Showing 1 - 10 of 49
can allocate money between two different points of time under the condition of risk. A&S claim that their results refute … discounted expected utility (DEU) as well as prospect theory and other models relying on probability weighting. In this note I …
Persistent link: https://www.econbiz.de/10010886922
Banks should evaluate whether a borrower is likely to default. The author applies several techniques in the extensive mathematical literature of stochastic optimal control/dynamic programming to derive an optimal debt in an environment where there are risks on both the asset and liabilities...
Persistent link: https://www.econbiz.de/10008561122
and the potential increments over it are evaluated by subjective expected utility with a risky utility function u. In … contrast to earlier approaches with models that aimed at separating riskless and risky utility, CT does not violate basic … irregularities like the expected utility paradoxes of Allais and Rabin, CT also separates risk attitude in the strong sense from …
Persistent link: https://www.econbiz.de/10010886918
According to the harmonic sequence paradox (Blavatskyy 2006), an expected utility decision maker's willingness …-to-pay for a gamble whose expected payoffs evolve according to the harmonic series is finite if and only if his marginal utility … of additional income becomes zero for rather low payoff levels. Since the assumption of zero marginal utility is …
Persistent link: https://www.econbiz.de/10009216280
In this paper we analyze theoretically and empirically the impact of an increase in income inequality on the current account balance. We develop a model with consumption externalities and heterogeneous agents which explains how an increase in income inequality can affect negatively or positively...
Persistent link: https://www.econbiz.de/10010886828
Aphorisms that "Rising tides raise all boats" or that material advances of the rich eventually "Trickle Down" to the poor are really maxims regarding the nature of stochastic processes that underlay the income/wellbeing paths of groups of individuals. This paper looks at the implications for the...
Persistent link: https://www.econbiz.de/10010956065
Much analysis in macroeconomics empirically addresses economy-wide incentives behind consumer/investment choices by using insights from the way a single representative household would behave. Heterogeneity at the micro level can jeopardize attempts to back up the representative consumer...
Persistent link: https://www.econbiz.de/10008727755
We construct a Blanchard-style overlapping generations model consisting of long-lived individuals who have uninsurable idiosyncratic risk resulting from uncertain retirement periods and medical costs in retirement. Without social insurance, such individuals must save for these eventualities. We...
Persistent link: https://www.econbiz.de/10005083411
Based on the aggregation of individual willingness-to-pay for a statistical life, we calibrate an intertemporal optimization model to determine the aggregate welfare losses from HIV/AIDS in 25 Eastern European countries. Assuming a discount rate of three percent, we find a total welfare loss for...
Persistent link: https://www.econbiz.de/10005755131
We compare seven established risk elicitation methods and investigate how they explain an extensive set of risky behavior from a large household survey. We find overall positive correlation between items and low explanatory power in terms of behavior. Using an average of seven risk elicitation...
Persistent link: https://www.econbiz.de/10011120336