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Targeted Product Design

By Heski Bar-Isaac, Guillermo Caruana, and Vicente Cuñat

American Economic Journal: Microeconomics, May 2023

We propose an intuitive representation of product design in which firms locate inside a circle and consumers in its outer circumference. Designs trade off horizontal and vertical transport costs. Our setting encompasses all linear demand rotations. Firms ...

Biased Beliefs in Search Markets

By Tobias Gamp and Daniel Krähmer

American Economic Journal: Microeconomics, May 2023

We study the implications of biased consumer beliefs for search market outcomes in the seminal framework due to Diamond (1971). Biased consumers base their search strategy on a belief function that specifies for any (true) distribution of utility offers i...

Complexity and Procedural Choice

By James Banovetz and Ryan Oprea

American Economic Journal: Microeconomics, May 2023

We test the core ideas of the "automata" approach to bounded rationality, using simple experimental bandit tasks. Optimality requires subjects to use a moderately complex decision procedure, but most subjects in our baseline condition instead use simpler ...