This paper proposes a new approach for modeling investor fear after rare disasters. The key element is to take into account that investors’ information about fundamentals driving rare downward jumps in the dividend process is not perfect. Bayesian learning implies that beliefs about the...

Based on OECD evidence, equity/housing-price busts and credit crunches are followed by substantial increases in public consumption. These increases in unproductive public spending lead to increases in distortionary marginal taxes, a policy in sharp contrast with presumably optimal Keynesian...

This paper uses the example of an exam to model multi-dimensional search under a deadline. When the dimension is two, an order-invariance property allows simple characterization of the optimal search policy. Behavior is shown to be highly sensitive to changes in the deadline, and a wide variety...

This paper studies sequential information acquisition by an ambiguity-averse decision maker (DM), who decides how long to collect information before taking an irreversible action. The agent optimizes against the worst-case belief and updates prior by prior. We show that the consideration of...

We study the effect of ambiguity on timing decisions. An agent faces a stopping problem with an uncertain stopping payoff and a stochastic time limit. The agent is unsure about the correct model quantifying the uncertainty and seeks to maximize her payoff guarantee over a set of plausible...

This paper proposes a new approach for modeling investor fear after rare disasters. The key element is to take into account that investors' information about fundamentals driving rare downward jumps in the dividend process is not perfect. Bayesian learning implies that beliefs about the...

Based on OECD evidence, equity/housing-price busts and credit crunches are followed by substantial increases in public consumption. These increases in unproductive public spending lead to increases in distortionary marginal taxes, a policy in sharp contrast with presumably optimal Keynesian...

This paper studies sequential information acquisition by an ambiguity-averse decision maker (DM), who decides how long to collect information before taking an irreversible action. The agent optimizes against the worst-case belief and updates prior by prior. We show that the consideration of...

We study the effect of ambiguity on timing decisions. An agent faces a stopping problem with an uncertain stopping payoff and a stochastic time limit. The agent is unsure about the correct model quantifying the uncertainty and seeks to maximize her payoff guarantee over a set of plausible...

In projects with a flexible project structure, the activities that have to be scheduled are not completely known beforehand. Instead, scheduling such a project includes the decision whether to carry out particular activities at all. This also effects precedence constraints between the finally...