This paper characterizes the optimal first-price auction (FPA) and second-price auction (SPA) for selling rights, contracts, or licenses that involve ensuing payoff uncertainty for the winning bidder. The distribution of the random payoff is common knowledge, except that bidders have private...

A government officials' propensity to corruption, or corruptibility, can be affected by his intertemporal preference over job benefits. Through a dynamic model of rent-seeking behavior, this paper examines how endogenously determined corruptibility changes with monitoring intensity, salary...

This paper applies the dichotomous theory of choice by Zou (2000a) to the analysis of investment strategies and security markets. Issues concerning individual optimality, (approximate) arbitrage, capital market equilibrium, and Pareto efficiency are studied under various market conditions. <BR>...

We show in general that risky investments become more attractive as the investment horizon (n) lengthens. Specifically, any investor's maximal expected utility directly increases with n, as well as the investor's willingness to allocate more capital to the risky assets if his optimal strategy is...

In this paper, a new paradigm is developed for analyzing investment strategies and pricing financial assets. This paradigm assumes that any investment strategy has its own “inherent reward” and “inherent risk” that can be judged with common sense. I justify axiomatically the existence...