A theory of decision making is proposed that offers an axiomatic basis for the notion of “satisficing” postulated by Herbert Simon. The theory relaxes the standard assumption that the decision maker always fully perceives his preferences among the available alternatives, requiring instead that his ability to perceive any given preference be decreasing with respect to the complexity of the choic...

Modica and Rustichini [1994] provided a logic for reasoning about knowledge where agents may be unaware of certain propositions. However, their original approach had the unpleasant property that nontrivial unawareness was incompatible with partitional information structures. More recently, Modica and Rustichini [1999] have provided an approach that allows for nontrivial unawareness in partition...

We predict and find that accounting restatements induce economically meaningful share price declines among non-restatement firms in the same industry. These price declines are most pronounced among non-restatement firms with low accounting quality, as measured by industry adjusted accruals. Our results are consistent with the notion that accounting restatements cause investors to reassess the c...

Article history: Received 22 October 2008 Available online xxxx JEL classification: C72 D80 Quantum games have been argued to differ from classical games by virtue of the quantum-mechanical phenomenon of entanglement. We formulate a baseline of classical correlation – which takes two forms according as signals added to the game are or are not required to be independent of chance moves in the un...

The incomplete information financial economic equilibrium (IIE) literature has been growing at a growing rate since its inception in the early nineteen eighties. This paper highlights, clarifies, and examines issues and concepts essential to this equilibrium. These include: the number of state variables, irrelevance of separation theorems, unobservable productivity processes that lead to comple...

We examine entry decisions in first-price and English clock auctions with participation costs. Potential bidders observe their value and report maximum willingness to pay (WTP) to participate. Entry occurs if revealed WTP (weakly) exceeds the randomly drawn participation cost. While payoffs are higher in English clock auctions, we find no corresponding difference in WTP between auction formats,...

This paper shows that models where preferences of individuals depend not only on their allocations, but also on the well being of other persons, can produce both large and testable effects. We study the allocation of workers with heterogeneous productivities to firms. We show that even small deviations from purely “selfish” preferences leads to widespread workplace skill segregation. That is, w...

This paper studies an incentive rationale for the use of group lending as a method of financing liquidity-constrained entrepreneurs. The joint liability feature associated with group lending lowers the liquidity risk of default but creates a free-riding problem. In the static setting, the free-riding problem dominates the liquidity risk effect under a plausible condition, thus making group lend...

The relationship between Popper spaces (conditional probability spaces that satisfy some regularity conditions), lexicographic probability systems (LPS’s) [Blume, Brandenburger, and Dekel 1991a; Blume, Brandenburger, and Dekel 1991b], and nonstandard probability spaces (NPS’s) is considered. If countable additivity is assumed, Popper spaces and a subclass of LPS’s are equivalent; without the as...

Consider any investor who fears ruin facing any set of investments that satisfy no-arbitrage. Before investing, he can purchase information about the state of nature in the form of an information structure. Given his prior, information structure α is more informative than information structure β if whenever he rejects α at some price, he also rejects β at that price. We show that this complete ...