Suppose n Bayesian agents need to make a decision as a group. The group as a whole is also supposed to be a Bayesian agent whose probabilities and utilities are derived or aggregated in reasonable ways from the probabilities and utilities of the group members. The aggregation could be ex ante, i.e., in terms of expected utilities, or it could be ex post, i.e., in terms of utilities only, or in ...

Diagnostic information helps agents to make more accurate decisions. One such decision is about investing in projects with uncertain outcomes. The value of diagnostic information is the difference in expected payoffs with and without it, and we show that such a value is non-monotonic in the ex-ante expected value of the project to be undertaken. We analyze optimal pricing schemes for selling in...

This paper considers efficient set mathematics for the case where the covariance matrix of asset returns is assumed known but ex ante the vector of expected returns is replaced by an estimated or forecast value. It is shown that the ex post mean and variance differ from the standard results. Consequently the maximum Sharpe ratio portfolio also differs from the standard result. However, even wit...

In this paper, we study consumption decisions under risk assuming a prioritarian social welfare function, namely a concave transformation of individual utility functions. Under standard assumptions, there is always more current consumption under ex ante prioritarianism than under utilitarianism. Thus, a concern for equity (in the ex ante prioritarian sense) means less concern for the risky futu...

This paper analyses the political constraints of intergenerational risk sharing. The …rst result is that the political process generally does not lead to ex ante optimal insurance. The second result is that in a second best political setting PAYG still contributes to intergenerational risk sharing. The third result is that aging increases the discrepancy between …rst-best and second-best transf...

In any legal system, one finds numerous rules and practices as well as constitutional provisions which are incompatible with utilitarian considerations. These rules and practices often grant benefits to an individual whose wellbeing is at risk; yet the costs of these benefits to other individuals outweigh the benefits. Thus, for instance, despite the persistent belief of economists that efficie...

The acquisition and dispersion of information, a critical aspect of economic decisions, can occur through a network of agents (Jackson, 2009). Empirical and theoretical findings suggest that an efficient information dispersion network takes the form of a star: small numbers of agents gather information and distribute it to a large group. Despite these findings, controlled tests of this theory f...

We propose a theory of international agreements on product standards. The key feature of the model is that agreements are viewed as incomplete contracts. In particular, these do not specify standards for products that may arise in the future. One potential remedy to contractual incompleteness is a dispute settlement procedure (DSP) that provides arbitration in states of the world that are not c...