framework. We test the model’s predictions in a laboratory experiment. Both in theory and in the experiment diagnostic … uncertainty decreases the rate of efficient service provision and leads to less trade. In theory, insurance also decreases the …

information. Respondents who learn of a higher personal exposure to unemployment risk during recessions increase their demand for … rational inattention that demand for information depends on its expected benefit. Moreover, the fact that perceived risk …

perception frictions. The model explains adaptive risk attitudes and probability weighting as in prospect theory and … the decision-maker’s understanding of the risk. The strategy does not distort choice in the limit as perception frictions … complexity of the decision problem, then risk attitudes reflect properties of the perception strategy even for vanishing …

choose their portfolio risk, bank size, and capital holdings. Banks voluntarily hold equity when the buffer effect against … the risk of default outweighs the cost advantages of debt financing. In the optimum, banks with lower monitoring costs are … to make higher-risk portfolios more attractive. Accounting for banks’ interior capital choices can thus explain why …

This paper investigates whether limited liability and moral hazard affect risk-taking through motivated beliefs. On the … subjects form motivated beliefs to self-justify their excessive risk-taking. For the same investment opportunity, subjects …

) we vary three payoff indices. Indices of risk and temptation capture the unilateral incentives to defect against … reduces cooperation. In neither study, nor in either subject pool of our second study, do we find a significant effect of risk …

We develop a financial-economic model for carbon pricing with an explicit representation of decision making under risk … specifications. We show that risk associated with high damages in the long term leads to stringent mitigation of carbon dioxide … emissions in the near term. Our results provide insight into how a systematic incorporation of climate-related risk influences …