| Summary: | This dissertation explores how experience and environment impact behavior. In the first chapter, I provide behavioral foundations for a model of taste uncertainty with endogenous learning through consumption. In this setting, uncertainty is over an unobservable, subjective state space. Preference over lottery-menu pairs is sufficient to identify the state space and the learning process. In this model, the agent is viewed as if he learns the utility of an object upon its consumption. This information is used to improve choice from the follow-on menu. This implies a trade-off between consumption value and information leading to experimentation. I provide a behavioral definition of experimentation. While the literature focuses on identifying subjective states through a demand for flexibility, I show that experimentation also (partially) identifies taste uncertainty.
The second chapter explores the potential for social networks to affect decisions of political leaders. To this end we construct a database linking European royal kinship networks, monarchies, and wars to study the effect of family ties on conflict. To establish causality, we exploit decreases in connection caused by apolitical deaths of network important individuals. These deaths are associated with substantial increases in the frequency and duration of war. We provide evidence that these deaths affect conflict only through changing the kinship network. Over our period of interest, the percentage of European monarchs with kinship ties increased threefold. Together, these findings help explain the well-documented decrease in European war frequency.
The final chapter builds on the robust finding from the psychology literature that the co-presentation of products causes consumers to associate them. Associated products are evaluated more similarly. Supposing that agents behave according to this evidence, I axiomatically derive a tractable utility model of this association effect. In an application, I study a two-product monopolist that can strategically choose whether or not to offer his products under the same brand. I demonstrate that psychological association can provide strict incentives for either brand extension or brand differentiation depending on the distribution of product valuations in the market. Appropriate branding strategies allow firms to extract more surplus from consumers when psychological association is present.
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