We study the role of alternative intertemporal preference representations in a model of economic growth, stock pollutant and endogenous risk of catastrophic collapse. We contrast the traditional “discounted utility” model, which assumes risk neutrality with respect to intertemporal utility,...

Oil spills are a major cause of environmental concern, in particular for Europe. However, the traditional approach to the evaluation of the expected external costs of these accidents fails to take into full account the implications of their probabilistic nature. By adapting a methodology...

Many empirical studies in the fields of urban and environmental economics rely on the hedonic pricing framework as described by Rosen (1974). The present paper draws attention to two important elements that are not covered by this theory: relocation costs and uncertainty. A theoretical model is...

In a seminal contribution, Thaler and Johnson ( 35 ) detected the existence of a house money effect which is defined as an increase in risk tolerance after previous gains resulting from a risky activity. Subsequent studies used the term house money effect also in case of windfall gains, i.e.,...

Investments in energy technologies are substantially governed by climate policy. We demonstrate analytically that price-based instruments, such as carbon-taxes, and quantity-based regulations, like emission trading systems, have distinct effects on the (co-)variance of power plant profits. If...

This study experimentally evaluates the risk preferences of children and adolescents living in an urban Chinese environment. We use a simple binary choice task that tests risk aversion, as well as prudence. This is the first test for prudence in children and adolescents. Our results reveal that...

In this paper the authors assess the importance of sample type in the estimation of risk preferences. The authors elicit and compare risk preferences from student subjects and subjects drawn from the general population, using the multiple price list method devised by Holt and Laury (Risk...

Samuelson (1963) conjectured that accepting multiple independent gambles you would reject on a stand-alone basis violated expected utility theory. Ross (1999) and others presented examples where expected utility maximizers would accept multiple gambles that would be rejected on a stand-alone...

This paper solves the irreversible investment decision problem under uncertainty by a new real options method. It yields a Shadow Net Present Value rule such that the investment is triggered only when the shadow revenue of the investment reaches the investment cost. This paper hence corrects and...

While humans often care about sunk investment, animals are not subject to this sort of sunk cost behavior or "Concorde fallacy". This paper investigates a simple two stage decision problem under uncertainty. At the second stage, subjects can commit the Concorde fallacy by sticking to the first...