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Optimal Expectations [PDF]

open access: possibleAmerican Economic Review, 2005
Forward-looking agents care about expected future utility flows, and hence have higher current felicity if they are optimistic. This paper studies utility-based biases in beliefs by supposing that beliefs maximize average felicity, optimally balancing this benefit of optimism against the costs of worse decision making.
Brunnermeier, Markus K   +1 more
openaire   +6 more sources

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