Ambiguity preferences are important to explain human decision-making in many areas in economics and finance. To measure individual ambiguity preferences, the experimental economics literature advocates using incentivized laboratory experiments. Yet, laboratory experiments are costly and require a lot of time and administrative effort. This study develops an ambiguity preference survey module th...

This paper is devoted to the study of how to extend a dichotomous partition of a universal set X into good and bad objects to an ordering on the power set of X. We introduce a family of rules that naturally take into account the number of good objects and the number of bad objects, and provide axiomatic characterizations of two rules for ranking sets in such a context. JEL Classi…cation Number:...

Tobin (1958) has argued that in the face of potential capital losses on bonds it is reasonable to hold cash as a means to transfer wealth over time. It is shown that this assertion cannot be sustained taking into account the evolution of wealth of cash holders versus non cash holders. Cash holders will be driven out of the market in the long run by traders who only use a (risky) long-lived asse...

This paper studies the dynamics of durable and nondurable consumption under two alternative assumptions about information updating by households — rational inattention and sticky expectations. We find that sticky expectations due to a fixed cost does a better job of reproducing the infrequent adjustments at the individual level and the slow adjustments at the aggregate level. We then show that ...

We show how optimal saving in a two-period model is affected when prudence and risk aversion of the underlying utility function change. Increasing prudence alone will induce higher savings only if, for certain combinations of the interest rate and the pure time discount rate, there is distributional neutrality between the two periods. Otherwise, changes of risk aversion that affect the distribu...

We show the incompatibility between the existence of stationary subgame perfect equilibria in Shaked’s game of cycling offers with exogenous breakdown and the behavior of players consistent with the Allais Paradox. Thus, the strategic support of the equally marginally bold solution presented in Burgos, Grant, and Kajii [2002. Games Econ. Behav. 38, 28–51] does not go beyond the two-person case....

Tobin (1958) has argued that in the face of potential capital losses on bonds it is reasonable to hold cash as a means to transfer wealth over time. It is shown that this assertion cannot be sustained taking into account the evolution of wealth of cash holders versus non cash holders. Cash holders will be driven out of the market in the long run by traders who only use a (risky) long-lived asse...

The concept of a non-extreme-outcome-additive capacity (neo-additive capacity ) is introduced. Neo-additive capacities model optimistic and pessimistic attitudes towards uncertainty as observed in many experimental studies. Moreover, neo-additive capacities can be applied easily in economic problems, as we demonstrate by examples. This paper provides an axiomatisation of Choquet expected utilit...

We analyse how progressive taxation and education subsidies affect schooling decisions when the returns to education are stochastic. We use the theory of real options to solve the problem of education choice in a dynamic stochastic model. We show that education attainment will be an increasing function of the risk associated with education. Furthermore, this result holds regardless of the degre...

The purpose of this paper is to suggest a new theory of portfolio selection which is based on evolutionary reasoning in simple repeated market situations. According to this new point of view the ultimate success of a portfolio strategy is measured by the wealth share the strategy is eventually able to conquer in an evolutionary process of market selection. We identify a simple portfolio strateg...