What is a rational decision-maker supposed to do when facing an unfamiliar problem, where there is uncertainty but no basis for making probabilistic assessments? One answer is to use a form of expected utility theory, and assume that agents assign their own subjective probabilities to each...

We experimentally test whether risk aversion or ambiguity aversion can explain decisions in a learning-by-doing game. We first measure subjects' preferences toward risk and ambiguity, and then use these measures to predict behavior in the game. We find that ambiguity averse subjects pay more...

The explanation of social inequalities in education is still a debated issue in economics. Recent empirical studies tend to downplay the potential role of credit constraint. This article tests a different potential explanation of social inequalities in education, specifically that social...

This paper proposes a general way to craft public policy when there is no consensual account of the situation of interest. The design builds on a dual extension of the traditional theory of economic policy. It does not require a representative policymaker's utility function (as in the literature...

Twenty years ago, the French created a so far unique insurance scheme to cover damages due to natural catastrophes. This so-called ''Cat-Nat system'' combines private insurance industry, a state-guaranteed public reinsurance and the Treasury. We provide a simple game-theoretic model which seems...

We consider the effect of an increase in the risk from pollution. We show that in the case of a flow pollution, when the number of players is sufficiently large, the result of Bramoulle and Treich, showing that a marginal increase of risk in the neighborhood of a risk-free world is...

The purpose of the study is to collect information that can be used to design a policy to induce the poor to invest in human capital. We use laboratory experimental methodology to measure the preferences and choices of the target population of a proposed government policy. We recruited 256...

This paper focuses on the disparity between willingness-to-pay and willingness-to-accept indices in nonmarket valuation. The substitution effect makes agents value net losses higher than opportunity losses. In regard to net losses, we show that imperfect substitutability respectively induces...

We elicit subjects' willingness to pay to reduce future risk. In our experiments, subjects are given a cash endowment and a risky lottery. They report their willingness to pay to exchange the risky lottery for a safe one. Subjects play the lottery either immediately, eight weeks later, or...

Uncertainties as to future supply costs of nonrenewable natural resources, such as oil and gas, raise the issue of the choice of supply sources. In a perfectly deterministic world, an efficient use of multiple sources of supply requires that any given market exhausts the supply it can draw from...