We provide a framework to disentangle preferences and beliefs in health behavior and apply it to lockdown compliance in the UK. We estimate a model of compliance choice with uncertain costs and benefits to quantify utility tradeoffs, decompose group differences in compliance, and compute...

When a news platform such as Google News or Apple News selects personalized news for its user, will it select news that conforms to its user's bias, thus creating an “echo chamber”? To answer this question, this paper studies a game between a click-maximizing platform and a rational user who...

This study investigates the effect of investors’ pro-sustainable higher-order beliefs – their beliefs about other investors’ preferences toward sustainability – on their investment decisions, and whether this relationship is sensitive to sustainability performance. While prior research...

We develop a dynamic model where heterogeneous firms take investment decisions depending on their beliefs on future carbon prices. A policy-maker announces a forward-looking carbon price schedule but can decide to default on its plans if perceived transition risks are high. We show that weak...

Recent research documents mounting evidence for sizable and persistent biases in individual labor market expectations. This paper incorporates subjective expectations into a general equilibrium labor market model and studies the implications of biased expectations for wage bargaining, vacancy...

In this paper we analyze how consumers in Germany updated expectations about inflation in response to the COVID-19 outbreak. We use a fixed effects model to estimate the effect of regional exposure to COVID-19 cases, the stringency of restriction measures and local unemployment rates on...

We develop a dynamic model where heterogeneous firms take investment decisions depending on their beliefs on future carbon prices. A policy-maker announces a forward-looking carbon price schedule but can decide to default on its plans if perceived transition risks are high. We show that weak...

Using responses obtained through the Nielsen Homescan panel survey, we explore the differences between managers’ and non-managers’ expectations and perceptions of inflation and unemployment. By and large, managers and non-managers exhibit similar average inflation and unemployment...

A critique of the theory of rational expectations is made. It is noted that Knight and Keynes, by distinguishing between risk and uncertainty, proposed an entirely different avenue of inquiry. It demonstrates how the lack of understanding of the concept of ergodicity and the arbitrary use of the...

It is widely believed that undervaluation is an important determinant of share repurchases. However, empirical evidence on undervaluation remains mixed. This paper considers a novel measure of undervaluation that relies on the difference between management earnings forecasts and the...