We present a tractable model of the effects of nonfinancial risk on intertemporal choice. Our purpose is to provide a simple framework that can be adopted in fields like representative-agent macroeconomics, corporate finance, or political economy, where most modelers have chosen not to...

The so called flat-rate bias is a well documented phenomenon caused by consumers’ desire to be insured against fluctuations in their billing amounts. This paper shows that expectation-based loss aversion provides a formal explanation for this bias. We solve for the optimal two-part tariff when...

This paper considers family formation and reciprocity-based cooperation in the form of sharing of earnings-risk. While risk sharing is one benefit to marriage it is also limited by divorce risk. With search in the marriage market there may be multiple equilibria diering not only in divorce rates...

The availability of quantity information along with expenditure information in some household surveys allows the estimation of price reactions on the basis of unit values. We compare two specifications that have been proposed in this context by Deaton (1990) and Crawford et al. (1997) in order...

Do the choices of consumers who search for a product's best price exhibit risk neutral, risk averse or loss averse risk attitudes? We study how in a problem of sequential search with costless recall the relation between a consumer's willingness to pay for continued search and the level of price...

We derive a class of utility functions that are equivalent with respect to a well-defined functional form. We apply a general view of constant relative risk aversion to investigate on different equivalence relations. Then we compare our results with standard applications in economics and finance.

The so called flat-rate bias is a well documented phenomenon caused by consumers; desire to be insured against fluctuations in their billing amounts. This paper shows that expectation-based loss aversion provides a formal explanation for this bias. We solve for the optimal two-part tariff when...

This paper studies the relation between concavity, stochastic or state dependent utility functions, and risk aversion. Using the common definition of risk aversion, but modified for state dependent preferences, we show that concavity does not imply risk aversion. Instead, it implies a weaker...

In this paper we revisit the literature on the economic consequences from inefficiency in public services provision. Following Dupuit (1844) and Pigou (1947) we argue that it is important to take the financing side explicitly into account. The fact that public expenditure financing must rely on...

The article shows that heterogeneous incomplete private information can explain the limited existence of guaranteed renewable health insurance (GR) contracts in an otherwise frictionless markets. We derive a unique equilibrium that can be of the form that either only a portion of the population...