The paper provides a psychological explanation of uncertainty aversion based on the fear of regret. We capture an agent’s regret using a reference-dependent utility function in which the agent’s utility depends on the performance of his chosen option relative to the performance of the option...

The paper studies a repeated contest when contestants are uncertain about their true abilities. A favourable belief about one’s own ability (confidence) stimulates effort and increases the likelihood of success. Success, in turn, reinforces favourable beliefs. We consider a specific example in...

We investigate a two-period Bertrand market in which one seller introduces a new product of uncertain quality. The new product competes with an alternative good of known quality. Ex ante neither sellers nor consumers know the value of the new product. While consumers can learn their valuation by...

The paper studies the role of delegation and authority within a principal-agent relation in which a non-contractible action has to be taken. The agent has private information relevant for the principal, but has policy preferences different from the principal. Consequently, an information...

This paper analyses the relation between authority and incentives. It extends the standard principal--agent model by a project selection stage in which the principal can either delegate the choice of project to the agent or keep the authority. The agent's subsequent choice of effort depends both...

This article analyzes the relation between authority and incentives. It extends the standard principal-agent model by a project selection stage in which the principal can either delegate the choice of project to the agent or keep the authority. The agent's subsequent choice of effort depends...

The paper formalizes the intuition that brands are consumed for image reasons and that advertising creates a brand’s image. The key idea is that advertising informs the public of brand names and creates the possibility of conspicuous consumption by rendering brands a signalling device. In...

This paper analyzes bilateral contracting in an environment with contractual incompleteness and asymmetric information. One party (the seller) makes an unverifiable quality choice and the other party (the buyer) has private information about its valuation. A simple exit option contract, which...