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Dynamic Behavioral Theory

Paper Session

Friday, Jan. 4, 2019 10:15 AM - 12:15 PM

Atlanta Marriott Marquis, L506
Hosted By: Econometric Society
  • Chair: Kristof Madarasz, London School of Economics

Learning and Selfconfirming Long-Run Biases

Pierpaolo Battigalli
,
Bocconi University
Alejandro Francetich
,
University of Washington-Bothell
Giacomo Lanzani
,
Massachusetts Institute of Technology
Massimo Marinacci
,
Bocconi University

Abstract

We consider an uncertainty averse, sophisticated decision maker facing a recurrent
decision problem where information is generated endogenously. In this context, we study
self-con…rming strategies as the outcomes of a process of active experimentation. We
provide inter alia a learning foundation for self-con…rming equilibrium with model un-
certainty (Battigalli et al., 2015). We also argue that ambiguity aversion tends to sti‡e
experimentation, increasing the likelihood that decision maker gets stuck into suboptimal
“certainty traps.”

Misinterpreting Social Outcomes and Information Campaigns

Aislinn Bohren
,
Carnegie Mellon University and University of Pennsylvania
Daniel Hauser
,
Aalto University

Abstract

We study how to design information to help misspecified learners learn the true state of the world. Agents learn by observing exogenous signals and the choices of others in addition to signals generated by the designer. With the correctly specified model, these agents would eventually learn the truth without any intervention, in the presence of misspecification this is no longer the case. We characterize how the degree and type of misspecification affect the optimal information policy. Depending on the misspecification, it may be optimal for the designer to release very one very precise signal or to continually release small amounts of information.

Long-Term Contracting with Time-Inconsistent Agents

Daniel Gottlieb
,
Washington University-St. Louis
Xingtan Zhang
,
University of Colorado Boulder

Abstract

We study contractual relationships between (partially naive) time-inconsistent consumers and risk neutral firms in settings with one- and two-sided commitment. Our main result is that as the number of periods grows, the welfare loss from time-inconsistency vanishes. We use our results to study two common regulatory interventions: removing commitment power from consumers and imposing limits on the fees that firms can charge. For each fixed contracting horizon, removing commitment power increases welfare when consumers are sufficiently time-inconsistent. However, removing commitment power cannot help if the contracting horizon is long. With one-sided commitment, setting a maximum fee weakly hurts consumers.

Identifying Procrastination from the Timing of Choices

Philipp Strack
,
University of California-Berkeley
Paul Heidhues
,
University of Düsseldorf

Abstract

Identifying Procrastination from the Timing of Choices
Discussant(s)
Martin Cripps
,
University College London
Elliot Lipnowski
,
University of Chicago
Michael Grubb
,
Boston College
Kristof Madarasz
,
London School of Economics
JEL Classifications
  • D9 - Micro-Based Behavioral Economics
  • D8 - Information, Knowledge, and Uncertainty