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In Elamin (2013), the credit rating agency (CRA) cannot credibly fully reveal its information about the quality of a rated structured finance project, when ratings are unverifiable. Can the fear of losing its reputation discipline the CRA? In this paper, there is incomplete information about the type of the CRA. With some probability, it can be a truthful type, always fully revealing its information. At every period, the (updated) probability that the CRA is of the truthful type is its reputation. With only two project types and when the CRA’s reputation is high enough, an informationally efficient equilibrium, where investors are fully informed, exists. With more than two project types, no matter how high the CRA’s patience level or its reputation, there is no informationally efficient equilibrium. The many-project-types case is clearly the relevant case; therefore, I conclude that the fear of losing a reputation is not enough of a deterrent in the structured finance market

We analyze voluntary private contributions to public goods and the role seed money plays in signaling the public good's quality to potential subsequent contributors. We present a theoretical model and analyze two sets of naturally occurring data from crowd-funding platforms. After developing the theoretical background we find statistically significant switch points which distinguish between seed contributions to subsequent contributions. A positive change in contribution behavior after the switch suggests an increase in the perceived value of the public good. We find that the signal comprises the number of contributors and the average contribution (as proportion of targeted goal).

This paper develops a method to integrate affective reponses into game theoretical models. We illustrate our method in a team production framework. The model analyzes how concave and convex status preferences for esteem solve the problem of team production under complete and incomplete information about workers’ abilities. Using a dual selves model, we model the choice of effort as a deliberative decision and the expression of esteem as an affective response. Modeling an individual’s affective system as a seperate player allows us to apply standard game-theoretic solution concepts to analyze affective responses.

Risk attitude and perception is reflected in brain reactions during RPID experiments. Given the fMRI data, an important research question is how to detect risk related regions and to investigate the relation between risk preferences and brain activity. Conventional methods are often insensitive to or misrepresent the original spatial patterns and interdependence of the fMRI data. In order to cope with this fact we propose a 3D Image Functional Principal Component Analysis (3D Image FPCA) method that directly converts the brain signals to fundamental spatial common factors and subject-specific temporal factor loadings via proper orthogonal decomposition. Simulation study and real data analysis show that the 3D Image FPCA method improves the quality of spatial representations and guarantees the contiguity of risk related regions. The selected regions provide signature scores and carry explanatory power for subjects' risk attitudes. For in-sample analysis, the 3D Image method perfectly classifies both strongly and weakly risk averse subjects. In out-of-sample, it achieves 73-88% overall accuracy, with 90-100% rate for strongly risk averse subjects, and 49-71% for weakly risk averse subjects.

The article formulates the information theory of firm, introduces the concept of firm as an operating system, which controls the firm’s operation by the means of the information resources processing, in an analogy with the operating system at a microprocessor in the computing devices, represents the director as an information processing element, describes the board of directors as the electronically-scanned electronically-steered phased array radar, considers the scientific problem of strategy creation by the interlocking interconnecting overlapping directors in the boards of directors in the firms in the economic system with the induced nonlinearities. We highlight a fact that the director makes the information sensing, filtering, processing, resonant absorption, analysis, decision making, strategy creation, hence it can be empirically represented as a processing element with the Harvard or von Neumann director’s mindset architectures in line with the digital signal processing science. We think that the board of directors in corporate governance system can be theoretically represented as the electronically-scanned electronically-steered phased array radar with a certain number of electronic devices (directors can be modeled as electronic devices with the active antenna elements, filters banks, digital signal processors, memory chipsets in agreement with the microwave and digital signal processing sciences). We developed the MicroITF operating system and software programs, 1) to control the firm operation by the means of the information resources processing; 2) to accurately characterize the director’s performance by means of a) the filtering of the generated/transmitted/received information by the director into the separate virtual channels, depending on the information content, and b) the measurement of the levels of signals in every virtual channel with the generated/transmitted/received information by the director, in the overlapping interconnecting interlocking directors networks in the boards of directors in the firms during the Quality of Service (QofS) measurements process, and 3) to create the winning virtuous business strategies by the interlocking interconnecting directors in the boards of directors in the firms, using the patented recursive artificial intelligence algorithm.

For a host of compelling methodological reasons, homo oeconomicus has to be replaced. This is consensus, the open question is how this could be accomplished. What is required first is the separation of the formal foundations into a structural and a behavioral part. This paper introduces the propensity function as general formalization of Economic Man/Woman. The propensity function is a compact formal expression of random, semi-random, and deterministic behavioral assumptions. It is shown how, in a random environment, target-oriented behavior produces stochastic stability and optimality in the product market. With homo oeconomicus the conception of simultaneous equilibrium, too, vanishes.

