In the context of extreme climate change, we ask how to conduct expected utility analysis in the presence of catastrophic risks. Economists typically model decision making under risk and uncertainty by expected utility with constant relative risk aversion (power utility); statisticians typically...

This paper argues that urbanization reshapes individual's risk preference by exerting self-selection and assimilation effects. Taking advantage of the unique hukou system in the People's Republic of China, we initiate a quasi-experiment method to elicit the two effects, employing the 2013-wave...

We study the impact of loss-aversion and the threat of catastrophic damages, which we jointly call threshold concerns, on international environmental agreements. We aim to understand whether a threshold for dangerous climate change is as an effective coordination device for countries to overcome...

We study the impact of loss-aversion and the threat of catastrophic damages, which we jointly call threshold concerns, on international environmental agreements. We aim to understand whether a threshold for dangerous climate change is as an effective coordination device for countries to overcome...

The question of how to discount the distant future has long been at the core of climate economics. It has also divided economists. Some argue for prescriptivist approaches to discounting, often calling for social discount rates of as low as 1% per year. Others argue strongly for descriptivist...

The notion of the greenhouse gas (GHG) aversion (GHGA) is introduced into the mean-variance portfolio (MVP) framework. GHGA is assumed to be a weighted sum of the portfolio holdings’ GHG emission intensities. A new portfolio performance measure, the GHGA-tilted Sharpe ratio, is offered for...

The question of how to discount the distant future has long been at the core of climate economics. It has also divided economists. Some argue for prescriptivist approaches to discounting, often calling for social discount rates of as low as 1% per year. Others argue strongly for descriptivist...

We analyse optimal investment in one of the most important forms of climate adaptation: flood protection. Investments to build and heighten dykes and surge barriers involve considerable adjustment costs, so that their construction locks in the level of flood protection for some time. Investment...