Many studies have found a gap between willingness-to-pay and willingness-to-accept that is inconsistent with standard theory. There is also evidence that the gap is eroded by experience gained in the laboratory and naturally occurring markets. This paper argues that the gap and the effects of...

Is it possible to obtain an objective and quantifiable measure of risk backed up by choices made by some specific groups of rational investors? To answer this question, in this paper we establish some behavior foundations for various types of VaR models, including VaR and conditional-VaR, as...

This paper establishes conditions under which the classical CAPM holds in equilibrium. Our derivation uses simple arguments to clarify and extend results available in the literature. We show that if agents are risk averse in the sense of mean-preserving-spread (MPS) the CAPM will necessarily...

We analyze gender differences in risk-taking in high-pressure situations. Using novel data from professional athletes (NBA and WNBA), we find that male teams increase their risktaking towards the end of matches when a successful risky strategy could secure winning the match. Female teams, in...

We analyse the all-pay auction with incomplete information and variance-averse bidders. We characterise the symmetric equilibrium for general distributions of valuations and any number of bidders. Variance aversion is a sufficient assumption to predict that high-valuation bidders increase their...

In his presidential address to the American Economic Association, Robert Lucas claimed that the welfare costs of the business cycle in the United States equaled .05 percent of consumption. His calculation compared the utility of a representative consumer receiving actual per-capita consumption...

Being the leader in a group often involves making risky decisions that affect the payoffs of all members, and the decision to take this responsibility in a group is endogenous in many contexts. In this paper, we experimentally study: (1) the willingness of men and women to make risky decisions...

This paper provides three measures of the uncertainty associated to an impulse response path: (1) conditional confidence bands which isolate the uncertainty of individual response coefficients given the temporal path experienced up to that point; (2) response percentile bounds} which provide...

We present a non-technical account of ambiguity in strategic games and show how it may be applied to economics and social sciences. Optimistic and pessimistic responses to ambiguity are formally modelled. We show that pessimism has the effect of increasing (decreasing) equilibrium prices under...

The probability triangle (also called the Marschak-Machina triangle) allows for compact and intuitive depictions of risk preferences. Here, we develop an analogous tool for choice under uncertainty - the ambiguity triangle - and show that indifference curves in this triangle capture preferences...