We develop a unifying framework for optimal income taxation in multi-sector economies with general patterns of externalities. Agents in this model are characterized by an N-dimensional skill vector corresponding to intrinsic abilities in N potentially externality-causing activities. The private return to each activity depends on individual skill and an aggregate activity-specific return, which is a fully general function of the economy-wide distribution of activity-specific efforts. We show that the N-dimensional heterogeneity can be collapsed to a one-dimensional, endogenous statistic sufficient for screening. The optimal tax schedule features a multiplicative income-specific correction to an otherwise standard tax formula. Because externalities change the relative returns to different activities, corrective taxes induce changes in the across-activity allocation of effort. These relative return effects cause the optimal correction to diverge, in general, from the Pigouvian tax that would align private and social returns. We characterize this divergence and its implications for the shape of the tax schedule both generally and in a number of applications, including externality-free economies, increasing and decreasing returns to scale, zero-sum activities such as bargaining or rent extraction, and positive or negative spillovers.

Consider the problem of maximizing the revenue from selling a number of goods to a single buyer. We show that, unlike the case of one good, when the buyer's values for the goods increase the seller's maximal revenue may well decrease. We then identify two circumstances where monotonicity does obtain: when optimal mechanisms are deterministic and symmetric, and when they have submodular prices. Next, through simple and transparent examples, we clarify the need for and the advantage of randomization when maximizing revenue in the multiple-good versus the one-good case. Finally, we consider "seller-favorable" mechanisms, the only ones that matter when maximizing revenue. They are essential for our positive monotonicity results, and they also circumvent well-known nondifferentiability issues.

Political scientists have long considered ideology, partisanship, and constituency in determining how members of the United States Congress make decisions. Meanwhile, psychologists have held that personality traits play central roles in decision-making. Here, we bridge these literatures by offering a framework for modeling how personality influences legislative behavior. Drawing from experimental economics and neuropsychology, we identify core cognitive constraints for the “Big Five” personality model, parameterizing them in ways useful for crafting formal models of legislative behavior. We then show one example of the applicability of this framework by creating a formal decision-theoretic model of constituency communication. We show that when there exists uncertainty over the true state of the world, personality traits have more influence on individual decisions.

Faced with a daily market competition, modern businesses require agility in business, willingness to changes within the environment and quality in business decision making in order to respond to all requests placed in front of them, with the aim of improving the quantitative and qualitative parameters of operations. Modern business intelligence systems provide the answer how to, in the shortest possible time, ensure a sufficient amount of reliable, high-quality and timely data which provide information strong enough to make a good business decision. One of the issues that affect the performance of business intelligence systems is its organizational aspect. Therefore, it is important to know how businesses who apply business intelligence tools to a large extent have orga- nized a separate department for business intelligence. These subjects are different from others according to their business, and in practice are more successful in the application of business intelligence tools. Practical research carried out on Croatian territory has led to such conclusions.

Knowledge, innovation, information technology, and people are the key contributories in the future of any organization, and IC is the key driver of market value in the "knowledge" economy. Voluntary disclosure of IC information in the annual reports is done by a few leading corporations. The omission of IC information, therefore, may adversely influence the quality of decisions made by shareholders, or lead to material misstatements. This study attempts to provide an insight into the "narrative" style of IC disclosures done by the Indian corporations. In order to survey the recent IC disclosure scenario, we conducted a study of 16 Indian IT corporations in which the "content analysis" was done on their 2007 to 2009 annual reports. The results of this study confirmed that IC disclosure by these IT corporations is almost negligible and its disclosure had not received any preference from the mentors of these corporations. IC reports may initially be used for "internal" management purposes; but an "external" stakeholder-focus of IC report should be the ultimate goal.

This paper aims to explore the relevance of the Asymmetric Information and the Theory of Argumentation TA in the complex area of financial crises. Specifically, we investigated the scope of the phenomenon of persuasion in advertising. It examines advertisements in publications notable economic movement in Colombia. The financial communication is important to distinguish how to run the models of behavior based on beliefs of agents. Consequently, investors' beliefs can also change systematically with changes in market prices.

The theoretical communication model by Gossner et al. (2006) (GHN henceforth) based on the matching pennies game has recently been implemented by García-Gallego et al. (2013) (GHR henceforth) in the lab, emphasizing the transmission of information among players with aligned incentives. The present work contributes to characterize the optimal structure of the equilibrium strategies or the set up under consideration. Also, we establish the length of the sequence of the experimental game for which the players' optimal strategy is the majority rule, considering a minimal length of 3. Finally, we aim at testing the model by GHN (2006). Experimental findings give! support to the theoretical results in GHN (2006).

