Showing 1 - 10 of 29
We apply utility indifference pricing to solve a contingent claim problem, valuing a connected pair of gas fields where the underlying process is not standard Geometric Brownian motion and the assumption of complete markets is not fulfilled. First, empirical data are often characterized by...
Persistent link: https://www.econbiz.de/10010465169
We study a two-stage R&D project with an abandonment option. Two types of uncertainty influence the decision to start R …&D. Demand uncertainty is modelled as a lottery between a proportional increase and decrease in demand. Technical uncertainty is … modelled as a lottery between a decrease and increase in the cost to continue R&D. We relate differences in uncertainty to …
Persistent link: https://www.econbiz.de/10011378299
their risk aversion parameter invest less in risky assets than wealthy investors with identical risk aversion uncertainty. …
Persistent link: https://www.econbiz.de/10011382430
We investigate the major choice of college graduates where we make choice dependent on expected initial wages and expected wage growth per major. We build a model that allows us to estimate these factors semiparametrically and that corrects for selection bias. We estimate the model on the...
Persistent link: https://www.econbiz.de/10012228687
This paper demonstrates that well-established biases in decision making under uncertainty can generate poverty traps. A …
Persistent link: https://www.econbiz.de/10015062969
In criminal cases the task of the judge is to transform the uncertainty about the facts into the certainty of the …
Persistent link: https://www.econbiz.de/10011377092
Many empirical studies on intertemporal choice report preference reversals in the sensethat a preference between a small reward to be received soon and a larger reward to bereceived later reverses as both rewards are equally delayed. Such preference reversals arecommonly interpreted as...
Persistent link: https://www.econbiz.de/10011379439
The origin of prospect theory is the desire to test the intuitive statistician in the real world. The development of this theory by the cognitive psychologists Kahneman and Tversky can be traced to the former's work in cognitive psychophysics, in which deviations from average behavior are termed...
Persistent link: https://www.econbiz.de/10011346453
Many important decisions are made without precise information about the probabilities of the outcomes. In such situations, individual ambiguity attitudes influence decision making. The present study identifies affective states as a transient cause of ambiguity attitudes. We conducted two...
Persistent link: https://www.econbiz.de/10010337020
Higher order risk preferences are important determinants of economic behaviour. We apply behavioural insights to this topic: we measure higher order risk preferences for pure gains and pure losses by controlling the reference point. We find a reflection effect not only for second order risk...
Persistent link: https://www.econbiz.de/10011924804