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Risk Matters : Breaking Certainty Equivalence

Parra-Alvarez, Juan Carlos - 2020

In this paper we use the property that certainty equivalence, as implied by a first-order approximation to the solution of stochastic discrete-time models, breaks in its equivalent continuous-time version. We study the extent to which a first-order approximated solution built by perturbation...

Persistent link: https://www.econbiz.de/10012834991

Consumer Loss Aversion and Scale-Dependent Psychological Switching Costs

Karle, Heiko; Schumacher, Heiner; Vølund, Rune - 2021

We consider the Salop (1979) model of product differentiation and assume that consumers are uncertain about the qualities and prices of firms’ products. They can inspect all products at zero cost. A share of consumers is expectation-based loss averse. For these consumers, a purchase plan,...

Persistent link: https://www.econbiz.de/10013211121

Ambiguous Protection

Gründler, Klaus; Hillman, Arye - 2021

Import regulations are globally the most prevalent form of intervention in international trade. The regulations should, under rules of the WTO, protect consumers and the environment but can be used to protect producers. We investigate the ambiguity of intent. We set out a model that when applied...

Persistent link: https://www.econbiz.de/10013246466

Control Aversion in Hierarchies

De Chiara, Alessandro; Engl, Florian; Herz, Holger; … - 2022

Companies typically control various aspects of their workers’ behaviors. In this paper, we investigate whether the hierarchical distance of the superior who imposes such control measures matters for the workers’ ensuing reaction. In particular, we test, in a laboratory experiment, whether...

Persistent link: https://www.econbiz.de/10014082243

Precautionary Savings, Loss Aversion, and Risk : Theory and Evidence

Dhami, Sanjit; Hajimoladarvish, Narges; Georgalos, … - 2023

of savings, precautionary savings, loss aversion, and risk. We provide the relevant theory, followed by empirical tests …

Persistent link: https://www.econbiz.de/10014346247

Loss Aversion, Risk Aversion, and the Shape of the Probability Weighting Function

Rablen, Matthew D. - 2023

extend to distinct PWFs in the gain and loss domains, as under prospect theory …

Persistent link: https://www.econbiz.de/10014350127

Loss Aversion and Tax Evasion : Theory and Evidence

Dhami, Sanjit; Hajimoladarvish, Narges; Mamidi, Pavan - 2023

estimation of the underlying behavioral parameters; and confirms the central predictions of the theory, while pointing out … challenges for further developments that existing theory is unable to account for …

Persistent link: https://www.econbiz.de/10014262742

World Equity Premium Based Risk Aversion Estimates

Pozzi, Lorenzo - 2013

The equity premium puzzle holds that the coefficient of relative risk aversion estimated from the consumption based CAPM under power utility is excessively high. Moreover, estimates in the literature vary considerably across countries. We gauge the uncertainty pertaining to the country risk...

Persistent link: https://www.econbiz.de/10013094420

Insurance for Catastrophes - Indemnity vs. Parametric Insurance with Imperfect Information

Feess, Eberhard; Jordan, Cathrin; Noy, Ilan - 2022

Insurance for natural hazards - earthquakes, hurricanes, or pandemics - is rarely comprehensively adopted without …. Efforts to close this insurance gap include the introduction of parametric (index) insurance products for various catastrophic … risks. We compare parametric to indemnity insurance in a simple model where the insurance company has superior information …

Persistent link: https://www.econbiz.de/10013296268

Discounting the long-distant future: a simple explanation for the Weitzman-Gollier-puzzle

Buchholz, Wolfgang; Schumacher, Jan - 2008

In this paper, we reconsider the debate on Weitzman's (1998) suggestion to discount the long-run future at the lowest possible rate, referring to Gollier (2004) and Hepburn & Groom (2007). We show that, while Weitzman's use of the present value approach may indeed seem questionable, its outcome,...

Persistent link: https://www.econbiz.de/10010264404

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