Many studies have shown that people display an apparent overconfidence. In particular, it is common for a majority of people to describe themselves as better-than-average. The literature takes for granted that this better-than-average effect is problematic. We argue, however, that, even...

We propose a model where voters experience an emotional cost when they observe a firm that has displayed insufficient concern for other people's welfare (altruism) in the process of making high profits. Even when there exist few truly altruistic firms, an equilibrium may emerge where all firms...

We observe that countries where belief in the "American dream" (i.e., effort pays) prevails also set harsher punishment for criminals. We know from previous work that beliefs are also correlated with several features of the economic system (taxation, social insurance, etc). Our objective is to...

We study the problem of a regulator who must control the emissions of a given pollutant from a series of industries when the firms' abatement costs are unknown. We develop a mechanism in which the regulator asks firms to report their abatement costs and implements the most stringent emissions...

We propose a model where voters experience an emotional cost when they observe a firm that has displayed insufficient concern for other people's welfare (altruism) in the process of making high profits. Even with few truly altruistic firms, an equilibrium may emerge where all firms pretend to be...

We study axiomatically the problem of obtaining an expected utility representation for a potentially incomplete preference relation over lotteries by means of a set of von Neumann-Morgenstern utility functions. It is shown that, when the prize space is a compact metric space, a preference...

We analyze how the entry of less informed participants in a market for a risky asset affects the volatility of the price of the asset. In an endogenous participation model, we show that in equilibrium the new market entrants are less informed than the rest of the participants. We study how...

In a standard search model I relax the assumption that agents know the distribution of offers and characterize the behavioral and welfare consequences of overconfidence. Optimistic individuals search longer than pessimists if they are equally "stubborn" and high offers are good news. Otherwise,...