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....

This paper introduces the concept of firm belief, which is proposed as a new epistemic model for a wide class of preferences. In particular, firm beliefs are shown to have the following desirable properties: (i) they are derived from preferences according to a plausible rule of epistemic...

Subjective expected utility (SEU) theory is ubiquitous in models of economic environments involving uncertainty. Part of its appeal is its elegant axiomatization by Anscombe and Aumann, whose representation theorem uses little more than the simple geometry of expected utility. Nevertheless, the...

We extend the Coase conjecture to the case of a seller with a single object, who faces n potential buyers and holds a sequence of English auctions until the object is sold. In an independent-private-values environment in which buyers and sellers share the same discount factor, we show that the...

We examine a dynamic model of English auctions with independent private values. There is a single object for sale and it is not possible for the seller, who has a value of zero for the object, to commit not to sell in the future if a sale is not accomplished today. The seller may be able to...

This paper presents an equilibrium model in which the process of firm formation and technology adoption is endogenous. Individuals decide whether to work in an existing firm for a posted wage, or to establish a new firm. Entrepreneurs hire a single worker and choose a production technology from...