In this paper, we show that considering the classic Allingham and Sandmo (1972) tax compliance problem under Rank-Dependent Expected Utility (RDEU) axiomatics provides a simple explanation for the "excess" level of full compliance observed in empirical studies, and which standard Expected...

Elicitation methods in decision-making under risk allow us to infer the utilities of outcomes as well as the probability weights from the observed preferences of an individual. An optimally efficient elicitation method is proposed, which takes the inevitable distortion of preferences by random...

Under expected utility theory, compound lotteries can be valued by "iterating" expectations: the expected utility of a compound lottery is the expected value of a simple lottery over prizes that are certainty equivalents to follow-up lotteries. We derive necessary and sufficient conditions for a...

A well-known result in the medical insurance literature is that zero co-insurance is never second-best for insurance contracts subject to moral hazard. We replace the usual expected utility assumption with a version of the rank-dependent utility (RDU) model that has greater experimental support....

In their celebrated contribution on credit rationing, Stiglitz and Weiss (1981) showed that the expected return to the borrower on a loan is increasing in the risk of the project it funds. In this paper, I show that their results do not necessarily carry over to the case where the agents'...

In their celebrated contribution on credit rationing, Stiglitz and Weiss (1981) showed that the expected return to the borrower on a loan is increasing in the risk of the project it funds. In this paper, I show that their results do not necessarily carry over to the case where the agents’...

Elicitation methods in decision making under risk allow a researcher to infer the subjective utilities of outcomes as well as the subjective weights of probabilities from the observed preferences of an individual. An optimally efficient elicitation method is proposed, which takes into account...

An income distribution is a mixture of two given income distributions if the relative frequency it associates with each income level is a convex combination of the relative frequencies associated with it by the given two income distributions——e.g., the income distribution of a country is...

We discuss a property of quasi-concavity for inequality measures. Defining income distributions as relative frequency functions, this property says that a convex combination of any two given income distributions is weakly more unequal than the least unequal income distribution of the two. The...

Pursuing our previous work in which the classical notion of increasing convex stochastic dominance relation with respect to a probability has been extended to the case of a normalised monotone (but not necessarily additive) set function also called a capacity, the present paper gives a...