Capitalism is characterized by booms and busts. Periods of strong growth in output alternate with periods of declines in economic growth. Every macro-economic theory should attempt to explain these endemic business cycle movements. In this paper I present two paradigms that attempt to explain...

Reciprocity is intuitively essential to almost every relationship, and many experimental studies indicate that people are driven by it. In this paper, we propose a theory that a party's ex post performance is only partially dependent on whether the outcome satisfies his entitlement, and develop...

This paper concerns the prescriptive function of decision analysis. I suppose that an agent must choose an action yielding welfare that varies with the state of nature. The agent has a welfare function and beliefs, but he does not know the actual state of nature. It is often argued that such an...

Previous empirical studies of information cascades use either naturally occurring data or laboratory experiments with student subjects. We combine attractive elements from each of these lines of research by observing market professionals from the Chicago Board of Trade (CBOT) in a controlled...

Most economic analyses presume that there are limited differences in the prior beliefs of individuals, as assumption most often justified by the argument that sufficient common experiences and observations will eliminate disagreements. We investigate this claim using a simple model of Bayesian...

Central banks have become more and more transparent about their monetary policy making process. In the central bank transparency literature the distinction between actual and perceived central bank transparency is often lacking. However, as perceptions are crucial for the actions of economic...