Dillenberger (2010) introduced the negative certainty independence (NCI) axiom, which captures the certainty effect phenomenon. He left open the question of whether there are continuous and monotone preference relations over simple lotteries that satisfy NCI but do not belong to the...

With moral hazard and anonymous asset trade, first-order conditions need not characterize effort and portfolio choices. The standard procedure for establishing validity of the first-order approach in economies with one hidden asset is not fruitful when multiple assets are hidden.

In a global game, larger ambiguity is shown to decrease the amount of coordination each player perceives. Consequently, small uncertainty tends to select the Pareto dominated equilibrium of the game without uncertainty. Implications for models of financial crises are drawn.

Subjects who overestimate their performance in experimental tasks unrelated to travel are less willing to insure against failing in the task and also less inclined to buy travel insurance. This suggests intrinsic optimism influences insurance demand and diminishes adverse selection.

We estimate the relative contribution of recursive preferences versus adaptive learning in accounting for the tail thickness of price–dividends/rents ratios. We find that both of these sources of volatility account for volatility in liquid (stocks) but not illiquid (housing) assets.

It is standard in experimental economics to use decontextualized designs where payoff structures are presented using neutral language. Here we show that cooperation in such a neutrally framed Prisoner’s Dilemma is equivalent to a PD framed as contributing to a cooperative endeavour....

Growth models under uncertainty and constant relative risk aversion (CRRA) utility are fragile in explaining consumers’ choice, as equilibrium consumption is dependent on distributional assumptions. We show that, under semi-nonparametric distributions, general equilibrium models are stable, as...

Using the Baker et al. (2013) index of policy uncertainty for six developed countries, this paper estimates spillovers of policy uncertainty. We find that spillovers account for slightly more than one-fourth of the dynamics of policy uncertainty in these countries, with this share rising to one...

This paper uses a two-step approach to characterize the evolution of US macroeconomic and financial variables during episodes of very high uncertainty. First, we identify episodes of very high uncertainty using a regime-switching model. Second, we assess the behavior of macroeconomic and...

We study credible information transmission by a benevolent short-lived central bank. When externalities create a wedge between private and social welfare, the central bank has an incentive to misreport its information. Information transmission through monetary policy creates a distortion, thus,...