Recent research has highlighted the notion that people can make judgments and choices by means of two systems that are labeled here tacit (or intuitive) and deliberate (or analytic). Whereas most decisions typically involve both systems, this chapter examines the conditions under which each...

Confidence in decision making is an important dimension of managerial behavior. However, what is the relation between confidence, on the one hand, and the fact of receiving or expecting to receive feedback on decisions taken, on the other hand? To explore this and related issues in the context...

The mathematical representation of Brunswik’s lens model has been used extensively to study human judgment and provides a unique opportunity to conduct a meta-analysis of studies that covers roughly five decades. Specifically, we analyze statistics of the “lens model equation” (Tucker,...

This paper investigates the role of learning by private agents and the central bank (two-sided learning) in a New Keynesian framework in which both sides of the economy have asymmetric and imperfect knowledge about the true data generating process. We assume that all agents employ the data that...

Consumption based asset pricing models with time-separable preferences can generate realistic amounts of stock price volatility if one allows for small deviations from rational expectations. We consider rational investors who entertain subjective prior beliefs about price behavior that are not...

The booms and busts in U.S. stock prices over the post-war period can to a large extent be explained by fluctuations in investors' subjective capital gains expectations. Survey measures of these expectations display excessive optimism at market peaks and excessive pessimism at market troughs....

Agent-based computational economics is becoming widely used in practice. This paper explores the consistency of some of its standard techniques. We focus in particular on prevailing wholesale electricity trading simulation methods. We include different supply and demand representations and...

Bertrand competition under decreasing returns involves a wide interval of pure strategy equilibrium prices. We first present results of experiments in which two, three and four identical firms repeatedly interact in this environment. Less collusion with more firms leads to lower average prices....

This paper studies optimal monetary policy in a framework that explicitly accounts for policymakers uncertainty about the channels of transmission of oil prices into the economy. More specifically, I examine the robust response to the real price of oil that US monetary authorities would have...