In this research article: 1) the new quantum macroeconomics and microeconomics theories in the quantum econophysics science are formulated, 2) the notion on the wave function in the quantum macroeconomics and microeconomics theories in the quantum econophysics science is introduced, and 3) the quantum econophysical wave equations in the quantum macroeconomics and microeconomics theories in the quantum econophysics science are derived for the first time. Authors show that there is a certain conceptual scientific analogy between 1) the wave functions in the quantum econophysical wave equations in the quantum macroeconomics and microeconomics theories in the quantum econophysics science as well as 2) the wave function in the Schrödinger quantum mechanical wave equation in the quantum mechanics science. The wave function theories are created to make: 1) the economy’s state prediction at the certain time moment, using the wave function in the quantum econophysical wave equation in the quantum macroeconomic theory in the quantum econophysics science; and 2) the firm’s state prediction at the certain time moment, using the wave function in the quantum econophysical wave equation in the quantum microeconomic theory in the quantum econophysics science. Authors use the quantum econophysical wave equations in the quantum econophysics science to develop a new software program for the application by the central / commercial / investment banks with the purpose the make the accurate characterization and forecasting of: 1) the national/global economic performance changes, including the GIP((t), GDP(t), GNP(t) dependences changes, in agreement with the quantum macroeconomics theory in the quantum econophysics science, and 2) the firm’s economic performance changes, including the EBITDA(t) dependence changes in agreement with the quantum microeconomics theory in the quantum econophysics science.

We consider legal obligations against a background of social norms, for example, societal norms, professional codes of conduct, or business standards. Violations of the law trigger reputational sanctions insofar as they signal nonadherence to underlying norms, raising the issue of the design of offenses. We show that the law generally ought to follow social norms or be stricter than them. When society is only concerned with the trade-off between deterrence and enforcement costs, legal standards defining offenses should align with underlying norms so long as the latter are not too deficient. When providing productive information to third parties is also a concern, legal standards should either align with underlying norms with fines that trade off deterrence against the provision of information; or legal standards should be more demanding and enforced with purely symbolic sanctions, for example, public reprimands. Our analysis has implications for general law enforcement and regulatory policies. (JEL: D8, K4, Z13)

We study the impact of diverse beliefs on conduct of monetary policy. Individual belief is modeled by a state variable that defines an individual’s perceived laws of motion. We use a New Keynesian Model that is solved with a quadratic approximation hence individual decisions are quadratic functions. Aggregation renders the belief distribution an aggregate state variable. Although the model has standard technology and policy shocks, diverse expectations change materially standard results about a smooth trade-off between inflation volatility and output volatility. Our main results are summed up as follows: (i) The policy space contains a curve of singularity which is a collection of policy parameters that divides the space into two sub-regions. Some trade-off between output and inflation volatilities exists within each region and some across regions. (ii) The singularity causes volatility of variables to be non monotone in policy parameters. Policymakers cannot assume a more aggressive policy will change outcomes in a predictable manner. (iii) When beliefs are diverse a central bank must also consider the volatility of individual consumption and the related volatility of financial markets. We show aggressive anti-inflation policy increases consumption volatility and aggressive output stabilization policy entails rising inflation volatility. Efficient central bank policy must therefore be moderate. (iv) High optimism about the future typically lowers aggregate output and increases inflation. This “stagflation†effect is stronger the stickier prices are. Policy response is muted since the effects of higher inflation and lower output on interest rates partially cancel each other. Effective policy requires targeting exuberance directly or its effects in asset markets. Central banks already do so with short term interventions. (v) The observed high serial correlation of 0.80 in policy shocks contributes greatly to market volatility and we show that a reduction in persistence of central bank’s deviations from a fixed rule will contribute to stability. (vi) Belief dispersion is measured by cross sectional standard deviation of individual beliefs. An increased belief diversity is found to make policy coordination harder and results in lower aggregate output and lower rate of inflation. Bank policy can lower belief dispersion by being more transparent.

Der Autor registriert, dass die Menge der verantwortungsbewusst denkenden Menschen in zunehmendem Maße fühlt, dass offenbar in der menschlichen Gesellschaft - weltweit wie auch in Deutschland - "vieles klemmt", ohne schlüssige Änderungsvorschläge unterbreiten zu können, was übrigens auch für die Wissenschaft gilt. Und auch die Grundlagenwissenschaft Philosophie hat mit Blick auf die Grundlagen mehr offene Fragen, als der Normalbürger vermutet. Im Beitrag wird gezeigt, wie eine neuartige Betrachtung naturgesetzlicher Zusammenhänge - speziell des II. Hauptsatzes der Thermodynamik - zu einem Naturprinzip führt, das das evolutionäre Verhalten der Natur plausibel werden lässt und - bei bewusster Anwendung - für eine menschgerechte Evolution der Gesellschaft wichtige Hinweise abzuleiten gestattet. Dass das beim heutigen Entwicklungsstand der Gesellschaft vorwiegend den Bereich Technik/Wirtschaft betrifft und die Politik fordert, versteht sich von selbst.

