A rigorous reconstruction of scenario-based real choice making reveals the incompleteness of decision-modeling and the practical prevalence of uncertainty. Theoretically complete models conceal it. As a remedy a scenario-based procedure of coping with uncertainty can prescribe how the boundedly...

We develop a theoretical model to identify and compare partial and equilibrium effects of uncertainty and the magnitude of fines on punishment and deterrence. Partial effects are effects on potential violators' and punishers' decisions when the other side's behavior is exogenously given....

Economic theory suggests that the deterrence of deviant behavior is driven by a combination of severity and certainty of punishment. This paper presents the first controlled experiment to study a third important factor that has been mainly overlooked: the swiftness of formal sanctions. We...

We report a portfolio-choice experiment that enables us to estimate parametric models of ambiguity aversion at the level of the individual subject. The assets are Arrow securities that correspond to three states of nature, where one state is risky with known probability and two states are...

When affirmative action policies target more than one disadvantaged group, they contain uncertainty as to whether an individual who belongs to one of these groups was actually favored. In a laboratory experiment, we study how this feature affects outcomes of affirmative action in the form of...

The market for copyrights is characterised by a highly skewed distribution of profits: very few movies, books and songs generate huge profits, whereas the great bulk barely manages to recover production cost. At the moment when the owner of intellectual property grants a licence ('ex ante'),...

From the perspective of competitors, competition may be modeled as a prisoner’s dilemma. Setting the monopoly price is cooperation, undercutting is defection. Jointly, competitors are better off if both are faithful to a cartel. Individually, profit is highest if only the competitor(s) is...

We conduct two experiments where subjects make a sequence of binary choices between risky and ambiguous binary lotteries. Risky lotteries are defined as lotteries where the relative frequencies of outcomes are known. Ambiguous lotteries are lotteries where the relative frequencies of outcomes...

We examine the economic behavior of the regret-averse firm under price uncertainty. We show that the global and marginal effects of price uncertainty on production are both positive (negative) when regret aversion prevails if the random output price is positively (negatively) skewed. In this...