We study belief updating about relative performance in an ego-relevant task. Manipulating the perceived ego-relevance of the task, we show that subjects update their beliefs optimistically because they derive direct utility flows from holding positive beliefs. This finding provides a behavioral...

As the widely applied method for measuring matching assortativeness in a transferable utility matching game, a matching maximum score estimation is proposed by Fox (2018). This article reveals that combining unmatched agents, transfers, and individual rationality conditions with sufficiently...

There is a rich complexity to actual human beings that cannot be captured in totality by any specialized academic discipline because all disciplines, in the process of specialization, focus only on narrow aspects of what it means to be human. Economics takes this reductive approach further. For...

We propose a recursive utility version of a basic Huggett (1993) model to study the implications of rational inattention (or RI, Sims 2003, 2010) for the cross-sectional dispersion of consumption and wealth (relative to income) in general equilibrium. We find that incorporating RI can...

Using lexicographic probability systems as representations of players beliefs, we define the solution procedure of directed lexicographic rationalizability. We show that the procedure characterizes the family of self-admissible sets (Brandenburger et al. 2008) in finite games. A corollary of...

We introduce a solution concept for signaling games, called Rational Hypothesis Testing Equilibrium (HTE). Beliefs are updated via Ortoleva’s (2012) Hypothesis Testing model, allowing for conditioning on information sets off the path. Hypotheses are beliefs about rational strategies of the...