This paper is aimed at highlighting how common law has evolved over the centuries, namely through the flexibility accorded to judicial precedents, as well as through the evolutionary nature evidenced in the processes and rules applied in statutory interpretation. In addition to illustrating how informational asymmetries can be mitigated through de centralisation, facilitated with courts employing the use of non-legal agents such as expert witnesses - as evidenced in the Daubert case, Pepper v Hart also illustrates how common law has evolved through the scope and permissibility of aids to statutory interpretation. Whilst financial markets and changes in the environment impact legislators, and whilst it is widely accepted that legislation constitutes the supreme form of law, the necessity for judges to introduce a certain level of flexibility will also contribute towards ensuring that legitimate expectations of involved parties are achieved - particularly where the construction of the words within a statute gives rise to considerable ambiguity. By way of reference to landmark rulings in the United States, cases such as Daubert and The Estate of Edgar A. Berg v. Commissioner, this paper also aims to illustrate the vital role increasingly assumed by non-legal actors, and why this approach should constitute a trend to be adopted in European common and civil law jurisdictions. This being the case given the failures and flaws of references to Parliamentary material and whether these should be permitted as an aid to the construction of legislation which is ambiguous or obscure, as illustrated in the case of Pepper v Hart.

We investigate in a model of horizontally differentiated products the effect of product market competition on fraudulent behavior. We show that the relationship between fraud and competition depends on the source of variation of competition (number of firms, product substitutability and market size) as well as on the endogeneity or exogeneity of industry structure.

This paper studies the choice of an individual who acquires information before choosing an action from a set of actions, whose consequences depend on the realization of a state of nature. Information processing can be costly, for example, due to limited attention. We show that the preference of the individual over sets of actions, is completely characterized by a preference for early resolution of uncertainty who becomes indifference when facing degenerate choices. When information acquisition is no longer part of the decision process, the individual is indifferent to the timing of resolution of uncertainty and she behaves according to the subjective learning model of Dillenberger et al. (2014).

The present innovative research continues a series of scientific articles on a) the theory of the firm in the nonlinear dynamic financial and economic systems in the classic economics science, b) the information theory of the firm in the classic economics science, c) the quantum microeconomics theory in the quantum economics science, presenting the groundbreaking theoretical research results: 1) the quantum theory of firm in the frames of the quantum microeconomics theory in the quantum econophysics science is proposed; 2) the formulas (1, 2) to compute the firm’s discrete-time EBITDA (the firm’s value) changes at the different time moments are derived; 3) the formulas (3, 4) to calculate the distribution of a number of the firms’ excited business processes of certain value at the selected firm’s state in the economy of scale and scope are presented; 4) the notion on the wave function in the quantum econophysical time-dependent/time independent wave equations is introduced; 5) the formulas (5, 6) to predict the firm’s discrete-time EBITDA (the firm’s value) state changes in the national/global economies at the certain time moment, using the wave functions in the quantum econophysical time-dependent/time independent wave equations, are derived; 6) the quantum phenomena, including the possible weak/strong interactions between the firms in the national/global economies are described; 7) the comparative analysis between a big number of the classic theories of the firm and the quantum theory of the firm is completed, explaining the main characteristic differences and existing similarities; 8) the evolutionary shift from the classic theory of the firm to the quantum theory of the firm is described; 9) the perspectives on the application of the quantum theory of the firm with the aim to solve the various economic problems in the real- and speculative- sectors of economic markets are discussed.

In this paper we study the impact of more transparency in the foreign exchange market on the ex ante expected volume of international trade. Transparency is measured by the informational content of publicly observed signals correlated to the random exchange rate. We find that more transparency may increase or decrease the volume of international trade. In particular, the impact of more transparency depends the curvature of the marginal cost function of the firms. Furthermore, ex ante expected profits of the firms are higher when the foreign exchange market is more transparent.

We study the formation of coalitions that provide public goods to members. Individuals are linked on a tree graph and those with similar preferences are connected on the tree. We present a solution that selects allocations belonging to the coalition structure core and that are also envy-free.

