Published and Forthcoming Papers
Dual Decision Processes: Retrieving Preferences when some Choices are Automatic
Appendix
Journal of Political Economy, 129 (6): 1667-1704, 2021 (Lead Article)
Listing Specs: The Effect of Framing Attributes on Choice (with S. Galperti)
Journal of the European Economic Association, 22 (2): 528-572, 2024
Appendix
Journal of Political Economy, 129 (6): 1667-1704, 2021 (Lead Article)
Listing Specs: The Effect of Framing Attributes on Choice (with S. Galperti)
Journal of the European Economic Association, 22 (2): 528-572, 2024
Research Papers
Dual Decision Processes and Noise Trading
Revise and Resubmit at the Journal of the European Economic Association
Evidence from financial markets suggests that asset prices can be consistently far from their fundamental value. Prices seem to underreact to news in the short-run and overreact in the long-run. In this paper, we use evidence from cognitive sciences to describe traders' behavior. A part of traders holds wrong beliefs anytime the market environment does not change sufficiently. We show that such model not only endogenizes noise trading while still allowing for rational one, but it also provides a justification for noise traders' beliefs and it shows that underreaction and overreaction naturally arise in such framework.
Stochastic Choice and Familiarity: Inertia and the Mere Exposure Effect
Revise and Resubmit at the Journal of Economic Behavior and Organization
In this paper we propose a first dynamic model of behavioral inertia that can be easily applied to economic analysis. Using evidence from cognitive sciences, we model a decision maker that has a higher probability of choosing an alternative the more he has been exposed to it. The model allows us (i) to give a first explanation for some empirical evidence that shows that inertia in choices is dynamic, (ii) to give a more general description of the well-known phenomenon of the status-quo bias, (iii) to obtain the endowment effect, loss aversion and present bias as byproducts, and (iv) to quantify the behavioral inertia that affects choices. In particular, we show that it is possible to have accurate forecasts of the kind of heterogeneity we should expect to emerge due to the effect of exposure on inertia. Finally, we provide a choice theoretical foundation of the model and we discuss some possible extensions.
Higher Orders of Rationality and the Structure of Games (with F. Germano, P. Rey-Biel and P. Zuazo-Garin)
Reject and Resubmit at the Games and Economic Behavior
Appendix
Identifying higher orders of rationality is crucial to the understanding of strategic behavior. Nonetheless, the identification of a subject's actual order of rationality from observed behavior in games remains highly elusive since games may significantly impact and hence invalidate the identified order. To tackle this fundamental problem, we propose an axiomatic approach that formalizes some of the key difficulties in an explicit manner. We then introduce a probability space to study under which conditions the proposed axioms are necessary for efficient identification. The axioms single out a new class of games, the e-ring games, that we use in a within subject experiment to compare individuals' classifications with the ones obtained in standard games previously used in the literature. The results show that our theoretical approach is empirically feasible and a first step towards a more reliable identification.
Choice by Association to Concepts (with J.Apesteguia) (Draft Coming Soon)
Associations and concepts are key notions in the understanding of human reasoning in fields such as Philosophy, Cognitive Sciences, Linguistics and, more recently, Computer Science. In this paper, we propose a tractable framework in which to introduce the role of concept associations in choice behavior. In our model, the evaluation of alternatives may depend on their associations to concepts, where the relevant concepts are defined by the choice context. We provide axiomatic foundations to give empirical content to the model and develop a measure of the comparative statics of associations. We show that the model could be instrumental in understanding a wide range of behavioral phenomena, such as framing, discrimination, identity, culture, marketing, the media and political economy.
Sequential Choice and Self-Reinforcing Ranking (with P.P. Analytis, A. Gelastopoulos and H. Stojic)
People's behavior is informed and influenced by other people's choices. In many online technologies, for instance, aggregate information about the choices of other individuals is encoded in the form of rankings. Such rankings, in turn, have a direct impact on people's future choices. What are the long-term dynamics of these rankings, and do the dynamics depend on specific assumptions about people's behavior? In this paper, we propose a general framework for modeling the dynamics in settings where information about peoples' past choices is recorded as a ranking and influences future choices. We find a general condition for convergence, show that it is satisfied by many important models in economics and beyond, and characterize the possible limits in terms of the choice probabilities.
