This paper contains an analysis of a simple principal-agent problem illustrating possible problems that may arise when the prinicpal ascribes to the agent subjective probabilities and utilities that are implied by the subjective expected utility model but do not represent the agent’s beliefs and valuations. In particular, it is possible that an incentive contract designed by the principal induc...

We study a model of non-Bayesian updating, based on the Hypothesis Testing model of Ortoleva (2012), for ambiguity averse agents. Agents ranks acts following the MaxMin Expected Utility model of Gilboa and Schmeidler (1989) and when they receive new information they update their set of priors as follows: If the information is such that all priors in the original set of priors assign to it a pro...

The transportation business sector, along with many others, has not, to a large extent, evaluated the possibility of gaining advantages through the use of more elaborated decision tools for operational decision making. This article presents a case study where an interval based decision tool was used for transportation business applications. The investigation was made in collaboration with a wel...

We discuss an economy which is subject to aggregate productivity shocks affecting all factors of production. The additional presence of income risk shifts the margin where agents save out of precautionary motives downwards, such that it does no longer correspond to logarithmic preferences.

This paper develops an approach to testing the adequacy of both classical and Bayesian models given sample data. An important feature of the approach is that we are able to test the practical scientiic hypothesis of whether the true underlying model is close to some hypothesized model. The notion of closeness is based on measurement precision and requires the introduction of a metric for which ...

Trust is a complex and multidimensional phenomenon. Organizational trust is an important part of professional relationships between co-workers, between managers and employees, or between employees and managers. Trust can be either interpersonal or institutional in nature. To measure, understand, and explain trust in an organizational context, it is important to identify different dimensions of ...

This paper performs new and more robust tests of the QALY model when health varies over time. Our tests do not involve confounding assumptions and are robust to violations of expected utility. Our results support the use of QALYs at the aggregate level, i.e. in economic evaluations of health care. At the individual level, there is less support for QALYs. The individual data are, however, largel...