An agent is asked to assess a real-valued variable Y p based on certain characteristics X p = (X p -super-1, ..., X p -super-m), and on a database consisting of X i -super-1, ... X i -super-m, Y i ) for i = 1, ..., n. A possible approach to combine past observations of X and Y with the current values of X to generate an assessment of Y is similarity-weighted averaging. It suggests that the predicted value of Y, Ȳ p -super-s, be the weighted average of all previously observed values Y i , where the weight of Y i for every i = 1, ..., n, is the similarity between the vector X p -super-1, ..., X p -super-m, associated with Y p , and the previously observed vector, X i -super-1, ..., X i -super-m. We axiomatize this rule. We assume that, given every database, a predictor has a ranking over possible values, and we show that certain reasonable conditions on these rankings imply that they are determined by the proximity to a similarity-weighted average for a certain similarity function. The axiomatization does not suggest a particular similarity function, or even a particular form of this function. We therefore proceed to suggest that the similarity function be estimated from past observations.We develop tools of statistical inference for parametric estimation of the similarity function, for the case of a continuous as well as a discrete variable. Finally, we discuss the relationship of the proposed method to other methods of estimation and prediction. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

On college campuses across the country and on millions of home computers, too, young adults download from each other digital files containing recorded music and films for their entertainment. The owners of that copyrighted material pursue the downloaders with legal action as well as the software services that facilitate it. Napster’s existence as a free file-sharing internet site was shut down in 2001, and the Supreme Court has recently ruled that a successor file-sharing service, Grokster, engaged in copyright infringement by providing an easy way for individuals to exchange files. The amount of filesharing activity is not trivial; Paul Romer (2002) estimates that Napster users were downloading at the rate of 1.5 billion downloads per month before Napster was shut down and that the consumer surplus generated by downloading roughly equaled the revenues of the recording industry.

It is known that in two-sided many-to-many matching problems, pairwise-stable matchings may not be immune to group deviations, unlike in many-to-one matching problems (Blair, 1988). In this paper, we show that pairwise stability is equivalent to credible group stability when one side has responsive preferences and the other side has categorywise-responsive preferences. A credibly group-stable matching is immune to any “executable” group deviations with an appropriate definition of executability. Under the same preference restriction, we also show the equivalence between the set of pairwise-stable matchings and the set of matchings generated by coalition-proof Nash equilibria of an appropriately defined strategic-form game.

This paper analyzes the incentive properties of the standard and burden of proof for a finding of negligence, when evidence about injurers' behavior is imperfect and rests with the parties. We show that the `preponderance of evidence' standard used in common law, together with ordinary exclusion rules defining legally admissible evidence, provides maximal incentives for potential tort-feasors to exert care. This holds even though, following the occurrence of harm, litigants have unequal access to evidence and may distort information in adversarial procedures. Abstracting from litigation costs, the optimal assignment of the burden of proof is shown to follow from the principle underlying the standard of proof. Our main results are derived in a mechanism design framework, but we also consider implementation as a sequential equilibrium with the court as a player in the game. Cet article analyse les propriétés incitatives du standard de preuve et de l'attribution de la charge de la preuve en responsabilité pour faute, lorsque l'information sur le comportement de l'auteur du dommage est imparfaite et relève des parties. Nous montrons que le standard de la « prépondérance de preuve » appliqué dans la common law, combiné aux règles d'exclusion définissant les faits admissibles en cour, fournit le maximum d'incitations à la prudence. Cette propriété est vérifiée même si, lorsque survient un dommage, les parties ont un accès inégal aux faits ou peuvent les présenter de manière partiale dans le cadre d'une procédure adversariale. Abstraction faite des coûts de litiges, l'attribution de la charge de la preuve s'explique également par le principe fondant le standard de preuve. Ces résultats sont obtenus comme propriétés d'un mécanisme optimal, mais nous analysons aussi la mise en oeuvre du mécanisme dans un équilibre séquentiel où le tribunal est modélisé comme un joueur.

Abel (2002) proposes a resolution of the riskfree rate and the equity premium puzzles} by considering pessimism and doubt. Pessimism is characterized by subjective probabilistic beliefs about asset returns that are stochastically dominated by the objective distribution of these returns. The subjective distribution is characterized by doubt if it is a mean-preserving spread of the objective distribution. This note offers a decision theoretic foundation of Abel's ad-hoc definitions of pessimism and doubt under the assumption that individuals exhibit ambiguity attitudes in the sense of Schmeidler (1989). In particular, we show that the behavior of a representative agent, who resolves her uncertainty with respect to the true distribution of asset returns in a pessimistic way, is the equivalent to pessimism in Abel's sense. Furthermore, a representative agent, who takes into account pessimistic as well as optimistic considerations, may result in the equivalent to doubt in Abel's sense.

In this note we use the Rank-Dependent Expected-Utility (RDEU) model to analyse how the effect of improved information on smoking risks impacts the consumption of cigarettes. The RDEU model enables us to incorporate the ways individuals perceive smoking risks. We provide conditions for individuals to modify cigarette consumption in the face of improved information, and we show that these conditions depend in particular on the probability of being ill.

