In Europe (and elsewhere) governments intervene to stimulate innovation in the SME sector, and because SMEs face financial constraints in particular, governments encourage the provision of debt and equity (venture capital) finance to such firms. This paper discusses sales contingent claim (SCC...

This paper studies the criteria with which the presence or absence of 'subsidy' in sales contingent Launch Aid Ramp;D support may be determined when payoff-relevant market incompleteness limits the precision of market-based pricing to non-trivial intervals. Existing criteria correctly account...

One of the aims of government policy has been to speed up the diffusion of new technologies. This aim has been pursued largely by policies aimed at improving information about the technology or by subsidising the purchase of new technology. In this paper we construct a simple diffusion model...

Reduction of compound lotteries is implicit both in the statement of the St. Petersburg Paradox and in its resolution by Expected Utility (EU).We report three real-money choice experiments between truncated compound-form St. Petersburg gambles and their reduced-form equivalents. The first tests...

The 2007-08 financial crisis exposed poignant examples of ill-judged risk accretion in both tails of the Lorenz curve: concentrations of inappropriate mortgages within low-income neighborhoods, and concentrations of Bernard Madoff’s victims within wealthy, predominantly Jewish...

Two recently published studies argue that conventional parameterizations of cumulative prospect theory (CPT) fail to resolve the St. Petersburg Paradox. Yet as a descriptive theory CPT is not intended to account for the local representativeness effect, which is known to induce 'alternation bias'...

We report an experiment in which subjects are not indifferent between real-money lotteries implemented with randomization devices that are equivalent under the Reduction Axiom. Instead, choice behavior is consistent with subjective distortion of conditional probability, and this persists in...

Monty Hall is a difficult task which triggers multiple biases. With sophisticated subjects and treatments that reverse and eliminate these triggers, non-rational choice is greatly reduced. Among task-familiar subjects, non-rational choice can can fall to background-error levels. But as our data...