Do the consequences of past behavior alter future policy, as the law of effect assumes? Or, are behavioral policies based on behaviorally produced information about the state of the world, but not themselves subject to change? In the first case, stable policies are equilibria discovered by trial and error, so adjustments to abrupt changes in the environment must proceed slowly. In the second, a...

In a perfect world, the choice of any course of action would lead to a satisfactory outcome, and we would obtain feedback about both our chosen course and those we have chosen to forgo. In reality, however, we often face harsh environments in which we can only minimize losses, and we receive impoverished feedback. In these studies, we examined how decision makers dealt with these challenges in ...

Starting in 2009, the Labor Insurance (LI) program in Taiwan has allowed workers to choose between pension old-age benefits and one-time old-age benefits. The introduction of the pension option not only mitigates longevity risk for workers but also provides a higher expected present value of old-age benefits to workers than the one-time benefit option (on average). Based on a lifecycle model wi...

We document that fear about misspecified economic and central bank policies explain 45% of variations in bond option implied volatilities and interest rate volatilities. We endogenize this empirical pattern with a parsimonious equilibrium asset pricing model. In equilibrium, volatility is endogenously driven by fear of not knowing the data generating process that drives future economic and futu...

Regarding ethical considerations, please be advised that the medications applied in this study are all routinely used to treat patients with ulcerative colitis. All are officially approved interventions. Additionally, it is our hospital policy that all patients accept the treatment option and are treated in accord with the Helsinki Declaration as stated in the methods section, under Ethical con...

This study examines the effectiveness of two prevailingly used sets of mutually exclusive surcharge policies in C2C online auctions. The first policy is the option of using an all-inclusive pricing strategy or a partitioned pricing strategy. The second policy entails the flexibility of shipping policies based on shipping destinations (domestic shipping versus worldwide shipping). The impacts of...

A multiarmed bandit problem is studied when the arms are not always available. The arms are first assumed to be intermittently available with some state/action-dependent probabilities. It is proven that no index policy can attain the maximum expected total discounted reward in every instance of that problem. TheWhittle index policy is derived, and its properties are studied. Then it is assumed ...

We study the perpetual American call option pricing problem in a model of a financial market in which the firm issuing a risky asset can regulate the dividend rate by switching it between two constant values. The firm dividend policy is unknown for small investors who can only observe the prices available from the market. The asset price dynamics are described by a geometric Brownian motion wit...

Energy costs are notoriously uncertain but what is the effect of this on energysaving investments? We find that real-option frictions imply a novel equilibrium response to increasing but uncertain energy costs: early investments are cautious but ultimately real-option frictions endogenously vanish, and the activity affected by higher energy costs fully recovers. We use electricity market data f...

L Finitely many growth options 30 L.1 Optimal policy in the waiting period . . . . . . . . . . . . . . . . . . . . . . 31 L.2 Optimal strategy for a firm with a growth option . . . . . . . . . . . . . . . 34 L.3 Proofs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 L.4 Solution to Problem 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 L.5 Solu...