We investigate an election model with costly accuracy improvement by allowing heterogeneity in the cost functions. We find that the aggregate accuracy in large elections is characterized by the average value of the inverse of the second derivative at zero information.

This contribution argues that Menger’s Grundsätze ground economic subjectivism in cognitive features. It elaborates on need-satisfaction in relation with the use value of goods. It details the various forms raised for utility in Menger’s texts and distinguishes between both Grundsätze editions. The second edition (1923 – edited by his son Karl) turns out as the starting point of an interpretation lowering the cognitive content of the 1871 text and, therefore, the originality of the representation of individuals. With the various aspects of needs and utility, with the concept of use value, Carl Menger’s economic subjectivism does exist on an autonomous basis.

This paper examines the ability of a policy maker to control equilibrium outcomes in a global coordination game; applications include currency attacks, bank runs, and debt crises. A unique equilibrium is known to survive when the policy is exogenously fixed. We show that, by conveying information, endogenous policy re-introduces multiple equilibria. Multiplicity obtains even in environments where the policy is observed with idiosyncratic noise. It is sustained by the agents coordinating on different interpretations of, and different reactions to, the same policy choices. The policy maker is thus trapped into a position where both the optimal policy and the coordination outcome are dictated by self-fulfilling market expectations.

Competing firms are usually better informed about their own cost parameters than about those of their rivals. Therefore, it is an important issue to study the incentives of firms to exchange private cost information. We resolve and further generalize an influential model of Raith (1996) and show that, independent of the number of firms, concealing cost information is a dominant firm strategy in heterogeneous Bertrand oligopolies with substitutive as well as with complementary goods.

This note reexamines the model of tax evasion of the monopolistic firm with profit taxes by incorporating the firm's strategic behavior for tax avoidance. It is shown that under certain conditions, the monopolist's decisions on output and expenditure are no longer separable from the evasion decision and there is a trade-off between production efficiency and cost efficiency. We then derive the optimal profit tax rate to investigate some properties of profit taxation.

This note presents several preference-based definitions of a likely event, and shows that they induce (in the sense of Lo 2005b) the same set of possible states for biseparable preferences.

Many argue that crises -- such as currency attacks, bank runs and riots -- can be described as times of non-fundamental volatility. We argue that crises are also times when endogenous sources of information are closely monitored and thus an important part of the phenomena. We study the role of endogenous information in generating volatility by introducing a financial market in a coordination game where agents have heterogeneous information about the fundamentals. The equilibrium price aggregates information without restoring common knowledge. In contrast to the case with exogenous information, we find that uniqueness may not be obtained as a perturbation from common knowledge: multiplicity is ensured when individuals observe fundamentals with small idiosyncratic noise. Multiplicity may emerge also in the financial price. When the equilibrium is unique, it becomes more sensitive to non-fundamental shocks as private noise is reduced.

Pooled forecasts frequently outperform individual forecasts of economic time series. This paper shows that the introduction of model uncertainty into the formation of expectations can account for the regularity. We conjecture that agents learn in a Bayesian way, using an optimally designed combination of forecasts to form expectations. When these expectations alter the ex-post realization of the data generating mechanism the pooled forecast may dominate the best individual device.

Experimental subjects receive a different presentation of a food product's potential health risk reductions if eaten regularly. They are then asked to bid for the product. Results suggest that the bids vary across the groups that receive differing risk information.

This paper investigates the price behavior in an experimental market in which participants are only aware of their own private values and do not possess information about the demand and supply curves, hence face ambiguity. The paper finds that when demand is flatter (more elastic) than the supply curve in price-quantity space then price approaches equilibrium from below, that is, all trades initially occur below the equilibrium price. However, if demand is steeper (less elastic) than supply, then the equilibrium price is reached from above. A simple rationale for this result is that in the first round of trading, participants tend to split the surplus from trading evenly among themselves since they are unaware of the equilibrium price. However, in subsequent rounds price quickly converges to the equilibrium as the equilibrium is discovered through repeated interactions.

I explore how investors allocate mental effort to learn about the mean return of a number of assets and I analyze how this allocation changes the portfolio selection problem. I show that the endogeneity of estimation risk alters the comparative statics of portfolio choice and provides an explanation to Huberman's (2001) empirical findings that “Familiarity Breeds Investment†.

Waiting tolerance at ramp meters and travel time on the freeway were measured using a computer administered stated preference (CASP) survey and a virtual experience stated preference (VESP) method employing a driving simulator.The selections varied in the number of minutes waiting at a ramp meter with vehicle speed once on the freeway. The subjects ranked the selections in order of preference. The results were statistically analyzed using a binary logit model controlling for demographics, socioeconomic characteristics, daily travel time, and personality scores.The results by the CASP method displayed a preference for freeway congestion to ramp delay, but opposite results were obtained by the VESP method. A number of reasons are posited to explain the difference, but the results indicate that method of stated preference data collection can significantly affect conclusions drawn.

