We consider an exchange economy under uncertainty, in which agents’ utility functions exhibit constant absolute risk aversion, but they may be recursive and the expected utility calculation may be based on multiple subjective beliefs. The risk aversion coefficients, subjective beliefs, subjective time discount factors, initial endowments, and tradeable assets may differ across agents. We prove ...

We show theoretically and empirically how real and financial frictions amplify the impact of uncertainty shocks on firms’investment, employment, debt (term structure of debt growth), and cash holding. We start by building a model with real and financial frictions, alongside uncertainty shocks, and show how adding financial frictions to the model almost doubles the negative impact of uncertainty...

The analysis of lab data entails a joint test of the underlying theory and of subjects’conjectures regarding the experimental design itself, how subjects frame the experiment. We provide a theoretical framework for analyzing such conjectures. We use experiments of decision making under uncertainty as a case study. Absent restrictions on subjects’framing of the experiment, we show that any behav...

The paper describes the results of an empirical study of some business environment factors impact on risk taking decision-making of entrepreneurs on the basis of individual entrepreneurial judgments. Multiple regression analysis is used to interpret data collected from 382 micro-entrepreneurs. It aims to answer the question of whether differences across economic environments may be reflected in...

The comonotonic additivity axiom has been applied successfully in behavior under risk and uncertainty, and in an other-regarding setting it suggests that preferences over two allocations are independent of the payoffs of unaffected players as long as both allocations generate the same rank order of payoffs. If other-regarding preferences satisfy comonotonic additivity and violate standard addit...

This paper analyses the determinants of outward processing (OP) trade; specifically, imports of intermediates subsequent to processing abroad. A model where firms choose between OP and importing intermediates directly from a third country (generic offshoring, GO) predicts higher tariffs, lower monitoring costs and higher quality make OP more likely, while better institutions and rule of law abr...

We consider energy investment, when a choice has to be made between fossil fuel and biomass fired production technologies. A dynamic model is presented to illustrate the effect of the different degrees of input price uncertainty on the choice of technology and the timing of the investment. It is shown that when the choice of technology is irreversible, it may be optimal to postpone the investme...

When an irreversible decision is taken under uncertainty there is an option value of delay. If a small number of agents are in competition each one’s ability to delay is restricted by the fear of preemption, seeming to undermine the real options approach. We present a model in which two firms may invest in competing research projects with uncertain returns. Two distinct types of equilibria aris...

Robust portfolio optimization has been developed to resolve the high sensitivity to inputs of the Markowitz mean-variance model. Although much effort has been put into forming robust portfolios, there have not been many attempts to analyze the characteristics of portfolios formed from robust optimization. We investigate the behavior of robust portfolios by analytically describing how robustness...

This paper presents an evolutionary model to explain the widespread diffusion of lifelong monogamous families. The essential condition, unique to humans, is the overlap of children of different ages. Under this condition, together with the salience of paternal investment and fatherhood uncertainty, monogamy attains a greater survivorship than serial monogamy and polygyny. This result is robust ...