Are market and voting institutions capable of producing optimal intergenerational risk-sharing? To study this question, we consider a simple endowment economy with uncertainty and overlapping generations. Endowments are stochastic; thus it is possible to increase the welfare of every generation...

Ordeals are burdens placed on individuals that yield no direct benefits to others. They represent a dead-weight loss. Ordeals - the most common being waiting time - play a prominent role in health care. Their goal is to direct scarce resources to recipients receiving greater value from them,...

In a world of imperfect information, reputations often guide the sequential decisions to trust and to reward trust. We consider two-player situations, where one player--the truster--decides whether to trust, and the other player--the temptee--has a temptation to betray when trusted. The strength...

We study the predictive power of approximately 2.5 million stock picks submitted by individual users to the "CAPS" website run by the Motley Fool company (www.caps.fool.com). These picks prove to be surprisingly informative about future stock prices. Indeed, a strategy of shorting stocks with a...

Financial, managerial, and medical decisions often involve alternatives whose possible outcomes have uncertain probabilities. In contrast to alternatives whose probabilities are known, these uncertain alternatives offer the benefits of learning. In repeat-choice situations, such learning brings...

An extreme event, such as a nuclear accident, an earthquake, a cluster of adverse reactions to a particular drug, or excessive breakdowns of some class of equipment, frequently focuses attention for the first time on an important issue. By then, however, data on the incidence and magnitudes of...

Differences in ethical behavior between members of the upper and lower classes have been at the center of civic debates in recent years. This paper presents a framework for understanding how class affects ethical standards and behaviors. The framework is applied using data from a large Dutch...

A principal provides budgets to agents (e.g., divisions of a firm or the principal's children) whose expenditures provide her benefits, either materially or because of altruism. Only agents know their potential to generate benefits. We prove that if the more "productive" agents are also more...