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Glaeser, Edward L. - 2005

Does bounded rationality make paternalism more attractive? This Essay argues that errors will be larger when suppliers have stronger incentives or lower costs of persuasion and when consumers have weaker incentives to learn the truth. These comparative statics suggest that bounded rationality...

Persistent link: https://www.econbiz.de/10012466882

Fair Pricing

Rotemberg, Julio J. - 2004

I suppose that consumers see a firm as fair if they cannot reject the hypothesis that the firm is somewhat benevolent towards them. Consumers that can reject this hypothesis become angry, which is costly to the firm. I show that firms that wish to avoid this anger will keep their prices rigid...

Persistent link: https://www.econbiz.de/10012467772

Relative Price Dispersion : Evidence and Theory

Kaplan, Greg - 2016

items from different stores. We calibrate our theory and show that it is not only consistent with the extent and sources of …

Persistent link: https://www.econbiz.de/10012456741

Behavioral Aspects of Price Setting, and Their Policy Implications

Rotemberg, Julio J. - 2008

This paper starts by discussing consumers' cognitive and emotional reaction to posted prices. Cognitively, some consumers do not appear to make effective use of price information to maximize their consumption-based utility. Emotionally, prices can induce regret and anger among consumers. The...

Persistent link: https://www.econbiz.de/10012464893

Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets

Gabaix, Xavier - 2005

. If consumers are Bayesian, firms will not shroud information in equilibrium. However, shrouding may occur in an economy … with some myopic (or unaware) consumers. Such shrouding creates an inefficiency, which firms may have an incentive to … informational shrouding flourishes even in highly competitive markets, even in markets with costless advertising, and even when the …

Persistent link: https://www.econbiz.de/10012466916

Pricing when Customers Care about Fairness but Misinfer Markups

Eyster, Erik - 2017

This paper proposes a theory of price rigidity consistent with survey evidence that firms stabilize prices out of … fairness to their consumers. The theory relies on two psychological assumptions. First, customers care about the fairness of … rigid. Embedded in a simple macroeconomic model, our pricing theory produces nonneutral monetary policy, a short …

Persistent link: https://www.econbiz.de/10012453933

A Sparsity-Based Model of Bounded Rationality

Gabaix, Xavier - 2011

This paper defines and analyzes a "sparse max" operator, which is a less than fully attentive and rational version of the traditional max operator. The agent builds (as economists do) a simplified model of the world which is sparse, considering only the variables of first-order importance. His...

Persistent link: https://www.econbiz.de/10012461746

Rational Finite Bubbles

Allen, Franklin - 1991

There has been a long-running debate about whether stock market prices are determined by fundamentals. To date no consensus has been reached. An important issue in this debate concerns the circumstances in which deviations from fundamentals are consistent with rational behavior. A...

Persistent link: https://www.econbiz.de/10012475283

Measuring and Bounding Experimenter Demand

de Quidt, Jonathan - 2017

We propose a technique for assessing robustness of behavioral measures and treatment effects to experimenter demand effects. The premise is that by deliberately inducing demand in a structured way we can measure its influence and construct plausible bounds on demand-free behavior. We provide...

Persistent link: https://www.econbiz.de/10012455211

Dampening General Equilibrium : From Micro to Macro

Angeletos, George-Marios - 2017

We argue that standard modeling practices often overstate the potency of general-equilibrium (GE) mechanisms. We formalize the notion that GE adjustment is weak, or that it takes time, by modifying an elementary Walrasian economy in two alternative manners. In one, we replace Rational...

Persistent link: https://www.econbiz.de/10012455302