Myopia and Anchoring

George-Marios Angeletos and Zhen Huo

No 24545, NBER Working Papers from National Bureau of Economic Research, Inc

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-codes: D83 D84 E03 E10 E32 G12 (search for similar items in EconPapers)
Date: 2018-04
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mic
Note: AP EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published as George-Marios Angeletos & Zhen Huo, 2021. "Myopia and Anchoring," American Economic Review, American Economic Association, vol. 111(4), pages 1166-1200, April.

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