Working papers results

We develop a general approach to exploring how regret influences strategic interaction and risky choice. Regret is captured by the payoff gap between what a player actually gets and what he believes he would have gotten had he chosen differently. Ex post beliefs are critical to that evaluation, and the modeling therefore draws on tools from psychological game theory. Predictions depend in novel ways on the information structure across end-nodes and assumptions regarding the precise nature of Chance moves. Regret can have a powerful impact in a variety of economic settings including, e.g., investments, delegation, gambling, market entry, and information revelation. 

We study panel data regression models when the shocks of interest are aggregate and possibly small relative to idiosyncratic noise. This speaks to a large empirical literature that targets impulse responses via panel local projections. We show how to interpret the estimated coefficients when units have heterogeneous responses and how to obtain valid standard errors and confidence intervals. A simple recipe leads to robust inference: including lags as controls and then clustering at the time level. This strategy is valid under general error dynamics and uniformly over the degree of signal-to-noise of macro shocks.

Most societies in the world contain strong group identities and the culture supporting these groups is highly persistent. This persistence in turn gives rise to a
practical problem: how do and should societies with strong group identities organize themselves for exchange and public good provision? In this paper, we develop a theoretical framework that allows us to study, normatively and positively, the relationship between social structure, state capacity, and economic activity.