Human utility embodies a number of seemingly irrational aspects. The leading example in this paper is that utilities often depend on the presence of salient unchosen alternatives. Our focus is to understand <i>why</i> an evolutionary process might optimally lead to such seemingly dysfunctional features...

This paper studies a model of mechanism design with transfers where agents' preferences need not be quasilinear. In such a model, (1) we characterize dominant strategy incentive compatible mechanisms using a monotonicity property; (2) we establish a revenue uniqueness result: for every dominant...

The paper proposes a novel way to handle the relation between decision theory and uncertainty in the context of policy design. Present risk governance is based primarily on two institutions - insurance markets and public risk governance - supported by a powerful theory: the expected utility...

Risikomanagement erscheint zunächst als originär betriebswirtschaftliches Sujet. Globale Krisen wie die internationale Finanzkrise, die COVID-19-Pandemie oder der russische Angriffskrieg sowie die daraus folgenden energiepolitischen Fragen zeigen jedoch, dass der staatliche Umgang mit Risiken...

This paper studies a two-person trading game in continuous time that generalizes Garivaltis (2018) to allow for stock prices that both jump and diffuse. Analogous to Bell and Cover (1988) in discrete time, the players start by choosing fair randomizations of the initial dollar, by exchanging it...

Uncertainty in economics is generated by “nature” but also by the model we use to “produce the future”. The production of the future comprises besides the allocation of resources on different instruments (technologies, financial products) also the design of the instruments....

This paper studies the design of optimal fiscal policy when a government that fully trusts the probability model of government expenditures faces a fearful public that forms pessimistic expectations. We identify two forces that shape our results. On the one hand, the government has an incentive...

This paper studies recursive exchange economies with short sales. Agents maximize discounted expected utility. The asset structure is general and includes real securities, infinite-lived stocks, options, and other derivatives. The main result shows the existence of a competitive equilibrium...

In this paper, we establish an axiomatically founded generalized recursive smooth ambiguity model that allows for a separation among intertemporal substitution, risk aversion, and ambiguity aversion. We axiomatize this model using two approaches: the second-order act approach à la Klibanoff,...