We consider a production planning problem under uncertainty in which companies have to make product allocation decisions such that the risk of failing regulatory inspections of sites and consequently losing revenue is minimized. In the proposed decision model the regulatory authority is an adversary. The outcome of an inspection is a Bernoulli-distributed random variable whose parameter is a fu...

The Working Papers should not be reported as representing the views of the Banco Central do Brasil. The views expressed in the papers are those of the author(s) and do not necessarily reflect those of the Banco Central do Brasil. This paper characterizes ambiguity averse preferences in the absence of the completeness axiom. We axiomatize multiple selves versions of some of the most important ex...

We consider an auction setting where the buyers are risk averse with correlated private valuations (CARA preferences, binary types), and characterize the optimal mechanism for a risk neutral seller. We show that the optimal auction extracts all buyer surplus whenever the correlation is sufficiently strong (greater than 1/3 in absolute value), no matter how risk averse the buyers are. In contras...

We study the coordination of supply chains with a risk-neutral supplier and a risk-averse retailer. Different from the downside risk setting, in a conditional value-at-risk (CVaR) framework, we show that the supply chain can be coordinated with the revenue-sharing, buy-back, two-part tariff and quantity flexibility contracts. Furthermore the revenuesharing contracts are still equivalent to the ...

We present a random variable characterization of the necessary and sufficient conditions for a shift of the distribution of rate of return on the risky asset in the two asset portfolio problem to reduce demand for all risk–averse expected utility maximizing investors. We also present a random variable characterization of the shifts that lead to both a reduction in demand and a non–increase in e...