This paper re-examines precautionary saving with general Selden/Kreps-Porteus preferences. The conditions existing in the literature are much more complex than in the Expected Utility framework. We obtain a simple and intuitive result on precautionary savings via disentangling time preference and risk preference effects.

On average, “young”people underestimate whereas “old”people overestimate their chances to survive into the future. We adopt a Bayesian learning model of ambiguous survival beliefs which replicates these patterns. The model is embedded within a non-expected utility model of life-cycle consumption and saving. Our analysis shows that agents with ambiguous survival beliefs (i) save less than origin...

We study agents whose expected utility preferences are interdependent for informational or psychological reasons. We characterize when two types can be “strategically distinguished” in the sense that they are guaranteed to behave differently in some finite mechanism. We show that two types are strategically distinguishable if and only if they have different hierarchies of interdependent prefere...

The paper exammes the optimal behavior of a smgle dealer who 1s faced with a stochastic demand to trade (modeled by a continuous time Pmsson Jump process) and facmg return risk on his stock and on the rest of his portfolio (modeled by diffusion processes). Usmg stochastic dynamic programmmg, we dertve the optimal bid and ask prices that maxnmze the dealer’s expected utility of termmal wealth as...

Acknowledgments: We thank Paul Glimcher for his comments on an earlier draft of this manuscript.

We find a necessary and sufficient condition for ex-ante trade when agents are non-expected utility maximizers. The condition is that they share subjective beliefs. Our result holds for a class of convex preferences that contains many functional forms used in applications. In a special case of expected utility, the condition becomes exactly the common prior assumption. It can also be articulate...

I consider a model of directed search in which strategic sellers advertise general trading mechanisms. A mechanism determines the number of buyers that will get served and the side payments as a function of ex post realized demand. After observing these advertisements buyers simultaneously visit exactly one seller. Each buyer’s expected utility depends on the visiting decisions of other buyers....

We develop and evaluate a two-level simulation procedure that produces a confidence interval for expected shortfall. The outer level of simulation generates financial scenarios, whereas the inner level estimates expected loss conditional on each scenario. Our procedure uses the statistical theory of empirical likelihood to construct a confidence interval. It also uses tools from the ranking-and...