The standard economic model of decision making assumes a decision maker makes her choices to maximize her utility or happiness. Her current emotional state is not explicitly considered. Yet there is a large psychological literature that shows that current emotional state, in particular positive...

The standard economic model of decision making assumes a decision maker makes her choices to maximize her utility or happiness. Her current emotional state is not explicitly considered. Yet there is a large psychological literature that shows that current emotional state, in particular positive...

We examine situations in which a party must make a sunk investment prior to contracting with a second party to purchase an essential complementary input. We study how the resulting old-up problem is affected by the seller’s information about the investing party’s likely returns...

Firms undertake a variety of actions to reduce risk through diversification, including entering diverse lines of business, taking on project partners, and maintaining portfolios of risky projects such as R&D or natural resource exploration. By a well-known argument, securities holders do not...