Related papers: Risk Preference Types, Limited Consideration, and …

Bias exists in how we pick leaders, who we perceive as being influential, and who we interact with, not only in society, but in organizational contexts. Drawing from leadership emergence and social influence theories, we investigate…

Incomplete take-up of welfare benefits remains a major policy puzzle. This paper decomposes the causes of incomplete welfare take-up into two mechanisms: inattention, where households do not consider program participation, and active…

Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…

Different models to study the wealth distribution in an artificial society have considered a transactional dynamics as the driving force. Those models include a risk aversion factor, but also a finite probability of favoring the poorer…

In most social choice settings, the participating agents express their preferences over the different alternatives in the form of linear orderings. While this clearly simplifies preference elicitation, it inevitably leads to poor…

We analyze the limiting behavior of the risk premium associated with the Pareto optimal risk sharing contract in an infinitely expanding pool of risks under a general class of law-invariant risk measures encompassing rank-dependent utility…

Prepayment risk embedded in fixed-rate mortgages forms a significant fraction of a financial institution's exposure, and it receives particular attention because of the magnitude of the underlying market. The embedded prepayment option…

We analyze demand settings where heterogeneous consumers maximize utility for product attributes subject to a nonlinear budget constraint. We develop nonparametric methods for welfare-analysis of interventions that change the constraint.…

This paper proposes a method for estimating consumer preferences among discrete choices, where the consumer chooses at most one product in a category, but selects from multiple categories in parallel. The consumer's utility is additive in…

Firms are more likely to introduce products in markets where they anticipate stronger demand. They also possess information that is unobserved to researchers. This creates endogenous selection bias in the estimation of demand parameters.…

This paper proposes a model of decision-making under uncertainty in which an agent is constrained in her cognitive ability to consider complex acts. We identify the complexity of an act according to the corresponding partition of state…

We consider a setting where agents take action by following their role models in a social network, and study strategies for a social planner to help agents by revealing whether the role models are positive or negative. Specifically, agents…

When making a decision as a group, there are two primary paradigms: aggregating preferences (e.g. voting, mechanism design) and aggregating information (e.g. discussion, consulting, forecasting). Almost all formally-studied group…

When does society eventually learn the truth, or take the correct action, via observational learning? In a general model of sequential learning over social networks, we identify a simple condition for learning dubbed excludability.…

Diversification is the typical investment strategy of risk-averse agents. However, non-diversified positions that allocate all resources to a single asset, state of the world or revenue stream are common too. We show that whenever finitely…

We study the design of an optimal insurance contract in which the insured maximizes her expected utility and the insurer limits the variance of his risk exposure while maintaining the principle of indemnity and charging the premium…

Recent work has considered theoretical models for the behavior of agents with specific behavioral biases: rather than making decisions that optimize a given payoff function, the agent behaves inefficiently because its decisions suffer from…

Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…

We revisit the problem of portfolio selection, where an investor maximizes utility subject to a risk constraint. Our framework is very general and accommodates a wide range of utility and risk functionals, including non-concave utilities…

Agent-based models provide a constructive approach to studying emergent dynamics in life-like systems composed of interacting, adaptive agents. Financial markets serve as a canonical example of such systems, where collective price dynamics…