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Schelling (1956) first clarified how power to reduce one’s freedom of choice might benefit a bargaining party. A commitment to reject proposals, when successful, may force concessions from opponents …
Discussion paper
This paper studies the effects of overreaction to recent news for macroeconomic outcomes in the context of a quantitative model of sovereign debt and default. Overreaction is formalized in terms of …
Discussion paper
Chasing and the house money effect are well-known phenomena in dynamic environments of risky activities such as investment decisions or gambling. Recent studies suggest that such behavior emerges …
Discussion paper