The Net Present Value maximizing model shows fallacies and inconsistencies that may be easily unmasked by performing a cognitive analysis of the decision-making process implied by the maximization problem. The model may be conveniently rescued if the maximizing version of the criterion is shunt...

We study product differentiation on a Salop circle when firms relocate incrementally due to bounded rationality. We prove that, under common assumptions on demand, firms relocate only when two or more firms target the same niche. In any other case, there is no incentive for any firm to relocate...

Traditional rational choice theories of voting state that, in a scenario with positive voting costs, people will vote only when they are pivotal. This hypothesis is contradicted by the frequent observation of relatively high rates of electoral turnout. Over the last few decades, several...

Language is an imperfect and coarse means of communicating information about a complex and nuanced world. We run an experimental investigation of a setting in which the messages available to the sender imperfectly describe the state of the world, however the sender can improve communication, at...

Overconfidence is a well-established behavioral phenomenon that involves an overestimation of 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 delegate...

We study the relationship between the cognitive load manipulation and strategic sophistication. The cognitive load manipulation is designed to reduce the subject's cognitive resources which are available for deliberation on a choice. In our experiment, subjects are placed under a large cognitive...

We study the relationship between the cognitive load manipulation and strategic sophistication. The cognitive load manipulation is designed to reduce the subject's cognitive resources that are available for deliberation on a choice. In our experiment, subjects are placed under a high cognitive...

We find that differences in the ability to devote cognitive resources to a strategic interaction imply differences in strategic behavior. In our experiment, we manipulate the availability of cognitive resources by applying a differential cognitive load. In cognitive load experiments, subjects...

We examine a market in which consumers are forced to rely on noisy price signals to select between homogeneous products. The noise originates either from firms' price obfuscation or consumers' bounded information processing capabilities. Standard models and empirical experiments of markets with...

We analyze a symmetric n-firm Cournot oligopoly with a heterogeneous population of optimizers and imitators. Imitators mimic the output decision of the most successful firms of the previous round a l`a Vega-Redondo (1997). Optimizers play a myopic best response to the opponents’ previous...