounded cognition,...

Overconfidence is a well-established behavioral bias that involves the overestimation of one's own capabilities. We introduce a model in which managers and agents exert effort in a joint production, after the manager decides on the allocation of the tasks. A rational manager tends to reduce...

We experimentally study how people form predictive models of simple data generating processes (DGPs), by showing subjects data sets and asking them to predict future outputs. We find that subjects: (i) often fail to predict in this task, indicating a failure to form a model, (ii) often cannot...

Evidence suggests that consumers do not perfectly optimize, contrary to a critical assumption of classical consumer theory. We propose a model in which consumer types can vary in both their preferences and their choice behavior. Given data on demand and the distribution of prices, we identify...

Financial-macroeconomic agent-based models offer a promising avenue for understanding complex economic interactions, but their use is hindered by challenging empirical estimation. Our paper addresses this gap by constructing a stylized integrated model and estimating its core parameters using US...

Ambiguous prospects are ubiquitous in social and economic life, but the psychological foundations of behavior under ambiguity are still not well understood. One of the most robust empirical regularities is the strong correlation between attitudes towards ambiguity and compound risk which...

Ambiguous prospects are ubiquitous in social and economic life, but the psychological foundations of behavior under ambiguity are still not well understood. One of the most robust empirical regularities is the strong correlation between attitudes towards ambiguity and compound risk which...

We study the impact of market incompleteness and bounded rationality on the effectiveness of make-up strategies. To do so, we simulate a heterogeneous-agent New Keynesian (HANK) model with reflective expectations and an occasionally-binding effective lower bound (ELB) on the policy rate. Our...

We consider the psychological and social foundations of human contributions and punishments in a voluntary contributions mechanism with punishment (VCMP). We eliminate 'dynamic economic linkages' between the two stages of our "modified" VCMP to rule out other potential explanations. We use a...

Using field and laboratory experiments, we demonstrate that the complexity of incentive schemes and worker bounded rationality can affect effort provision, by shrouding attributes of the incentives. In our setting, complexity leads workers to over-provide effort relative to a fully rational...

The subject of this paper is how the epistemic limitations of individuals and their biases in reasoning affect collective decisions and in particular the functioning of democracies. In fact, while the cognitive sciences have largely shown how the imperfections of human rationality shape...

A large literature shows that people discount financial rewards hyperbolically instead of exponentially. While discounting of money has been questioned as a measure of time preferences, it continues to be highly relevant in empirical practice and predicts a wide range of real-world behaviors,...

Since the channel for agents' expectations matters for the effectiveness of monetary policies, it is crucial for policy-makers to assess the degree to which economic agents are boundedly rational and understand how the bounded rationality affects the monetary rules in stabilising the economy. We...

Using field and laboratory experiments, we demonstrate that the complexity of incentive schemes and worker bounded rationality can affect effort provision, by shrouding attributes of the incentives. In our setting, complexity leads workers to over-provide effort relative to a fully rational...

We study the welfare performance of various simple monetary policy rules under bounded rationality (BR) along the lines of Gabaix (2020) in a New Keynesian model with sticky wages and an effective lower bound (ELB) on interest rates. Policy strategies with a strong history dependence lose their...