On Memory Management, with Philippe Jehiel, work in progress
We model decision-making of an agent with bounded memory. The agent collects payoff-relevant information until she reaches her memory constraint, at which point she can either terminate the decision process and choose an action, or restart the process. The optimal decision strategy involves mixing over the termination decisions. The model makes predictions about the stochastic choice of the agent that are robust to the details of the cognitive constraints and these predictions can be used to partially identify the agent's utility from choice data. Memory management generates confirmation bias; the agent is relatively more likely to stop the decision process and implement an action if the collected information supports choice that the agent found attractive ex ante.
Optimal Illusion of Control and Related Perception Biases, with Olivier Gossner, this draft Dec 2016
We study perception biases arising under second-best perception strategies. An agent correctly observes a parameter that is payoff-relevant in many decision problems that she encounters in her environment but is unable to retain all the information until her decision. A designer of the decision process chooses a perception strategy that determines the distribution of the perception errors. If some information loss is unavoidable due to cognition constraints, then (under additional conditions) the optimal perception strategy exhibits the illusion of control, overconfidence, and optimism.
1. Rational Inattention Dynamics: inertia and delay in decision-making 2017, Econometrica 85(2), 521-553,with Colin Stewart and Filip Matějka,
Presentation, Popularizační přednáška v Češtině
We solve a general class of dynamic rational-inattention problems in which an agent repeatedly acquires costly information about an evolving state and selects actions. The solution resembles the choice rule in a dynamic logit model, but it is biased towards an optimal default rule that depends only on the history of actions, not on the realized state. We apply the general solution to the study of (i) the status quo bias; (ii) inertia in actions leading to lagged adjustments to shocks; and (iii) the tradeoff between accuracy and delay in decision-making.
2. Perceiving Prospects Properly, with Colin Stewart, 2016, American Economic Review 106, 1601-31.
Presentation, Summary for press by AEA
When an agent chooses between prospects, noise in information processing generates an effect akin to the winner's curse. Statistically unbiased perception systematically overvalues the chosen action because it fails to account for the possibility that noise is responsible for making the preferred action appear to be optimal. The optimal perception pattern exhibits a key feature of prospect theory, namely, overweighting of small probability events (and corresponding underweighting of high probability events). This bias arises to correct for the winner's curse effect.
3. Price Price Distortions under Coarse Reasoning with Frequent Trade, with Colin Stewart, 2015, J. Econ. Theory 159, 574-595. Presentation, Supplement
4. Influential Opinion Leaders, with Colin Stewart and Antoine Loeper, 2014, Economic Journal 124, 1147–1167.
5. Tractable Dynamic Global Games and Applications, with Laurent Mathevet, 2013, J. Econ. Theory 148, 2583–2619. (previously circulated as “Sand in the Wheels: A Dynamic Global Game Approach”)
Reversibility in Dynamic Coordination Problems,
with Eugen Kováč,
and Economic Behavior 77, 298–320.
7. Who Matters in Coordination Problems?, with József Sákovics, 2012, American Economic Review 102(7), 3439–3461. (An older version)
Dynamic Coordination with Private
Learning, with Amil
Dasgupta and Colin
Stewart, 2012, Games
and Economic Behavior 74, 83–101.
9. Communication, Timing, and Common Learning, with Colin Stewart, 2011, J. Econ. Theory 146, 230–247. (An older version), The paper explained on the blog of Jeff Ely.
10. Contagion through Learning, with Colin Stewart, 2008, Theoretical Economics 3, 431–458.
11. Coordination of Mobile Labor, 2008, J. Econ. Theory 139(1), 25–46. (An older version)
12. Coordination Cycles, 2008, Games and Economic Behavior 63(1), 308–327.
13. The Effects of Risk Aversion in Mixed-Strategy Equilibria of 2x2 Games, with Dirk Engelmann, 2007, Games and Economic Behavior 60, 381–388.
14. A Trace of Anger is Enough: On the Enforcement of Social Norms, 2007, Economics Bulletin, vol. 8. (An expanded version)
15. Dynamic scaling and universality in evolution of fluctuating random networks, with Kotrla M. and F. Slanina, 2002, Europhys. Lett. 60, 14–20.
Essays on Roma
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