Conditional on the considered equilibrium, the probability of a bank run in the demand-deposit contract models of Bryant (1980) and of Diamond and Dybvig (1983) is either one or zero. In contrast, we establish the existence of an interval - being a strict subset of the unit-interval - of...

The unique point-rationalizable solution of a game is the unique Nash equilibrium. However, this solution has the additional advantage that it can be justified by the epistemic assumption that it is Common Knowledge of the players that only best responses are chosen. Thus, games with a unique...

Moulin (1984) describes the class of nice games for which the solution concept of point-rationalizability coincides with iterated elimination of strongly dominated strategies. As a consequence nice games have the desirable property that all rationalizability concepts determine the same strategic...

This paper examines the existence of strategic solutions for finite normal form games under the assumption that strategy choices can be described as choices among lotteries where players have security- and potential level preferences over lotteries (e.g., Gilboa, 1988; Jaffray, 1988; Cohen, 1992). Since...

According to the harmonic sequence paradox (Blavatskyy 2006), an expected utility decision maker's willingness to pay for a gamble whose expected payoffs evolve according to the harmonic series is finite if and only if his marginal utility of additional income becomes eventually zero. Since the...

We present an axiomatic model of preferences over menus that is motivated by three assumptions. First, the decision maker is uncertain ex ante (i.e. at the time of choosing a menu) about her ex post (i.e. at the time of choosing an option within her chosen menu) preferences over options, and she...

This paper develops a theoretical model for the formation of subjective beliefs on individual survival expectations. Data from the Health and Retirement Study (HRS) indicate that, on average, young respondents underestimate their true survival probability whereas old respondents overestimate...

We establish mathematical equivalence between independence of irrelevant alternatives and monotonicity with respect to first order stochastic dominance. This formal equivalence result between the two principles is obtained under two key conditions. Firstly, for all , each principle is defined on...

We study a Lucas (1978) "fruit-tree" economy under the assumption that agents are Choquet expected utility (CEU) rather than standard expected utility (EU) decision makers. The agents’ non-additive beliefs about the economy’s stochastic dividend payment process may thus express...