We use the revealed preference method to derive a model of individual decision making when one’s endowment provides a reference point that may influence her choices. This model generalizes the classical rational choice model. While the latter views choice as a consequence of “utility maximization,” the model proposed here views choice as arising from “mentally constrained utility maximization,”...

We study the Markov equilibria of a model of free riding in which n infinitely lived agents choose between private consumption and irreversible contributions to a durable public good. We show that the set of equilibrium steady states converges to a unique point as depreciation converges to zero. For any level of depreciation, moreover, the highest steady state converges to the efficient level a...

In a model of dynamic duopoly, optimal price policies are characterized assuming consumers learn adaptively about the relative quality of the two products. A contrast is made between belief-based and reinforcement learning. Under reinforcement learning, consumers can become locked into the habit of purchasing inferior goods. Such lock-in permits the existence of multiple history-dependent asymm...

We derive a new cost of information in rational inattention problems, the neighborhood-based functions, starting from observation that many settings involve exogenous states with topological structure. These functions are uniformly posterior separable and capture notions perceptual distance. This second property ensures costs, unlike mutual information, make accurate predictions about behavior ...

We study the life cycle of a firm that produces good unknown quality. The manages its quality by investing while consumers learn via public breakthroughs; if fails to generate such breakthroughs, revenue falls and it eventually exits. Optimal investment depends on firm’s reputation (the market’s belief about quality) self-esteem own quality), is single-peaked in time since breakthrough. derive ...

This paper studies competitive allocations under adverse selection. We first provide a general necessary and sufficient condition for entry on an inactive market to be unprofitable. then use this result characterize, active market, unique budget-balanced allocation implemented by tariff making additional trades with entrant Motivated the recursive structure of allocation, we finally show that i...

This paper presents the partial analytical solution to a model of periodic consumption that incorporates imperfect capital markets and uncertainty. Our model assumes that consumption decisions occur more frequently than income receipt. We show that the week specific consumption functions can be ordered. At low levels of wealth these functions exhibit a “ushaped” pattern between income receipts....

Neurocysticercosis is a major cause of epilepsy in developing countries. Cysticercal involvement of the spinal cord is rare even in endemic areas and accounts for 0.7 to 5.85% of all cases. We present a 19-year-old man who presented with weakness of both lower limbs and urinary complaints in the form of straining of micturition with increased frequency, in whom preoperative MRI revealed a well-...

Most existing portfolio choice models ignore the prevalent periodic market closure and the fact that market volatility is significantly higher during trading periods. We find that market closure and the volatility difference across trading and nontrading periods significantly change optimal trading strategies. In addition, we numerically demonstrate that transaction costs can have a first order...

The paper introduces the concept of adjustment utility, that is, referencedependent utility from expectations. It offers an explanation for observed preferences that cannot be explained with existing models, and yields new predictions for individual decision making. The model gives a simple explanation for, e.g., why people are reluctant to change their plans even when these turn out to be unex...