We modify the classic single-period inventory management problem by assuming that the newsvendor is expectation-based loss averse according to  Kőszegi and Rabin (2006, 2007). We show that the expectation-based loss-averse newsvendor orders less than the profit-maximizing quantity. Moreover,...

We show that a team may favor self-sabotage to influence the principal’s contract decision. Sabotage increases a team member’s bonus and total team effort. If these benefits outweigh the reduction in the success probability, sabotaging the team is rational.

When penalties for first-time offenders are restricted, it is typically optimal for the lawmaker to overdeter repeat offenders. First-time offenders are then deterred not only by the (restricted) fine for a first offense, but also by the prospect of a large fine for a subsequent offense. Now...