We study the impact of ambiguity on two alternative institutions of nancial intermediationin an economy where consumers face uncertain liquidity needs. The ambiguitythe consumers experience is modeled by the degree of condence in their additive beliefs. Weanalyze the optimal liquidity allocation...

The purpose of this paper is to provide a coherent framework in which the main characteristics of growth, uncertainty and crisis are connected. Within this framework, we find that these issues, which were so prominent in East Asia, are consequences of the chosen development strategy. Thus, we...

This paper addresses the following unresolved questions: Why do some firms issue equity instead of debt? Why did most firms retain their cash holdings instead of distributing them as dividends in recent times? How do firms change their financing policies during a period of severe financial...

Ambiguity refers to a decision situation under uncertainty when there is incomplete information about the likelihood of events. Different formal models of this notion have been developed with differing implications about the representation of ambiguity and ambiguity aversion.

Accounting for ambiguity aversion in dynamic decisions generally implies that either dynamic consistency or consequentialism must be given up. To gain insight into which of these principles better describes people's preferences we tested them using a variation of Ellsberg's three-color urn...

This paper studies how updating affects ambiguity-attitude. In particular we focus on the generalized Bayesian update of the Jaffray-Phillipe sub-class of Choquet Expected Utility preferences. We find conditions for ambiguity-attitude to be the same before and after updating. A necessary and...

Goeree & Holt (2001) observe that, for some parameter values, Nash equilibrium providesgood predictions for actual behaviour in experiments. For other payoff parameters, however,actual behaviour deviates consistently from that predicted by Nash equilibria. They attributethe robust deviations...

Accounting for ambiguity aversion in dynamic decisions generally implies that either dynamic consistency or consequentialism must be given up. To gain insight into which of these principles better describes people's preferences we tested them using a variation of Ellsberg's three-color urn...