In this paper, we consider a decision-maker who tries to learn the distribution of outcomes from previously observed cases. For each observed database of cases the decision-maker predicts a set of priors expressing his beliefs about the underlying probability distribution. We impose a version of...

The psychology literature provides ample evidence that people have difficulties taking the perspective of less informed others. This paper presents a controlled experiment showing that this "curse of knowledge" can cause comparative overconfidence and overentry into competition. In a broader...

We analyze a new type of bandit where an agent is confronted with two-dimensional uncertainty. The agent does not know whether ability or effort is required to succeed at a given task. Moreover, the agent does not know her own ability level. In each period, after deciding whether to exert effort...

Previous research shows that firms may offer excessively high (and shrouded) add-on prices in competitive markets when some consumers are myopic. We analyze the effects of regulatory intervention via educating myopic consumers on equilibrium strategies of firms, consumer protection and welfare....

This paper analyzes optimal linear taxes on labor income and savings in a standard two-period life-cycle model with endogenous leisure demands in both periods and non-insurable income risks. Households are subject to skill shocks in both periods of the life-cycle. We allow for completely general...

The assessment that the implementation of efficient outcomes by means of decentralized spontaneous solutions is to be expected for private goods, but not for public goods has become part of the conventional wisdom of our discipline. This paper uses a mechanism design approach to clarify under...

In recent decades, many firms offered more discretion to their employees, often increasing the productivity of effort but also leaving more opportunities for shirking. These "high-performance work systems" are difficult to understand in terms of standard moral hazard models. We show...

In a recent paper, Koszegi and Rabin (2009) make a novel prediction about people's attitudes towards noninstrumental information, i.e. information about fixed but unknown future outcomes. People prefer to get information clumped together rather than piecewise. We use a controlled lab experiment...

Individuals exhibit a randomization preference if they prefer random mixtures of two bets to each of the involved bets. Such preferences provide the foundation of various models of uncertainty aversion. However, it has to our knowledge not been empirically investigated whether uncertainty-averse...