We focus on four stylized facts of behavior under risk. Decision makers: (1) Overweight low probabilities and underweight high probabilities. (2) Ignore events of extremely low probability and treat extremely high probability events as certain. (3) Buy inadequate insurance for very low...

We welfare rank different types of second-best environmental policy. The focus is on the roles of uncertainty and public finance. The setup is the basic stochastic neoclassical growth model augmented with the assumptions that pollution occurs as a by-product of output produced and environmental...

El Programa de investigación Heurísticas y Sesgos" liderado por el economista Amos Tversky (fallecido en 1996) y por el sicólogo ganador del premio Nobel Daniel Kahneman, ha ofrecido desde 1971 una alternativa al Modelo de la Utilidad Esperada en el campo de la toma de decisiones. Las...

Disaggregation arises when broad categories like households budget units are divided into elementary units as individual income recipients. We study the preservation of stochastic dominance for every order beyond two after disaggregation: If we observe a dominance relation among household income...

There is a notable shortage of empirical research directed at measuring the magnitude and direction of stress effects on performance in a controlled environment. One reason for this is the inherent difficulties in identifying and isolating direct performance measures for individuals....

We model a two-stage R&D project with an abandonment option. Two types of uncertainty influence the decision to start R&D. Demand uncertainty is modelled as a lottery between a proportional increase and decrease in demand. Technical uncertainty is modelled as a lottery between a decrease and...

The purpose of this paper is to provide a simple example of an alternating offers bargaining model with breakdowns, in which both the breakdown probabilites and the order of play are determined endogenously. We consider two countries in a conflict over a contested asset. We assume that one of...

The extended dry conditions in the Murray Darling Basin have resulted in unprecedented levels of reduced water availability for both irrigators and the environment. Concerns over environmental degradation and the health of the river Murray have prompted the Federal and State Governments to...

In the nonconventional economic literature decision processes are mainly analyzed on the basis of cognitive aspects (such as the existence of limited rationality) and institutional aspects (such as rules of thumb, institutions and conventions). The fuzzy logic, in turn, offers a form of treating...

Based on the notion of affiliation a model is developed which suggests that laws which restrict the firm's flexibility to adjust its employment force resume in higher requirements on potential employees. The paper demonstrates the interaction between the legal structures and individual firm's...