Costs of attention, while central to choice behavior, have proven hard to measure. We introduce a simple method of recovering them from choice data. Our recovery method rests on the observation that costs of attention play precisely the same role in consumer choice as do a competitive firm's...

We complete the study of comparative statics initiated in Caplin and Leahy [2010], which introduced a new mathematical apparatus for understanding NTU allocation markets, as such covering the housing market and other markets for large indivisible goods. We introduce homotopy methods to...

Federal Housing Administration (FHA) insurance has doubled over the past two years and is projected to redouble to $1.5 trillion over the next five. Despite clear signs of strain in the FHA's Mutual Mortgage Insurance Fund, a recent actuarial review indicates that the FHA will not need any form...

We model agents who get utility from their beliefs and therefore interpret information optimistically. They may exhibit several biases observed in psychological studies such as optimism, procrastination, confirmation bias, polarization, and the endowment effect. In some formulations, they...

Economic data engineering deliberately designs novel forms of data to solve fundamental identification problems associated with economic models of choice. I outline three diverse applications: to the economics of information; to life-cycle employment, earnings, and spending; and to public policy...

We present a model of the market for used cars in which agents face a fixed cost of adjustment, the magnitude of which depend on the degree of adverse selection in the secondary market. We find that, unlike typical models, the sS bands in our model contract as the variance of the shock process...

This paper analyzes how the decision of when to buy a durable good affects both non-durable consumption and business cycle dynamics. At the individual level, we show that the timing of durable goods purchases plays an important role in smoothing consumption over time. In the benchmark case, the...

The standard version of q theory, in which investment is positively related to marginal q, breaks down in the presence of fixed costs of adjustment. With fixed costs, investment is a non-monotonic function of q. Therefore its inverse, which is the traditional investment function, does not exist....

The theoretical relationship between investment and uncertainty is ambiguous. This paper briefly surveys the insights that theory has to offer and then runs a series of simple tests aimed at evaluating the empirical significance of various theoretical effects. Our results from a panel of U.S....

We study whether the effects of monetary policy are dependent on the demographic structure of the population. We exploit cross-sectional variation in the response of US states to an identified monetary policy shock. We find that there are three distinct age groups. In response to an increase in...