We develop a theory that rationalizes the use of a dominant unit of account in an economy. Agents enter into non-contingent contracts with a variety of business partners. Trade unfolds sequentially in credit chains and is subject to random matching. By using a dominant unit of account, agents...

This paper uses new household survey data to study expectation formation during the recent housing boom in Germany. The cross section of forecasts depends on only two household characteristics: location and tenure. The average household in a region responds to local conditions but underpredicts...

In der Diskussion um die Verrechtlichung der Arbeitsbeziehungen lenken wir den Blick auf das vermeintlich (zu) arbeitnehmerfreundliche Richterrecht in Deutschland. Aus rechtsökonomischer Perspektive untersuchen wir exemplarisch die Arbeitnehmerhaftung. Sie ist in dieser Sicht effizient...

This paper considers business cycle models with agents who dislike both risk and ambiguity (Knightian uncertainty). Ambiguity aversion is described by recursive multiple priors preferences that capture agents' lack of con fidence in probability assessments. While modeling changes in risk...

"The Ellsberg paradox suggests that people behave differently in risky situations -- when they are given objective probabilities -- than in ambiguous situations when they are not told the odds (as is typical in financial markets). Such behavior is inconsistent with subjective expected utility...