Utilizing the asset pricing framework, we justify S-shaped consumption utility functions by reconciling realized consumption with asset returns. The S-shaped consumption utility predicts a possible negative correlation between asset returns and lower quantiles of consumption growth, for which we...

In the study of rational expectations equilibria, negative exponential and linear utility with a quadratic holding cost are two most commonly used classes of utility functions. Under the classical normality assumption, we show the functional equivalence in the cases of both exogenous and...

I explain puzzles in the school assignment literature using a many-to-one matching model in which participants on one side of the market, the students, are endowed with ego-utilities à la Köszegi (2006). Ego concerns generate a form of information avoidance that results in non-truthful...

We develop one-parameter preference functions for payoff situations in which the decision maker knows the potential states of nature and their payoffs, but not the probability of these states (Knightian uncertainty). Focusing on the extreme version of Knightian uncertainty, we do not employ...