Revise and Resubmit at the Journal of the European Economic Association
Evidence from financial markets suggests that asset prices can be consistently far from their fundamental value. Prices seem to underreact to news in the short-run and overreact in the long-run. In this paper, we use evidence from cognitive sciences to describe traders' behavior. A part of traders holds wrong beliefs anytime the market environment does not change sufficiently. We show that such model not only endogenizes noise trading while still allowing for rational one, but it also provides a justification for noise traders' beliefs and it shows that underreaction and overreaction naturally arise in such framework.
Stochastic Choice and Familiarity: Inertia and the Mere Exposure Effect
Revise and Resubmit at the Journal of Economic Behavior and Organization
In this paper we propose a first dynamic model of behavioral inertia that can be easily applied to economic analysis. Using evidence from cognitive sciences, we model a decision maker that has a higher probability of choosing an alternative the more he has been exposed to it. The model allows us (i) to give a first explanation for some empirical evidence that shows that inertia in choices is dynamic, (ii) to give a more general description of the well-known phenomenon of the status-quo bias, (iii) to obtain the endowment effect, loss aversion and present bias as byproducts, and (iv) to quantify the behavioral inertia that affects choices. In particular, we show that it is possible to have accurate forecasts of the kind of heterogeneity we should expect to emerge due to the effect of exposure on inertia. Finally, we provide a choice theoretical foundation of the model and we discuss some possible extensions.
Higher Orders of Rationality and the Structure of Games (with F. Germano, P. Rey-Biel and P. Zuazo-Garin)
Reject and Resubmit at the Games and Economic Behavior
Appendix
Identifying higher orders of rationality is crucial to the understanding of strategic behavior. Nonetheless, the identification of a subject's actual order of rationality from observed behavior in games remains highly elusive since games may significantly impact and hence invalidate the identified order. To tackle this fundamental problem, we propose an axiomatic approach that formalizes some of the key difficulties in an explicit manner. We then introduce a probability space to study under which conditions the proposed axioms are necessary for efficient identification. The axioms single out a new class of games, the e-ring games, that we use in a within subject experiment to compare individuals' classifications with the ones obtained in standard games previously used in the literature. The results show that our theoretical approach is empirically feasible and a first step towards a more reliable identification.
Choice by Association to Concepts (with J.Apesteguia) (Draft Coming Soon)
Associations and concepts are key notions in the understanding of human reasoning in fields such as Philosophy, Cognitive Sciences, Linguistics and, more recently, Computer Science. In this paper, we propose a tractable framework in which to introduce the role of concept associations in choice behavior. In our model, the evaluation of alternatives may depend on their associations to concepts, where the relevant concepts are defined by the choice context. We provide axiomatic foundations to give empirical content to the model and develop a measure of the comparative statics of associations. We show that the model could be instrumental in understanding a wide range of behavioral phenomena, such as framing, discrimination, identity, culture, marketing, the media and political economy.
Sequential Choice and Self-Reinforcing Ranking (with P.P. Analytis, A. Gelastopoulos and H. Stojic)
People's behavior is informed and influenced by other people's choices. In many online technologies, for instance, aggregate information about the choices of other individuals is encoded in the form of rankings. Such rankings, in turn, have a direct impact on people's future choices. What are the long-term dynamics of these rankings, and do the dynamics depend on specific assumptions about people's behavior? In this paper, we propose a general framework for modeling the dynamics in settings where information about peoples' past choices is recorded as a ranking and influences future choices. We find a general condition for convergence, show that it is satisfied by many important models in economics and beyond, and characterize the possible limits in terms of the choice probabilities.
