We introduce a notion of coarse competitive equilibrium (CCE), to study households’ inability to tailor their consumption to the state of the economy. Our notion is motivated by limited cognitive ability (in particular attention, memory, and complexity) and it main-tains the complete market structure of competitive equilibrium. Compared to standard competitive equilibrium, our concept yields riskier allocations and more extreme prices (both for consumption and for assets). Thus, limited cognitive ability can produce mar-ket data that are usually attributed to heightened degrees of risk aversion. We provide a tractable model that is suitable for general equilibrium analysis as well as asset pricing in dynamic environments.

This paper proves that the additive representation of Dekel-Lipman-Rustichini (2001) is consistent with any preference relation among the deterministic alternatives in their model. The result yields an additive representation which relaxes both the monotonicity and ordinal sub-modularity axioms in Kreps (1979) flexibility representation theorem.

Monopoly”. While many colleagues have provided valuable and in some cases detailed comments, special debts are due to Kevin Murphy (who originally inspired the work), Tony Atkinson and Faruk Gul (for suggesting the subtitle and title of the article, respectively), Luciano de Castro and Michael

-parameter utility function based on Faruk Gul (1991). This specification provides a good interpretation of the data at the individual level and can account for the highly heterogeneous behaviors observed in the laboratory. The parameter estimates jointly describe attitudes toward risk and allow us to characterize

---but their short-run e#ective rates of discount may be negative. Our model, which is an elaboration on the framework proposed by Faruk Gul and Wolfgang Pesendorfer, does not feature time inconsistencies. Thus, we view consumers as fully rational, but subject to specific "internal frictions" in the form

, Incomplete preferences, Cautious Completion, Multi-Utility representation. * We thank Faruk Gul, Fabio Maccheroni, Massimo Marinacci, Efe Ok, Wolfgang Pesendorfer, Gil Riella, and Todd Sarver for very useful comments and suggestions. The co-editor and four anonymous referees provided valuable comments

, when players can make o¤ers arbitrarily frequently. The paper also presents two applications of the baseline model featuring delays and ine ¢ ciencies. I am indebted to Faruk Gul, Wolfgang Pesendorfer and Sylvain Chassang for advice, encouragement and support. For helpful comments I also thank Dilip

I am grateful to Esteban Rossi-Hansberg and especially to Gene Grossman and Faruk Gul for helpful comments. I have also benefited from a stimulating discussion by Thomas Chaney at the CEPR Conference on Product Heterogeneity and Quality Heterogeneity in International Trade. An earlier draft

helps him to infer higher-order beliefs on others information after communication. We also single out the geometry of informal communication channels among workers that the manager would like to implement to improve the organizations performance. We are grateful to Faruk Gul and Xavier Vives for helpful

-run effective rates of discount may be negative. Our model, which is an elaboration on the framework proposed by Faruk Gul and Wolfgang Pesendorfer, does not feature time inconsistencies. Thus, we view consumers as fully rational, but subject to specific “internal frictions ” in the form of temptation