People reason about real-estate prices both in terms of general rules and in terms of analogies to similar cases. We propose to empirically test which mode of reasoning fits the data better. To this end, we develop the statistical techniques required for the estimation of the casebased model. It is hypothesized that case-based reasoning will have relatively more explanatory power in databases of rental apartments, whereas rule-based reasoning will have a relative advantage in sales data. We motivate this hypothesis on theoretical grounds, and find empirical support for it by comparing the two statistical techniques (rule-based and case-based) on two databases (rentals and sales).

Pareto efficiency is not as compelling when people hold different beliefs as it is under common beliefs or certainty. Gilboa, Samuelson, and Schmeidler (2013) have suggested that the standard Pareto relation be weakened by imposing the additional constraint that, in order for one allocation to dominate another, there should exist a single hypothetical belief under which all agents prefer the former to the latter. In the present work we propose an alternative definition whereby Pareto efficiency is supplemented by the requirement that according to each agent's belief the former alternative is preferred to the latter for all other agents. This paper analyzes and compares these and other definitions.

This paper tries to provide a preliminary description of the mental process individuals experience in their attempt to comprehend stated probabilities of simple lotteries.The evaluation of probabilities is based on three main components: lotteries encountered in the past, the realizations of these lotteries, and the similarity between stated probabilities. A probability is evaluated based on the experienced relative frequencies of outcomes that had that stated probability, as well as outcomes of other lotteries, that had similar stated probabilities. This process may result in distortion of probabilities as observed in the literature, in particular overvaluing low probabilities and undervaluing of high probabilities. We also …nd that when the size of the memory grows, the decision maker learns the real value of the stated probabilities.I am indebted to my advisor Itzhak Gilboa for extremely valuable suggestions at all stages of this project, and for his encouragement and advice. I also thank Eddie Dekel, Ady Pauzner, Ariel Rubinstein, Ran Spiegler and Peter Wakker for many helpful suggestions.

In our model an individual forms beliefs over events based on the frequencies of occurrences of the events in past cases. However, in some cases, he might not know whether or not a speci…c event has occurred. Our model suggests that ambiguity may arise due to this sort of partial information and that attitude towards ambiguity can be explained by the way the individual process such imprecise cases. An individual who tends to put low weight on the possibility that an event occurred in these imprecise cases will turn out to be ambiguity averse, whereas an individual who tends to put high weight on the possibility that this event occurred will turn out to be ambiguity loving.The model is followed by an experiment designed to test the main features of the model. It is corroborated that given precise data subjects are ambiguity neutral while given imprecise data subjects are ambiguity averse.We wish to thank Anat Bracha, Itzhak Gilboa, Dotan Persitz, Ariel Rubinstein, Ella Segev, Peter Wakker and participant of the PhD seminar at Tel Aviv University for many helpful comments and suggestions.

We consider the dynamics of reasoning by general rules (theories) and by speci…c cases (analogies). When an agent faces an exogenous process, we show that, under mild conditions, if reality happens to be simple, the agent will converge to adopt a theory and discard analogical thinking. If, however, reality is complex, the agent may rely on analogies more than on theories. By contrast, when the agent is a player in a large population coordination game, and the process is generated by all players'predictions, convergence to a theory is much more likely. This may explain how a large population of players selects an equilibrium in such a game, and how social norms emerge. Mixed cases, involving noisy endogenous processes are likely to give rise to complex dynamics of reasoning, switching between theories and analogies.