This exercise offers an innovative learning mechanism to model economic agent's decision-making process using a deep reinforcement learning algorithm. In particular, this AI agent is born in an economic environment with no information on the underlying economic structure and its own preference....

We propose a heuristic switching model of an asset market where the agents' choice of heuristic is consistent with their individual risk aversion. They choose between a fundamentalist and a trend-following rule to form expectations about the price of a risky asset. Given their risk aversion,...

This paper experimentally studies the role of associative memory for belief formation. Realworld information signals are often embedded in memorable contexts. Thus, today’s news, and the contexts they are embedded in, may cue the selective retrieval of similar past news and hence contribute to...

The paper investigates social-learning when the information structure is not commonly known. Individuals repeatedly interact in social-learning settings with distinct information structures. In each round of interaction, they use their experience gained in past rounds to draw inferences from...

It is common to analyze the effects of alternative monetary policy commitments under the assumption of fully model-consistent expectations. This implicitly assumes unrealistic cognitive abilities on the part of economic decision makers. The relevant question, however, is not whether the...

We develop a simple model of the exchange rate in which agents optimize their portfolio and use different forecasting rules. They check the profitability of these rules ex post and select the more profitable one. This model produces two kinds of equilibria, a fundamental and a bubble one. In a...

This paper uses a discrete-time partial equilibrium model of the European Emissions Trading System (EU ETS) to analyze the impact of the recent reform on allowance prices. By including bounded rationality such as myopia or hedging requirements, we find that the Hotelling price path is no longer...

A large literature shows that people discount financial rewards hyperbolically instead of exponentially. While discounting of money has been questioned as a measure of time preferences, it continues to be highly relevant in empirical practice and predicts a wide range of real-world behaviors,...

Using field and laboratory experiments, we demonstrate that the complexity of incentive schemes and worker bounded rationality can affect effort provision, by shrouding attributes of the incentives. In our setting, complexity leads workers to over-provide effort relative to a fully rational...

We consider the psychological and social foundations of human contributions and punishments in a voluntary contributions mechanism with punishment (VCMP). We eliminate 'dynamic economic linkages' between the two stages of our "modified" VCMP to rule out other potential explanations. We use a...