We propose a boundedly rational model of opinion formation in which individuals are subject to persuasion bias; that is, they fail to account for possible repetition in the information they receive. We show that persuasion bias implies the phenomenon of social influence, whereby one’s...

We propose a model of the phenomenon of persuasion. We argue that individual beliefs evolve in a way that overweights the opinions and information of individuals whom they "listen to" relative to other individuals. Such agents can be understood to be acting as though they believe they listen to...

We estimate the consumption of alcohol during Prohibition using mortality, mental health and crime statistics. We find that alcohol consumption fell sharply at the beginning of Prohibition, to approximately 30 percent of its pre-Prohibition level. During the next several years, however, alcohol...

We explore the scope of the firm in a setting where employee wage contracts are nonbinding and firms cannot contract with one another on their respective employment decisions. Specifically, we consider two divisions that have scope for beneficial interaction, and examine whether it is best for...

We test for a "hot hand'' (i.e., short-term predictability in performance) in Major League Baseball using panel data. We find strong evidence for its existence in all ten statistical categories we consider. The magnitudes are significant; being "hot" corresponds to between one-half and one...

A standard DCF corporate valuation usually includes a terminal value based on a long-term growth rate to reflect value from beyond the typical forecasting horizon of three to seven years. Despite often having a dominant effect on overall firm value, both the academic literature and practitioner...

We estimate the consumption of alcohol during Prohibition using mortality, mental health and crime statistics. We find that alcohol consumption fell sharply at the beginning of Prohibition, to approximately 30 percent of its pre-Prohibition level. During the next several years, however, alcohol...

We consider a managerial optimal framework for top executive compensation, where top management sets their own compensation subject to limited entrenchment, instead of the conventional setting where such compensation is set by a board that maximizes firm value. Top management would like to pay...

We analyze the design and renegotiation of covenants in debt contracts as a particular example of the contractual assignment of property rights under asymmetric information. In particular, we consider a setting where future firm investments are efficient in some states, but also involve a...

We propose a boundedly-rational model of opinion formation where agents are subject to the phenomenon of persuasion. We argue that persuasion - whereby repeated exposure to an opinion has a cumulative effect on an agent's beliefs - is pervasive and closely related to the concept of social...