The legal system encounters many problems in facing uncertainty. Neither does a particular theory exist of how to recognize and clarify situations of missing knowledge nor has an explicit theory been designed how to decide in such situations between possible alternatives of action. One reason...

The legal system encounters many problems in facing uncertainty. Neither does a particular theory exist of how to recognize and clarify situations of missing knowledge nor has an explicit theory been designed how to decide in such situations between possible alternatives of action. One reason...

Unintended consequences manifest themselves in many aspects of socioeconomic life. We develop a model of unintended consequences (UC) of novel policies. In our setup, the policymaker is unaware of the UC of her policy. We discuss several approaches to evaluating policy in terms of welfare...

We address the problem of choosing a portfolio of policies under "deep uncertainty." We introduce the idea of belief dominance as a way to derive a set of non-dominated portfolios and robust individual alternatives. Our approach departs from the tradition of providing a single recommended...

Behavioral economics characterizes decision-makers using psychologically-informed models. Cognitive science produces psychologically-informed models. Why don't these disciplines talk more? Here, the author presents several arguments for why cognitive science should inform behavioral economics -...

Behavioral economics aspires to replace the agents of neoclassical economics with living, breathing human beings. Here, the author argues that behavioral economics, like its neoclassical counterpart, often neglects the role of active sense-making that motivates and guides much human behavior....

We study a dynamic corporate investment problem where decisions have to be made collectively by a group of agents holding heterogeneous beliefs and adhering to a "utilitarian" governance mechanism in which each agent has a given influence in the decision. In this setting we show that: (i) group...

We formulate a robust theory of liquidity and risk management based on two fundamental frictions: 1) the entrepreneur cannot alienate his human capital, and 2) the entrepreneur worries about model uncertainty and seek robust decisions. In line with max-min expected utility, a robust entrepreneur...

Firms in Africa report "regulatory and economic policy uncertainty" as a top constraint to their growth. We argue that often firms in Africa do not cope with policy rules, rather they face deals; firm-specific policy actions that can be influenced by firm actions (e.g. bribes) and...

This paper provides the first empirical attempt of linking firms' profits and investment in R&D revisiting Knight's (1921) distinction between uncertainty and risk. Along with the risky profit-maximizing scenario, identifying a second, off-setting, unpredictable bias that leads to heterogeneous...