This paper considers the case that potential victims affect each other by taking care. Analyzing standard liability rules, we show that strict liability with a defense of contributory negligence is in the best position to induce the efficient outcome, i.e., this liability rule ensures efficiency...

As in any research field, risk theory has its important questions, results, and paradoxes, as well as its seminal papers and key authors. Louis Eeckhoudt has been a key author in the field of risk theory. To celebrate his many contributions and continue the development of theories of decision...

This paper tests whether utility is the same for risk and for uncertainty. This test is critical for models that capture ambiguity aversion through a difference in event weighting between risk and uncertainty, like the multiple priors models and prospect theory. We present a new method to...

We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA) utility functions. We illustrate the consequences of this...

Did the August 2011 European short sale bans on financial stocks accomplish their goals? In order to answer this question, we use stock options' implied volatility skews to proxy for investors' risk aversion. We find that on ban announcement day, risk aversion levels rose for all stocks but more...

Climate change involves uncertain probabilities of catastrophic risks, and very longterm consequences of current actions. Climate economics, therefore, is centrally concerned with the treatment of risk and time. Yet conventional assumptions about utility and optimal economic growth create a...

Gatekeepers have an increasing role in taxation and regulation. Whereas burdening them with legal liability for misconducts that benefit those who resort to their services actually discourages wrongdoings—as will be clarified in the article—an alienation effect can also arise. The gatekeeper...

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...

Building on Kihlstrom and Mirman (Journal of Economic Theory, 8(3), 361–388, <CitationRef CitationID="CR4">1974</CitationRef>)’s formulation of risk aversion in the case of multidimensional utility functions, we study the effect of risk aversion on optimal behavior in a general consumer’s maximization problem under uncertainty. We...</citationref>