We propose a heuristic switching model of an asset market where the agents' choice of heuristic is consistent with their individual risk aversion. They choose between a fundamentalist and a trend-following rule to form expectations about the price of a risky asset. Given their risk aversion,...

Common integrated assessment models produce the counterintuitive result that higher risk aversion does not lead to stronger near-term abatement. This paper re-examines this result with a DICE model that is fully coupled with a thermohaline circulation model. It also features Epstein-Zin utility...

We use a Wicksellian single rotation framework to analyze the impact of the intertemporally fluctuating and stochastic mean-reverting interest rate process on the optimal harvesting threshold and thereby the expected length of the rotation period, when forest value is also stochastic following...

Most large-scale economic experiments use a between-subjects random incentive system-BRIS-which selects a subset of the participants at random and offers real payment only to the selected participants. We evaluate the relative impact of nominal payoffs and the selection probability on the...

The paper derives the optimal carbon tax in closed-form from an integrated assessment of climate change. The formula shows how carbon, temperature, and economic dynamics quantify the optimal mitigation effort. The model's descriptive power is comparable to numeric models used in policy advising....

In this paper we analyze a large sample of individual responses to six lottery questions. We derive a simultaneous estimate of risk aversion and the time preference discount rate per individual. This can be done because the consumption of a large prize is smoothed over a larger time period. It...

One of the leading theories of entrepreneurship is that less risk averse individuals become entrepreneurs and more risk averse individuals become their employees. Kihlstrom and Laffont (1979) formalized this insight in an elegant and widely taught general equilibrium model. However, their model...

We use perturbation methods to derive a rule for the optimal risk-adjusted social cost of carbon (SCC) that incorporates the effects of uncertainties associated with climate and the economy from a calibrated DSGE model. We allow for different aversions to risk and intertemporal fluctuations,...