A possibility of the existence of a discontinuity of Prelec’s (probability weighting) function W(p) at the probability p = 1 is discussed. This possibility is supported by the Aczél–Luce question whether Prelec’s weighting function W(p) is equal to 1 at p = 1, by the purely mathematical restrictions and the “certain–uncertain” inconsistency of the random–lottery incentive experiments. The results of the well-known experiments support this possibility as well.

A need for experiments on the certainty effect near the certainty (near the probability p = 1) is stated in this paper. The need supported by the Aczél–Luce question whether Prelec’s weighting function W(p) is equal to 1 at p = 1, by the purely mathematical restrictions and the “certain–uncertain” inconsistency of the random–lottery incentive experiments. The results of the experiments of the certainty effect near the certainty show that Prelec’s (probability) weighting function can be discontinuous at the probability p = 1. There is a need for new experiments at probabilities which are closer to p=1, e.g., at probabilities p=.99 and p=.999.

Risk-averse investors induce competitive intermediaries to hold safe assets, thereby lowering the probability of a run and reducing financial fragility. We revisit Goldstein and Pauzner (2005), who obtain a unique equilibrium in the banking model of Diamond and Dybvig (1983) by introducing risky investment and noisy private signals. We show that, in the optimal demand-deposit contract subject to sequential service, banks hold safe assets to insure investors against investment risk. Consequently, fewer investors withdraw prematurely, which reduces the probability of a bank run. Safe asset holdings increase investor welfare and may increase the bank’s provision of liquidity.

La conception d’innovations agro-écologiques de nature systémique dans le secteur des grandes cultures permet aujourd’hui de concilier les enjeux de productivité et la protection de l’environnement. Ces innovations sont souvent complexes car combinant des outils agronomiques traditionnels, comme l’allongement des rotations, avec des techniques de production novatrices telles que l’agriculture de précision. L’adoption de ces innovations engendre des incertitudes supplémentaires pour les agriculteurs. Plusieurs travaux ont révélé que l’aversion au risque est un frein majeur à l’adoption d’innovations dans l’exploitation agricole. Mais d’autres déterminants individuels de l’adoption d’ordres agronomiques, économiques ou psycho-sociaux affectent aussi le processus de décision des exploitants. Cependant, parmi les déterminants recensés dans les travaux, peu semblent communs et généralisables à tous les contextes de production. D’autres déterminants, non directement observables, influent sur la décision d’adoption des innovations. Cet article présente une revue de littérature permettant d’identifier le rôle joué, dans le processus d’adoption d’innovations agro-écologiques, par les déterminants observables et non observables tels que les perceptions et les préférences., One way to reconcile the issues of productivity and environmental protection for field crops farmers is the implementation of systemic agroecological innovations. These innovations are complex combining traditional agricultural tools, such as the lengthening of rotations, with innovative production techniques such as precision agriculture. The adoption of these innovations creates additional uncertainty for farmers. Several studies have shown that risk aversion is a major break in the adoption of agricultural innovations. But others individual agronomic, economic and psychosocial determinants also affect the adoption decision process. However, among the determinants identified in the literature, few seem common and generalized to all production context. Other determinants, not directly observable, influence the adoption decision. This article presents a literature review to identify the role of observable and unobservable determinants, such as perceptions and preferences, in the adoption process of agroecological innovations.

RESUMEN El presente trabajo muestra un estudio estructural dentro de las técnicasprospectivas realizado en el Instituto Universitario de Tecnología del Estado Bolívar(IUTEB) como aporte al proceso de transformación que se desarrolla en las institucionesuniversitarias venezolanas y en el marco de discusión de una universidad distinta y conmayor pertinencia e inclusión social. La validez científica de la propuesta estáfundamentada en la utilización del método de expertos, la construcción de la matriz directade influencia/dependencia del MICMAC y el enfoque estratégico. El análisis estructural yla interpretación de la interrelación existente permiten descubrir las variables que dinamizana dicha Institución, generando el mapa de transformaciones en los niveles de realización depoder, enlace y conflicto dándole tejido sistémico al constructo prospectivo, poniendo derelieve las líneas de ruptura estratégica necesarias para alcanzar un nivel de eficiencia,competitividad y sostenibilidad en los procesos que dentro de ella se realizan y dar cumplimiento al encargo social, enmarcado en el nuevo modelo productivo enconstrucción. English abstract This paper presents a prospective study conducted at the University Institute of Technology of the State of Bolivar (IUTEB) to assist the process of transformation taking place in Venezuelan universities and to contribute to the discussion of a different type of university with greater presence and social inclusion. The scientific validity of the proposal is based on the use of the experts method, the construction of the direct matrix of influence/dependence of MICMAC, and a strategic approach. The structural analysis and the interpretation of the interrelated variables enable to discover the variables that streamline each institution. This generates a map of changes in levels of achievement of power, engagement and conflict, which gives the systemic tissue a prospective construct, highlights the breaklines that are strategically necessary to achieve a level of efficiency, competitiveness and sustainability in the processes that occur within it, and comply with the social order, framed in the new management model under construction.&nbsp

