In the literature of financial economics, there has not been introduced yet a model which is capable of explaining at the same time high risk premium and low risk-free rate. Mehra and Prescott (1985) have found that it requires implausibly high levels of risk aversion on the part of the...

This paper uses panel data and Euler equations to estimate preference specifications that are nonseparable in consumption and leisure. The econometric analysis uses panel data, and therefore it differs from existing econometric studies that use a representative agent framework. Moreover, the...

In this paper, we develop finite-sample inference procedures for stationary and nonstationary autoregressive (AR) models. The method is based on special properties of Markov processes and a split-sample technique. The results on Markovian processes (intercalary independence and truncation) only...

I examine the case where fulfillment of a contractual commitment is only imperfectly verifiable and ask whether the court should then "tell the truth"" regarding the action in dispute. I show that truth seeking does not maximize the expected surplus from contractual relationships. From the...

We consider the cost of providing incentives through tournaments when workers are inequity averse and performance evaluation is costly. The principal never benefits from empathy between the workers, but he may benefit from their propensity for envy depending on the costs of assessing...

We compare the wage costs of providing incentives through group versus individual bonus schemes. When workers are envious, either scheme may be the least cost one owing to the trade-off between the dissatisfaction with the prospect of unequal pay and the incentives it generates Nous comparons...

This paper analyzes the incentive properties of the standard and burden of proof for a finding of negligence, when evidence about injurers' behavior is imperfect and rests with the parties. We show that the `preponderance of evidence' standard used in common law, together with ordinary exclusion...

The paper reports on an experiment testing whether agents perceive correctly the lethal risks they face personally. The results suggest that subjects exhibit comparable biases when making predictions for their own-age-cohort, or for the entire population (i.e. agents overestimate rare risks, and...

We argue that the common law standard of proof, given the rules of evidence, does not minimize expected error as usually argued in the legal literature, but may well be efficient from the standpoint of providing maximal incentives for socially desirable behavior. By contrast, civil law's higher...

This paper develops a general stochastic framework and an equilibrium asset pricing model that make clear how attitudes towards intertemporal substitution and risk matter for option pricing. In particular, we show under which statistical conditions option pricing formulas are not...