The properties of risk measures or insurance premium principles have been extensively studied in actuarial literature. We propose an axiomatic description of a particular class of coherent risk measures defined in Artzner, Delbaen, Eber, and Heath (1999). The considered risk measures are...

We construct a model whereby stock exchanges take a new role as an information intermediary, notably absent in their roles. We show that exchanges differentiate themselves at subgame perfect equilibrium and will not race to the top or the bottom.

The expected value of a lotto ticket depends on the particular numbers selected on the payslip. This is because the individual prizes are not fixed in advance; instead, a prize pool is divided between all the players with winning tickets. This means that if you choose a populare set of numbers,...

This paper provides an explanation for the emergence of political extremism in an environment in which a change in “ré gime” requires an investment that benefits more than one player. We show that in order to mitigate the effects of free riding, players may choose extreme positions....

Sweeping regulatory reforms in Britain resulted in the formation of the Financial Services Authority (FSA). Because greater transparency of information is a major objective for this Act, shifting from one information system to another has re-distributive effects. We identify these effects at a...

A man is a key subject of economics and economic theory. “A man is irrational” - this opinion can be made from Allais paradox, risk aversion and other well-known fundamental problems. For a long time, this opinion was a barrier to proper solution of these problems and the development of the...

It is well known that all the experimental results concerning the Ultimatum game are at variance with its single subgame perfect equilibrium prediction. We use here Rabin's concepts of equity and fairness equilibrium to investigate these results and analyse the coordination problem of that game.

Holmstrom (1982) considered a group of agents who jointly produce some output and showed that if the agents are required to balance the budget then the first best, or Pareto efficient, allocation cannot be obtained as an equilbrium relative to any sharing rule. Recent research on risk-neutral...

We show experimentally that a principal's distrust in the voluntary performance of an agent has a negative impact on the agent's motivation to perform well. Before the agent chooses his performance, the principal in our experiment decides whether he wants to restrict the agents' choice set by...

In this paper we analyze the behavioral consequences of control on motivation. We study a simple experimental principal-agent game, where the principal decides whether he controls the agent by implementing a minimum performance requirement before the agent chooses a productive activity. Our main...