We study the problem of uncertainty sharing within a household: “risk sharing,” in a context of Knightian uncertainty. A household shares uncertain prospects using a social welfare function. We characterize the social welfare functions such that the household is collectively less averse to uncertainty than each member, and satisfies the Pareto principle and an independence axiom. We single out ...

MUSL 1310 Piano Lessons — 1 credit Half-hour or 50-minute lessons available. Register for course number 1310 the first two semesters of lessons, 2310 the third and fourth semesters, 3310 the fifth and sixth semesters, and 4310 the seventh and eight semesters. Register for section D01 for 30-minute lessons, and section D02 for 50-minute lessons. Offered in the College for Women. Prerequisites: P...

An experiment tested whether and in what circumstances people are more likely to believe an event simply because it makes them better off. Subjects observed a financial asset’s historical price chart, and received both an accuracy bonus for predicting the price at some future point, and an unconditional award that was either increasing or decreasing in this price. Despite incentives for hedging...

In many instances of potential violent and non-violent conflict the future strategic positions of adversaries are very di erent when there is open conflict than when there is settlement. Then, as the future becomes more important, open conflict becomes more likely than settlement. We theoretically demonstrate this result and discuss its applicability in war, litigation, and other settings. We t...

Using data from a unique pricing experiment, we investigate Vickrey’s conjecture that responsive pricing can be used to smooth both predictable and unpredictable demand shocks. Our evidence shows that increasing the responsiveness of price to demand conditions reduces the magnitude of deviations in capacity utilization rates from a pre-determined target level. A 10 percent increase in price var...

This paper offers a model of optimism, pessimism, and cognitive dissonance. Beliefs—and consequently choices—depend not only on relevant information, but also on what makes the decision maker better-off. In an associated experiment, subjects who stood to gain from an increase in the price of a financial asset predicted higher prices than subjects who stood to gain from a decrease in price. Cons...

In economic theory, utility depends on past, present and future outcomes. The experiment described in this paper suggests that utility also depends on people’s attitudes, and that it can easily be manipulated through these attitudes. The results imply, first, that purely outcome-based models of individual utility may be incomplete. Second, that reference-states are not determined completely end...

The economics of happiness is applied to further the understanding of important consumption decisions in which limited willpower is often argued to lead to suboptimal choices. Based on individuals’ judgments of the quality of their lives, it is, in principle, possible to derive whether some observed behavior is suboptimal and is therefore reducing a person’s welfare. We discuss the key characte...

Various concepts of interaction are reconsidered in light of a su¢ cient-component cause framework. Conditions and statistical tests are derived for the presence of synergism within su¢ cient causes. The conditions derived are su¢ cient but not necessary for the presence of synergism. In the context of monotonic e¤ects, but not in general, the conditions which are derived are closely related bu...

Individuals with identical preferences each receive a signal about the unknown state of the world and separately decide upon a utilitymaximizing recommendation on the basis of that signal. The group’s decision maximizes the common utility function based on perfect pooling of individual information. With no restrictions on the information structure, the individual recommendations place no constr...