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Decision making in incomplete markets with ambiguity : a case study of a gas field acquisition

Zhao, Lin; Wijnbergen, Sweder van - 2014

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

Optimal search with costly recall

Janssen, Maarten C. W.; Parakhonyak, Alexei - 2008

This paper builds a consumer search model where the cost of going back to stores already searched is explicitly taken into account. We show that the optimal search rule under costly recall is very different from the optimal search rule under perfect recall. Under costly recall, the optimal...

Persistent link: https://www.econbiz.de/10011373816

Starting an R&D project under uncertainty

Dobbelaere, Sabien; Luttens, Roland Iwan; Peters, Bettina - 2010

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

Risk aversion under preference uncertainty

Kräussl, Roman; Lucas, André; Siegmann, Adriaan Hendrik - 2010

their risk aversion parameter invest less in risky assets than wealthy investors with identical risk aversion uncertainty. …

Persistent link: https://www.econbiz.de/10011382430

Educational choice, initial wage and wage growth

Mazza, Jacopo; Ophem, Hans van - 2020

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

Advance information and consumption insurance : evidence from panel data

Pedroni, Marcelo; Singh, Swapnil; Stoltenberg, Christian - 2022 - Preliminary, April 15, 2022

We investigate whether US households possess advance information about their future income and what this means for consumption insurance. Based on insights from a theoretical model, we propose a new test to detect advance information, which requires only panel data on consumption and income....

Persistent link: https://www.econbiz.de/10013186823

Poverty and uncertainty attitudes

Gonzalez Jimenez, Victor H. - 2024

This paper demonstrates that well-established biases in decision making under uncertainty can generate poverty traps. A …

Persistent link: https://www.econbiz.de/10015062969

Errors in judicial decisions

Sonnemans, Joep; Dijk, Frans van - 2008

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

Eliciting discount functions when baseline consumption changes over time

Gerber, Anke; Rohde, Kirsten I. M. - 2014

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, or testing the intuitive statistician

Heukelom, Floris - 2005

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