India embarked on a path of liberal economic reform in the 1990s after years of nurturing an intensively regulated and controlled economic environment that was loosened slightly in the mid-1980s. The most important and critical segments of this reform were trade and foreign investment. India has...

We propose an experimental method to test individuals for prudence (i.e. downside risk aversion) outside the expected utility framework. Our method relies on a novel representation of compound lotteries which allows for a systematic parameterization that captures the full generality of prudence....

A random variable X is digit-regular (respectively, significant-digit-regular) if the probability that every block of k given consecutive digits (significant digits) appears in the b-adic expansion of X approaches b &supk; as the block moves to the right, for all integers b 1 and k ? 1. Necessary...

This paper asks the following two questions: First, can a model with nominal rigidities in wage and price setting account for the average welfare costs of business cycle fluctuations identified in Gali, Gertler, and Lopez- Salido (2003)? Second, do we need to agree on a particular scheme for...

In this paper we deal with voluntary and compulsory redistribution in an economy where the enforcement of property rights is costly. Two agents engage in a common-pool contest and two types of potential distortions arise: the waste of resources in the contest and the dilution of incentives to...

The market model of interest rates specifies simple forward or Libor rates as lognormally distributed, their stochastic dynamics has a linear volatility function. In this paper, the model is extended to quadratic volatility functions which are the product of a quadratic polynomial and a...

While various liability rules of tort law provide efficient incentives to invest, breach remedies of contract law are claimed to be distortive. Since, at least in Germany, obligations law provides general rules for both contractual and tort relationships such discrepancy seems puzzling. The...

We examine the impact of ambiguity on economic behaviour. We present a relatively non-technical account of ambiguity and show how it may be applied in economics. Optimistic and pessimistic responses to ambiguity are formally modelled. We show that pessimism has the effect of increasing...

In this paper we analyze the frequently observed phenomenon that (i) some members of a team (“black sheep”) exhibit behavior disliked by other (honest) team members, who (ii) nevertheless refrain from reporting such misbehavior to the authorities (they set up a “wall of silence”). Much...

A new approach of estimating a forward-looking equity risk premium (ERP) is to calculate the implied risk premium using present value (PV) formulas. This paper compares implied risk premia obtained from dierent PV models and evaluates them by analyzing their underlying firmspecific...