This paper investigates the role of guilt aversion for corruption in public administration. Corruption is modeled as the outcome of a game played between a bureaucrat, a lobby, and the public. There is a moral cost of corruption for the bureaucrat, who is averse to letting the public down. We study how the behavior of the lobby and the bureaucrat depend on perceived public beliefs, when these a...

This study empirically confirms the existence of the status quo deviation aversion hypothesis, but not increasing status quo deviation aversion, in people who own their primary residence. The examination was conducted in the 20 Case-Shiller MSAs across the country. The results are systemic and do not vary substantially by demographic characteristics. However, variations are noted with different...

We study utility-based pricing systems for options written on a nontraded asset in the presence of a correlated traded asset. We develop and analyse a concept of the term structure of risk aversion which unables us to consider options of di¤erent maturities in a way which is consistent with the present value calculations. In our framework European options of di¤erent maturities are priced relat...

This view may not be reflected in the behaviour of those parts of a university which normally purchase and deploy technology infrastructure. These departments or services are slow to change because they are typically, and understandably, risk-averse; the more so, because the consequences of expensive decisions about infrastructure will stay with the organisation for many years. Furthermore acro...

An intriguing problem in stochastic growth theory is as follows: even when the return on investment is arbitrarily high near zero and discounting is arbitrarily mild, long run capital and consumption may be arbitrarily close to zero with probability one. In a convex one-sector model of optimal stochastic growth with i.i.d. shocks, we relate this phenomenon to risk aversion near zero. For a Cobb...

We study optimal consumption and portfolio choice in a framework where investors adjust their labor supply through an irreversible choice of their retirement time. We show that investing for early retirement tends to increase savings and reduce an agent’s effective relative risk aversion, thus increasing her stock market exposure. Contrary to common intuition, an investor might find it optimal ...

In this paper we propose minority voting as a scheme that can partially protect individuals from the risk of repeated exploitation. We consider a committee that meets twice to decide about projects where the first-period project may have a long-lasting impact. In the first period a simple open majority voting scheme takes place. Voting splits the committee into three groups: voting winners, vot...

Prior research argues that a manager whose wealth is more sensitive to changes in the firm׳s stock price has a greater incentive to misreport. However, if the manager is risk-averse and misreporting increases both equity values and equity risk, the sensitivity of the manager׳s wealth to changes in stock price (portfolio delta) will have two countervailing incentive effects: a positive “reward e...

In this paper, a control methodology based on the hyperbolic absolute risk averse (HARA) utility function is presented as an alternative to the exponential-of-an-integral approach to finding robust controllers. This work is inspired by the intuition that HARA controllers, while being robust, may give better performance than exponential controllers in normal situations. The HARA problem is shown...