Resumen El artículo desarrollado se dirige a considerar la visión subyacente de la Industria del Aluminio en Venezuela (IAV), en el despliegue del pensamiento estratégico y la consecuente actitud estratégica que debe signar el comportamiento de quienes se ubican en todos los niveles de toma de decisiones de la Industria. La aplicación de las herramientas propias de la prospectiva permitió recoger la opinión de los expertos del sector, mediante la aplicación de un cuestionario, constituido por 11 ítems, con escala de selección múltiple, y procesado a través del programa estadístico informático de amplia aplicación en las ciencias sociales, SPSS. Los resultados indicaron las variables a considerar en el plano de las transformaciones que deben replicarse en la industria que indicaran los cimientos para edificar su imagen del futuro, con el aporte de todos los trabajadores. Se trata de dar respuesta al modelo normado desde el Plan de la Patria Segundo Plan Socialista de Desarrollo Económico y Social de la Nación, 2013-2019, en la consideración de la Industria desde una perspectiva estratégica, con la necesidad presente de generar aportes desde el punto de vista de su sostenibilidad para cumplir con el encargo social. Abstract The paper aims to consider the underlying vision of Venezuelan Aluminum Industry in the deployment of strategic thinking, and the consequent strategic approach should conduct the behavior of those located in all levels of decision-making in this Industry. The application of foresight tools allowed to collect the opinions of industry experts, by applying a questionnaire consisting of 11 items with multiple-choice scale, and processed through SPSS. The results indicated the variables to consider in terms of the changes to be replicated in the industry to indicate the foundation to build his image of the future, with the contribution of all workers. It is regulated in response to the model from the Homeland Plan Second Socialist Plan for Economic and Social Development of the Nation, 2013-2019, in consideration of the industry from a strategic perspective, the present need to generate contributions from the point of view of sustainability to meet the social order.

The Netherlands is one of the most flood prone countries in the world. It also has the best flood defenses in the world that are built to make floods an extremely rare event. This paper uses the unique Dutch setting to provide evidence on the price and perception of rare environmental disasters. In particular, it allows us to precisely identify whether houses in areas that would flood, in case the Dutch flood defenses fail, cost less than otherwise equal homes that do not run any risk. We do this using a border-discontinuity design that heavily relies on the (spatial) detail of our unique dataset covering every housing transaction over the period 1999-2011. Despite €1.1 billion publicly spent on flood protection each year, we find a 1% flood risk price discount on houses in flood prone areas. The median household living in a flood prone area would be willing to pay an additional €69 per year to be fully insured against flood risk. Our estimate implies that people’s perceived flood risk is substantially higher than the official protection levels at which the government claims to uphold the country’s flood defenses.

In periods of high energy demand, utilities frequently issue "emergency" appeals for conservation over peak hours to reduce brownout risk. We estimate the impact of such appeals using high-frequency data on actual and forecasted electricity generation, pollutant emission measures, and real-time prices. Our results suggest a perverse impact; while there is no significant reduction in grid stress over superpeak hours, such calls lead to increased off -peak generation, CO2 emissions, and price volatility. We postulate that consumer attempts at load shifting lead to this result.

In this paper, we investigate political communications in social networks characterized both by homophily–a tendency to associate with similar individuals–and group size. To generate testable hypotheses, we develop a simple theory of information diffusion in social networks with homophily and two groups: conservatives and liberals. The model predicts that, with homophily, members of the majority group have more network connections and are exposed to more information than the minority group. We also use the model to show that, with homophily and a tendency to produce like-minded information, groups are disproportionately exposed to like-minded information and the information reaches like-minded individuals more quickly than it reaches individuals of opposing ideologies. To test the hypotheses of our model, we analyze nearly 500,000 communications during the 2012 US elections in a social network of 2.2 million politically-engaged Twitter users. Consistent with the model, we find that members of the majority group in each state-level network have more connections and are exposed to more tweets than members of the minority group. Likewise, we find that groups are disproportionately exposed to like-minded information and that information reaches like-minded users more quickly than users of the opposing ideology.