As a helpful guide for applications, the alternative hypotheses of the three-hypothesis test problems are designed under the required error probabilities and average sample number in this paper. The asymptotic formulas and the proposed numerical quadrature formulas are adopted, respectively, to obtain the hypothesis designs and the corresponding sequential test schemes under the Koopman-Darmois...

We study indirect democracy in which countries, states, or districts each elect a representative who later votes at a union level on their behalf. We show that the voting rule that maximizes the total expected utility of all agents in the union involves assigning a weight to each district’s vote and then sticking with the status quo unless at least a threshold of weighted votes is cast for chan...

I consider static, incomplete information games where players may not be ambiguity neutral. Every player is one of a finite set of types, and each knows her own type but not that of the other players. Ex ante, players differ only in their taste for outcomes. If every player is dynamically consistent with respect to her own information structure and respects consequentialism, then players act as...

We characterize optimal strategies in a simple herding model where observations have a small cost. We assume that there are two states and two possible signals that each agent may get. The prior distribution is biased towards adopting behavior. That is, ex-ante, adopting gives a higher expected utility than not adopting. Contrary to Kultti & Miettinen (2005) herding does not arise deterministic...

This paper models behavior when a decision maker cares about and manages her self-image. In addition to having preferences over material outcomes, the agent derives “ego utility” from positive views about her ability to do well in a skill-sensitive, “ambitious,” task. Although she uses Bayes’ rule to update beliefs, she tends to become overconfident regarding which task is appropriate for her. ...

The financial life often requires the calculation of some sort of expectations: expected utility, expected payoffs, expected losses, which are expressed as certain transforms of some random variables. We shall provide a method, based on the copula concept, to calculate the probabilities that these transforms belong to a certain neighbourhood of their expected values. First, we recall briefly th...

In economies with nonconvexities consumers can increase their expected utility by consuming lotteries. Lotteries are probability distributions over bundles in the consumption set. Standard revealed preference logic can be applied to choices in lottery space, however the implications are not readily interpretable. In this paper, we formulate the law of demand for lottery economies in terms of co...