This paper introduces a model of endogenous network formation and systemic risk. In it, agents form networks that efficiently trade-off the possibility of systemic risk with the benefits of trade. Second, fundamentally ‘safer' economies generate higher interconnectedness, which in turn leads...

We study a decision maker who faces a dynamic decision problem in which the process of information arrival is subjective. By studying preferences over menus of acts, we derive a sequence of utility representations that captures the decision maker’s uncertainty about the beliefs he will hold...

We study a two-stage choice problem, where alternatives are allocations between the decision maker (DM) and a passive recipient. The recipient observes choice behavior in stage two, while stage one choice is unobserved. Choosing selfishly in stage two, in the face of a fairer available...

We study a decision maker (DM) who has recursive preferences over compound lotteries and who cares about the way uncertainty is resolved over time. DM has preferences for one-shot resolution of uncertainty (PORU) if he always prefers any compound lottery to be resolved in a single stage. We...

We study the attitude of decision makers to skewed noise. For a binary lottery that yields the better outcome with probability p, we identify noise around p, with a compound lottery that induces a distribution over the exact value of the probability and has an average value p. We propose and...

Maximizing subjective expected utility is the classic model of decision making under uncertainty. Savage (1954) provides axioms on preference over acts that are equivalent to the existence of a subjective expected utility representation, and further establishes that such a representation is...

Individuals often tend to conform to the choices of others in group decisions, compared to choices made in isolation, giving rise to phenomena such as group polarization and the bandwagon effect. We show that this behavior, which we term the consensus effect, is equivalent to a well-known...

We study preferences over lotteries that pay a xed prize at an uncertain future date: what we call time lotteries. The standard model of risk and time preferences, Expected Discounted Utility, implies that individuals must be risk seeking towards such lotteries (RSTL). In contrast, we show...

One of the most well-known models of non-expected utility is Gul (1991)'smodel of Disappointment Aversion. This model, however, is defined implicitly,as the solution to a functional equation; its explicit utility representation is unknown,which may limit its applicability. We show that an...

We study a simple variant of the house allocation problem (one-sided matching). We demonstrate that agents with recursive preferences may systematically prefer one allocation mechanism to the other, even among mechanisms that are considered to be the same in standard models, in the sense that...