Myopia and Anchoring
Name
aer.20191436.pdf
Description
Published version
Size
921.2 KB
Format
Adobe PDF
Checksum (MD5)
3024629423bf10abbc98c155e9221d16
Author(s)
Angeletos, George-Marios
Huo, Zhen
Date Issued
2021
Journal
American Economic Review
Publisher
American Economic Association
Citation
Angeletos, George-Marios and Huo, Zhen. 2021. "Myopia and Anchoring." American Economic Review, 111 (4).
Version
Final published version
Abstract
We develop an equivalence between the equilibrium effects of incomplete information and those of two behavioral distortions: myopia, or extra discounting of the future; and anchoring of current behavior to past behavior, as in models with habit persistence or adjustment costs. We show how these distortions depend on higher-order beliefs and GE mechanisms, and how they can be disciplined by evidence on expectations. We finally illustrate the use of our toolbox with a quantitative application in the context of inflation, a bridge to the HANK literature, and an extension to networks. (JEL C53, D83, D85, E12, E31, E37)
MIT Department
Massachusetts Institute of Technology. Department of Economics
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1257/AER.20191436
