This paper merges the non-expected utility approach (Tversky and Kahneman (1992) and Quiggin (1982)) into Akerlof's (1970) model of "Market for lemons". Our main finding suggests that when the proportion of traded "lemons" is high (low), the problem of market failure is mitigated (enhanced). We...

We present an empirical model of firm behavior in the presence of switching costs. Customers' transition probabilities, embedded in firms' value maximization, are used in a multi-period model to derive estimable equations of a first order condition, market-share (demand), and supply equations....

Examining myopic loss aversion (MLA [Benartzi, S., Thaler, R., 1995. Myopic loss aversion and the equity premium puzzle. Quarterly Journal of Economics 110, 73-92]) in real financial markets has several merits: in repeated situations investors may learn from each other, aggregate market prices...