In spite of fiat money is useless in a standard Arrow-Debreu model, in this paper we will show that this does not hold true anymore when goods are indivisible. In our setting, although fiat money yields no utility, its price will always be positive and the set of equilibrium allocations changes...

This paper reports an experimental study on three well known solutions for claims problems, that is, the constrained equal-awards, the proportional, and the constrained equal-losses rules. To do this, we first let subjects play three games designed such that the unique equilibrium allocation...

In this paper we experimentally investigate decentralized, organizational learning. The main objective is to understand how learning members of an organization cope with the confounding effects of the simultaneous learning of others. We use versions of a simple "success-or-failure" game due to...

This paper evaluates performance of human subjects and instances of a bidding model that interact in continuous-time double auction experiments. Asks submitted by instances of the seller model ("automated sellers") maximize the seller's expected surplus relative to a heuristic belief function,...

Researchers typically assume experimental subjects have rational expectations. If the object of the experiment is to learn the distibution of decision makers' types, then this amounts to assuming subjects' know the very thing the researcher wishes to learn. We propose a method of conducting...

We use household survey data to construct a direct measure of absolute risk aversion based on the maximum price a consumer is willing to pay to buy a risky asset. We relate this measure to a set of consumers' decisions that in theory should vary with attitude towards risk. We find that elicited...

We examine an economy in which the cost of consuming some goods can be reduced by making commitments to consumption levels that do not vary across states. For example, moral hazard and matching considerations may make it cheaper to produce housing services via owner-occupied than rented housing,...

We study the loan contracing problem of Gale and Hellwig (1985) under general assumptions of risk aversion and possibly diverse subjective beliefs of the borrower and lender about the income of the investment. We characterize the optimal contract and show that (i) the contractual payoff in...

This paper characterizes optimal income tax and audit schemes in the presence of costly enforcement when the agent is risk averse and not necessarily risk neutral. It is shown that the results under risk-neutrality (Chander and Wilde (1998)) largely hold under risk aversion. We first show that...

This paper studies optimal asset allocation to stocks, long-term bonds and T-bills and consumption choice in the presence of regime switching in asset returns. Optimal asset allocations vary considerably across four states - both across bonds and stocks and among large and small stocks - and...