This paper introduces the concept of firm belief, which is proposed as a new epistemic model for a wide class of preferences. In particular, firm beliefs are shown to have the following desirable properties: (i) they are derived from preferences according to a plausible rule of epistemic...

A well-known result in the medical insurance literature is that zero co-insurance is never second-best for insurance contracts subject to moral hazard. We replace the usual expected utility assumption with a version of the rank-dependent utility (RDU) model that has greater experimental support....

Subjective expected utility (SEU) theory is ubiquitous in models of economic environments involving uncertainty. Part of its appeal is its elegant axiomatization by Anscombe and Aumann, whose representation theorem uses little more than the simple geometry of expected utility. Nevertheless, the...