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By
Krysiak, Frank C.
17 Citations
Evaluating the longrun consequences of present actions, as in the context of sustainability, requires information about the actions’ outcomes and about future preferences that is often uncertain. We analyze a riskbased criterion of sustainability and a corresponding efficiency concept that cover these uncertainties. We derive several properties of these criteria and formally characterize the tradeoff between sustainability and efficiency. Furthermore, we show that maximizing the probability of ex post efficiency under a sustainability constraint provides an interesting choice rule and that, for a special case, this rule is connected to portfolio theory.
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By
Herden, Gerhard; Mehta, Ghanshyam B.
7 Citations
Summary
It is shown that each of the Debreu Open Gap Theorem and the Debreu Continuous Utility Representation Theorem can be used in order to prove the other. Furthermore, it is proved that the classical AlexandroffUrysohn Metrization Theorem implies Debreu's Continuous Utility Representation Theorem and, thus, all known results on the existence of continuous utility functions.
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By
CerreiaVioglio, Simone; Ghirardato, Paolo; Maccheroni, Fabio; Marinacci, Massimo; Siniscalchi, Marciano
Show all (5)
65 Citations
This paper analyzes preferences in the presence of ambiguity that are rational in the sense of satisfying the classical ordering condition as well as monotonicity. Under technical conditions that are natural in an Anscombe–Aumann environment, we show that even for such a general preference model, it is possible to identify a set of priors, as first envisioned by Ellsberg (Q J Econ 75:643–669, 1961). We then discuss ambiguity attitudes, as well as unambiguous acts and events, for the class of rational preferences we consider.
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By
d’Aspremont, Claude; Dos Santos Ferreira, Rodolphe
3 Citations
We use a comprehensive model of strategic household behavior in which the spouses’ expenditure on each public good is decomposed into autonomous spending and coordinated spending à la Lindahl. We obtain a continuum of semicooperative regimes parameterized by the relative weights put on autonomous spending, by each spouse and for each public good, nesting full cooperative and noncooperative regimes as limit cases. Testing is approached through revealed preference analysis, by looking for rationalizability of observed data sets, with the price of each public good lying between the maximum and the sum of the hypothesized marginal willingness to pay of the two spouses. Once rationalized, an observed data set always allows to identify the sharing rule, except when both spouses contribute in full autonomy to some public good (a situation of local income pooling).
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By
FaulíOller, Ramon; Ok, Efe A.; OrtuñoOrtín, Ignacio
11 Citations
Summary.
We consider a model of political competition among two ideological parties who are uncertain about the distribution of voters. The distinguishing feature of the model is that parties can delegate electoral decisions to candidates by nomination. It is shown that if the credible platform commitments of the candidates is feasible, then at least one of the parties nominates in equilibrium to a candidate who has an ideology that is more radical than the delegating party's ideology. In a variety of circumstances, this, in turn, yields a polarization of equilibrium policy choices of the candidates. It is thus argued formally here that strategic nomination of the candidates may well be one of the major reasons behind the well documented observation that the platforms associated with the political parties in twoparty democracies are often surprisingly polarized.
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By
Bütler, Monika
42 Citations
Summary.
We present a simple neoclassical lifecycle model in continuous time, in which the effects of endogenous labor supply, uncertain lifetime, and family composition on consumption and income profiles are jointly analyzed. Due to a parsimonious specification, analytical solutions for consumption growth are available for constant intertemporal elasticity of substitution preferences. Without relying on borrowing constraints, the model can generate a hump in the consumption profile, and a comovement of consumption and income during working life.
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By
Traeger, Christian P.
30 Citations
Uncertainty has an almost negligible impact on project value in the standard economic model. I show that a comprehensive evaluation of uncertainty and uncertainty attitude changes this picture fundamentally. The illustration of this result relies on the discount rate, which is the crucial determinant in balancing immediate costs against future benefits, and the single most important determinant of optimal mitigation policies in the integrated assessment of climate change. First, the paper removes an implicit assumption of (intertemporal or intrinsic) risk neutrality from the standard economic model. Second, the paper introduces aversion to nonrisk uncertainty (ambiguity). I show a close formal similarity between the model of intertemporal risk aversion, which is a reformulation of the widespread Epstein–Zin–Weil model, and a recent model of smooth ambiguity aversion. I merge the models, achieving a threefold disentanglement between risk aversion, ambiguity aversion, and the propensity to smooth consumption over time.
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By
Gersbach, Hans; Schmutzler, Armin
33 Citations
Summary.
We present a new approach to endogenizing technological spillovers. Firms choose levels of a costreducing innovation from a continuum before they engage in competition for each other's R&Demployees. Successful bids for the competitor's employee then result in higher levels of cost reduction. Finally, firms enter product market competition. We apply the approach to the longstanding debate on the effects of the mode of competition on innovation incentives. We show that incentives to acquire spillovers are stronger and incentives to prevent spillovers are weaker under quantity competition than under price competition. As a result, for a wide range of parameters, price competition gives stronger innovation incentives than quantity competition.
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By
Gottardi, Piero; Rahi, Rohit
4 Citations
At a competitive equilibrium of an incompletemarkets economy agents’ marginal valuations for the tradable assets are equalized exante. We characterize the finest partition of the state space conditional on which this equality holds for any economy. This leads naturally to a necessary and sufficient condition on information that would induce agents to retrade, if such information was to become publicly available after the initial round of trade.
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