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Consumers often resort to third-party information such as word of mouth, testimonials and reviews to learn more about the quality of a new product. However, it may be difficult for consumers to assess the precision of such information. We…
In the study by Chen et al. (2023) [01], the large language model GPT demonstrated economic rationality comparable to or exceeding the average human level in tasks such as budget allocation and risk preference. Building on this finding,…
This paper presents an empirical investigation of the relation between decision speed and decision quality for a real-world setting of cognitively-demanding decisions in which the timing of decisions is endogenous: professional chess.…
Extensive research shows that consumers are generally averse to price discrimination. However, instruments of differential pricing can benefit consumer surplus and alleviate inequity through targeted price discounts. This paper examines how…
How do decisions change with the economic environment and with time? This paper studies general nonstationary stopping problems and provides the methodological tools to answer these questions. First, we identify conditions that ensure a…
This paper analyzes the 1/3 Financial Rule, a method of allocating income equally among debt repayment, savings, and living expenses. Through mathematical modeling, game theory, behavioral finance, and technological analysis, we examine the…
Using a model in which agents compete to develop a potentially dangerous new technology (AI), we study how changes in the pricing of factors of production (computational resources) affect agents' strategies, particularly their spending on…
Quantifying uncertainties in collective human behavior and decision making is crucial for ensuring public health and safety, enabling effective disaster response, informing the design of transportation and communication networks, and…
We present a formal model for studying fashion trends, in terms of three parameters of fashionable items: (1) their innate utility; (2) individual boredom associated with repeated usage of an item; and (3) social influences associated with…
A perfectly rational decision-maker chooses the best action with the highest utility gain from a set of possible actions. The optimality principles that describe such decision processes do not take into account the computational costs of…
This paper provides a comprehensive examination of the evolution of credit cards in the United States, tracing their historical development, causes, consequences, and impact on both individuals and the economy. It delves into the…
An agent choosing between various actions tends to take the one with the lowest cost. But this choice is arguably too rigid (not adaptive) to be useful in complex situations, e.g., where exploration-exploitation trade-off is relevant in…
Is it true that if citizens understand hurricane probabilities, they will make more rational decisions for evacuation? Finding answers to such questions is not straightforward in the literature because the terms judgment and decision making…
Keeping up with "The Joneses" matters. This paper examines a model of reference dependent choice where reference points are determined by social comparisons. An increase in the strength of social comparisons, even by only a few agents,…
We develop a theoretical framework for understanding how cognitive load affects information processing in financial markets and test it using exogenous variation in disclosure complexity. Our model distinguishes between attention allocation…
When agents' information is imperfect and dispersed, existing measures of macroeconomic uncertainty based on the forecast error variance have two distinct drivers: the variance of the economic shock and the variance of the information…
Choice overload - in which larger choice sets are detrimental to a chooser's well-being - is potentially of great importance in the design of economic policy. Yet the current evidence on its prevalence is inconclusive. We argue that…
Cognitive distraction and measurement noise are two distinct factors that significantly impact the performance of humans and engineering systems. Cognitive distraction occurs when an individual's attention is diverted from a task, while…
Consequential decision-making typically incentivizes individuals to behave strategically, tailoring their behavior to the specifics of the decision rule. A long line of work has therefore sought to counteract strategic behavior by designing…
This paper explores various socioeconomic factors that contribute to individual financial success using machine learning algorithms and approaches. Financial success, a critical aspect of all individual's well-being, is a complex concept…