I solve the life-cycle portfolio allocation problem of a disappointment averse (DA) agent with labor income risk. DA preferences overweight disappointing outcomes and are consistent with behavior highlighted by the Allais paradox. I show that unlike constant relative risk aversion (CRRA)...

For choice with deterministic consequences, the standard rationality hypothesis is ordinality, i.e., maximization of a weak preference ordering. For choice under risk (resp. uncertainty), preferences are assumed to be represented by the objectively (resp. subjectively) expected value of a von...

We propose a model of history-dependent risk attitude, allowing a decision maker's risk attitude to be affected by his history of disappointments and elations. The decision maker recursively evaluates compound risks, classifying realizations as disappointing or elating using a threshold rule. We...

I solve the life-cycle portfolio allocation problem of a disappointment averse (DA) agent. DA agents overweight disappointing outcomes. Unlike expected utility investors, DA investors drastically cut their allocation to stocks around retirement due to a distinct effect associated with the drop...

At a time when policy makers want to change the behaviour of citizens to tackle a broad range of social problems, such as climate change, excessive drinking, obesity and crime, a promising new policy approach has appeared that seems capable of escaping the liberal reservations typically...

The conceptual foundations of transitive economy structural transformations under institutional uncertainty are investigated in the article in a political economy context. A profound structural collision of the transitive economy of that kind appears as a contradiction between economic...

Theoretical and practical problems of structural policy are considered under institutional uncertainty, financial constraints and fiscal consolidation programs. The necessity for development and implementation of a new concept of structural policy is justified in view of the actual state of the...

Macroeconomics must take radical uncertainty into account, if it aims at contributing to the solution of serious real-world problems such as climate change. Allowing for radical uncertainty must happen at two levels: the level of modeling and the level of the scientific discipline. I argue that...

Both institutional quality and institutional stability have been argued to stimulate economic growth. But to improve institutional quality, a country must endure a period of institutional change, which implies at least a little and possibly a lot of institutional instability. We investigate the...

The efficiency of institutions, understood in the neoclassical sense, i.e., as the result of constraint optimization of a neoclassical economy is pointless from the perspective of the New Institutional Economics, because the latter assumes incomplete foresight. For such a world one cannot use...