The literature on both theoretical and empirical dynamics requires agents to solve complex dynamic programs, which assumes implicitly that agents are fully rational and have the most accurate expectations given their information set. We claim that this assumption is easily testable provided that...

The assumption that consumers are fully rational and hold correct expectations over prices is demanding in dynamic settings. We claim that it is testable provided that market-level data on prices and purchases are available. We find that consumers hold simple expectations on the timing of...