This paper analyzes the meaning of comparing the economic performance of strict liability and negligence rule in a unilateral standard accident model under Knightian uncertainty. It focuses on the cost expectation of major harm on which the injurers form beliefs. It shows first that, when the...

We study the impact of ambiguity on two alternative institutions of financial intermediation in an economy where consumers face uncertain liquidity needs. The ambiguity the consumers experience is modeled by the degree of confidence in their additive beliefs. We analyze the optimal liquidity...

In a recent paper, Hart and Moore (2008) introduce new behavioral assumptions that can explain long term contracts and important aspects of the employment relation. However, so far there exists no direct evidence that supports these assumptions and, in particular, Hart and Moore's notion that...

We present a model in which investors observe the same macroeconomic data but have varying levels of information about the parameters that determine the distribution of the expected returns on investment. During a crisis that increases macroeconomic uncertainty and reduces asset prices, the...

Based on the aggregated insights of the existing theories related to multiple sources of efficacy and locus of control, we introduce the theory of mixed control, a model of compound-risk perception. This theory considers outcome expectancies as being composed of expectancies regarding three...

We survey the literature on the Risk Augmented Mincer equation that seeks to estimate the compensation for uncertainty in the future wage to be earned after completing an education. There is wide empirical support for the predicted positive effect of wage variance and the negative effect of wage...

We present a model in which investors observe the same macroeconomic data but have varying levels of information about the parameters that determine the distribution of the expected returns on investment. During a crisis that increases macroeconomic uncertainty and reduces asset prices, the...

Individuals exhibit a randomization preference if they prefer random mixtures of two bets to each of the involved bets. Such preferences provide the foundation of various models of uncertainty aversion. However, it has to our knowledge not been empirically investigated whether uncertainty-averse...

Most insurance companies publish few data on the occurrence and detection of insurance fraud. This stands in contrast to the previous literature on costly state verification, which has shown that it is optimal to commit to an auditing strategy, as the credible announcement of thoroughly auditing...

This paper invokes the axiomatic approach to explore the notion of growing awareness in the context of decision making under uncertainty. It introduces a new approach to modeling the expanding universe of a decision maker in the wake of becoming aware of new consequences, new acts, and new links...