The paper focuses on the problem of pricing and hedging a European contingent claim for an incomplete market model, in which evolution of price processes for a saving account and stocks depends on an observable Markov chain. The pricing function is evaluated using the martingale approach. The...

We study tacit collusion in repeated auctions in which bidders can only observe pastwinners and not their bids. We adopt a stringent interpretation of tacit collusion ascollusion without communication about strategies that we model as a symmetryrestriction on repeated game strategies: Strategies...

This paper examines a model in which people’s preferences adjust to changes in their relative ability to attain various goals. Preference changes are modeled as changes in the configuration of weights (or values) attached to these goals. The model permits to explain common prototype...

From the early-1950s on, F.A. Hayek was concerned with the development of a methodology of sciences that study systems of complex phenomena. Hayek argued that the knowledge that can be acquired about such systems is, in virtue of their complexity (and the comparatively narrow boundaries of human...

One way the social scientists explain phenomena is by building structural models. These models are explanatory insofar as they manage to perform a recursive decomposition on an initial multivariate probability distribution, which can be interpreted as a mechanism. The social scientists should...

Knowing what event precipitated a client's abnormal behaviors makes the client appear more normal than if the event is not known (Meehl, 1973). Does such knowledge also influence judgments of the need for psychological treatment, and if so, does it matter whether the precipitating event was...