Profit maximization is not a well defined objective when markets are incomplete. Several criteria of investment choice have therefore been put forward in the literature, some of which crucially hinge upon aggregation of shareholders' preferences, as is the case with the criteria proposed by...

This paper proposes an equilibrium concept for n-person finite games based on boundedly rational decision making by players. The players are modeled as following random choice behavior in the manner of the logit model of descrete choice theory as set forth by Luce.

We study the effect of dynamic and investment externalities in a one-sector growth model. In our model, two agents interact strategically in the utilization of capital for consumption, savings, and investment in technical progress. We consider two types of investment choices: complements and...

In the literature, utility functions in the expected utility class are generically limited to second-order (conditional) risk aversion, while non-expected utility functions can exhibit either first-order or second-order (conditional) risk aversion. This paper extends the concepts of order of...

We consider the original Arrow-Lind framework in which a government undertakes a risky project to be shared among many taxpayers. In our model, the taxpayers decide the level of participation in the risky project. Moreover, the amount of taxes collected by the government fully finances the...

Building on Kihlstrom and Mirman (1974)’s formulation of risk aversion in the case of multidimensional utility functions, we study the effect of risk aversion on optimal behavior in a general consumer’s maximization problem under uncertainty. We completely characterize the relationship...

Harsanyi (1955) proved that, in the context of uncertainty, social ratio- nality and the Pareto principle impose severe constraints on the degree of priority for the worst-off that can be adopted in the social evaluation. Since then, the literature has hesitated between an ex ante approach that...

The identification of information problems in different markets is a challenging issue in the economic literature. In this paper, we study the identification of moral hazard from adverse selection and learning within the context of a multi-period dynamic model. We extend the model of Abbring et...

We analyze the empirical relationship between opportunistic fraud and business cycle. We find that residual opportunistic fraud exists both in the contract with replacement cost endorsement and the contract with no-deductible endorsement in the Taiwan automobile theft insurance market. These...

The study of risk management began after World War II. Risk management has long been associated with the use of market insurance to protect individuals and companies from various losses associated with accidents. Other forms of risk management, alternatives to market insurance, surfaced during...