The most widely used economic models of social preferences are specified only for certain outcomes. There are two obvious methods of extending them to lotteries. If we do so by expected utility theory, so that the independence axiom is satisfied, our results imply that the resulting preferences do not exhibit ex ante fairness. If we do so by replacing certain outcomes with their expected utilit...

We study the effects of patent enforcement insurance when used by an incumbent patent holder in order to increase its incentives to oppose alleged infringers (entrants). By covering some of the legal costs ex-ante, the incumbent can increase its commitment to litigate and, as a result, deter some potential entrants and, in case of entry, induce a more profitable settlement deal. We find that it...

A premature death unexpectedly brings a life and a career to their end, leading to substantial welfare losses. We study the retirement decision in an economy with risky lifetime, and compare the laissezfaire with egalitarian social optima. We consider two social objectives: (1) the maximin on expected lifetime welfare (ex ante), allowing for a compensation for unequal life expectancies; (2) the...

Abstract We study redistribution in a setting where individual responsibility and circumstance characteristics determine pre-tax income. distinguish between ex ante post versions of the key principles compensation reward. Furthermore, we absolute relative On basis these axioms, provide characterizations five familiar two new mechanisms.

This Essay has two goals: one descriptive and one normative. Descriptively, it explicates the connection between interpretation of insurance contracts and the Insurer’s disclosure duty. Disclosure duties and interpretation rules constitute a two way street. The interpretation of insurance contracts by courts, ex post, influences the incentives of insurance companies to disclose information to c...

Social media analytics is showing promise for the prediction of financial markets. However, the true value of such data for trading is unclear due to a lack of consensus on which instruments can be predicted and how. Current approaches are based on the evaluation of message volumes and are typically assessed via retrospective (ex-post facto) evaluation of trading strategy returns. In this paper...

There is a fundamental incompatibility between efficiency, interim individual rationality, and budgetbalance in mechanism design, even for extremely simple settings. Yet it is possible to specify efficient mechanisms that satisfy participation and budgetbalance constraints in expectation, prior to types being realized. We do so here, in fact deriving mechanisms that are individually rational fo...

This paper analyses a model of legislative bargaining in which parties form tentative coalitions (protocoalitions) before deciding on the allocation of a resource. Protocoalitions may fail to reach an agreement, in which case they may be dissolved (breakdown) and a new protocoalition may form. We show that agreement is immediate in equilibrium, and the proposer advantage disappears as the break...

Suppose that a group of people meet to determine the cost allocation of a collective action, and that each individual’s valuation of the collective action is private and independent of all others’ values. With this information structure there is an incentive problem—each individual has an incentive to understate value in order to lower his or her cost share of the collective action. This paper ...