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We consider the problem of Adverse Selection and optimal derivative design within a Principal-Agent framework. The principal's income is exposed to non-hedgeable risk factors arising, for instance, from weather or climate phenomena. She…
A family of models of individual discrete choice are constructed by means of statistical averaging of choices made by a subject in a reinforcement learning process, where the subject has short, k-term memory span. The choice probabilities…
Becker (1973) presents a bilateral matching model in which scalar types describe agents. For this framework, he establishes the conditions under which positive sorting between agents' attributes is the unique market outcome. Becker's…
This paper studies identification and inference of the welfare gain that results from switching from one policy (such as the status quo policy) to another policy. The welfare gain is not point identified in general when data are obtained…
This paper examines a heterogeneous beliefs model in which there is a process that is only partially observed by the agents. The economy contains a risky asset producing dividends continuously in time. The dividends are observed by the…
This paper studies a one-sector optimal growth model with i.i.d. productivity shocks that are allowed to be unbounded. The utility function is assumed to be non-negative and unbounded from above. The novel feature in our framework is that…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant…
We introduce a rational inattention model which produces a unique, interior, weighted multinomial logit conditional choice probability for an agent who acquires costly information about the hedonic characteristics (e.g. whether an insurance…
We consider the optimal risk sharing problem with a continuum of agents, modeled via a non-atomic measure space. Individual preferences are not assumed to be convex. We show the multiplicity of agents induces the value function to be…
Information policies such as scores, ratings, and recommendations are increasingly shaping society's choices in high-stakes domains. We provide a framework to study the welfare implications of information policies on a population of…
We analyze and quantify, in a financial market with parameter uncertainty and for a Constant Relative Risk Aversion investor, the utility effects of two different boundedly rational (i.e., sub-optimal) investment strategies (namely, myopic…
This paper provides a nonparametric framework for causal inference with categorical outcomes under binary treatment and binary instrument settings. I decompose the observed joint probability of outcomes and treatment into marginal…
The random utility model (RUM, McFadden and Richter, 1990) has been the standard tool to describe the behavior of a population of decision makers. RUM assumes that decision makers behave as if they maximize a rational preference over a…
In high-risk environments, traditional indemnity insurance is often unaffordable or ineffective, despite its well-known optimality under expected utility. We compare excess-of-loss indemnity insurance with parametric insurance within a…
Most social choice rules assume access to full rankings, while current alignment practice -- despite aiming for diversity -- typically treats voters as anonymous and comparisons as independent, effectively extracting only about one bit per…
Decision-making problems often feature uncertainty stemming from heterogeneous and context-dependent human preferences. To address this, we propose a sequential learning-and-optimization pipeline to learn preference distributions and…
I study the welfare-maximizing allocation of heterogeneous goods when monetary transfers are prohibited. Agents have private values, and the designer chooses a mechanism subject to incentive compatibility and aggregate supply constraints. I…
Complexity of the problem of choosing among uncertain acts is a salient feature of many of the environments in which departures from expected utility theory are observed. I propose and axiomatize a model of choice under uncertainty in which…
The most commonly accepted model for investors' preferences is expected utility theory. More recently, other theories have emerged and pose new challenges to mathematics. The present paper treats preferences of cumulative prospect theory…
Gilboa and Schmeidler's (1989) uncertainty aversion plays a central role in decision theory and economics, yet many inconsistent behaviors have been observed in experiments. Motivated by this, we study an axiom postulating a minimal degree…