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Bailout Uncertainty in a Microfounded General Equilibrium Model of the Financial System

Cukierman, Alex; Izhakian, Yehuda - C.E.P.R. Discussion Papers - 2011

between risk and uncertainty is implemented by applying the Gilboa-Schmeidler maxmin with multiple priors framework to lenders …

Persistent link: https://www.econbiz.de/10009144737

Dynamic Incentive Contracts under Parameter Uncertainty

Jovanovic, Boyan; Prat, Julien - C.E.P.R. Discussion Papers - 2010

We analyze a long-term contracting problem involving common uncertainty about a parameter capturing the productivity of the relationship, and featuring a hidden action for the agent. We develop an approach that works for any utility function when the parameter and noise are normally distributed...

Persistent link: https://www.econbiz.de/10008784751

Banker Compensation and Confirmation Bias

Sabourian, Hamid; Sibert, Anne - C.E.P.R. Discussion Papers - 2009

Confirmation bias refers to cognitive errors that bias one towards one's own prior beliefs. A vast empirical literature documents its existence and psychologists identify it as one of the most problematic aspects of human reasoning. In this paper, we present three related scenarios where...

Persistent link: https://www.econbiz.de/10005661569

Cognitive Ability and Paternalism

Saint-Paul, Gilles - C.E.P.R. Discussion Papers - 2002

This Paper analyses the welfare effects of price restrictions on private contracting in a world where agents have a limited cognitive ability. People compute the costs and benefits of entering a transaction with an error. The government knows the distribution of true costs and benefits as well...

Persistent link: https://www.econbiz.de/10005662402

An Economic Analysis of Exclusion Restrictions for Instrumental Variable Estimation

den Berg, Gerard J van - C.E.P.R. Discussion Papers - 2007

Instrumental variable estimation requires untestable exclusion restrictions. With policy effects on individual outcomes, there is typically a time interval between the moment the agent realizes that he may be exposed to the policy and the actual exposure or the announcement of the actual...

Persistent link: https://www.econbiz.de/10005792073

Optimal Interventions in Markets with Adverse Selection

Philippon, Thomas; Skreta, Vasiliki - C.E.P.R. Discussion Papers - 2010

We study interventions to restore efficient lending and investment when financial markets fail because of adverse selection. We solve a design problem where the decision to participate in a program offered by the government can be a signal for private information. We charac terize optimal...

Persistent link: https://www.econbiz.de/10008468692

Collateralisation bubbles when investors disagree about risk

Broer, Tobias; Kero, Afroditi - C.E.P.R. Discussion Papers - 2014

contributed to higher asset prices through increased use of collateralisation, which allows risk-neutral investors to realise … perceived gains from trade. Investors with lower risk perceptions buy collateralised loans, whose downside-risk they perceive as … small. Investors with higher risk perceptions buy upside-risk through asset purchase and collateralised loan issuance …

Persistent link: https://www.econbiz.de/10011084220

Was Prometheus Unbound by Chance? Risk, Diversification and Growth

Acemoglu, Daron; Zilibotti, Fabrizio - C.E.P.R. Discussion Papers - 1996

This paper offers a theory of development which links the degree of market incompleteness to capital accumulation and … growth. At early stages of development, the presence of indivisible projects limits the degree of risk …

Persistent link: https://www.econbiz.de/10005124312

Groupthink: Collective Delusions in Organizations and Markets

Bénabou, Roland - C.E.P.R. Discussion Papers - 2009

I develop a model of (individually rational) collective reality denial in groups, organizations and markets. Whether participants' tendencies toward wishful thinking reinforce or dampen each other is shown to hinge on a simple and novel mechanism. When an agent can expect to benefit from other's...

Persistent link: https://www.econbiz.de/10005666620

Manipulating Reliance on Intuition Reduces Risk and Ambiguity Aversion.

Butler, Jeff; Guiso, Luigi; Jappelli, Tullio - C.E.P.R. Discussion Papers - 2013

averse to risk and ambiguity. The evidence is largely correlational, however, leaving open the question of the direction of … causality. In this paper, we present experimental evidence of causation running from reliance on intuition to risk and ambiguity … lowers the probability of being ambiguity averse by 30 percentage points and increases risk tolerance by about 30 percent in …

Persistent link: https://www.econbiz.de/10011083555