We study the problem of elicitation of subjective beliefs of an agent when the beliefs are ambiguous (the set of beliefs is a non-singleton set) and the agent’s preference exhibits ambiguity aversion; in particular, as represented by α-maxmin preferences. We construct a direct revelation mechanism such that truthful reporting of beliefs is the agent’s unique best response. The mechanism uses kn...

We consider a family of exchange economies where consumers have multiprior preferences representing their ambiguity aversion. Under a linear independence assumption, we prove that regular economies are generic. Regular economies exhibit enjoyable properties: odd finite number of equilibrium prices, local constancy of this number and local differentiable selections of the equilibrium prices. Thu...

This paper investigates how interest rates on liquid assets and excess returns on risky assets are determined when only safe assets can be used as liquid assets when waiting for an informative signal of future payoffs. In particular, we carefully differentiate between a demand for liquid assets while waiting for new information and a demand for safe assets for precautionary reasons. Employing K...

This paper provides an overview on the impacts of food aid. We consider its effects on consumption, nutrition, food markets and labour supply, as well as the extent to which it exacerbates or mitigates conflict. We also consider the comparative evidence on alternatives to food aid including evidence on cost, impact, relative risks and beneficiary preferences. We note that there are two large ga...

Ken Binmore and Avner Shaked are highly respected economists, well-known for their analytical contributions and breadth of knowledge. Moreover, they have actively participated in experimental economics for many years. However, their critique of the current state of experimental economics in general, and of Ernst Fehr and Klaus Schmidt’s presentation of their theory of inequality aversion in par...

People tend to believe what they want to believe. In this paper, I examine how people interpret others’ behavior to form beliefs about others’ preferences. I develop a “selective beliefs” model of social preferences in which people have intrinsic preferences over outcomes and also hold prior beliefs about the preferences of others. I propose that people attempt to selectively perceive and inter...

We study rankings of completely and partially diversified portfolios and also of specialized assets when investors follow so-called Markowitz preferences. It turns out that diversification strategies for Markowitz investors are more complex than in the case of risk-averse and risk-inclined investors, whose investment strategies have been extensively investigated in the literature. In particular...

This paper examines how aversion to risk and aversion to intertemporal substitution determine the strength of the precautionary saving motive in a two-period model with Selden/Kreps-Porteus preferences. For small risks, we derive a measure of the strength of the precautionary saving motive which generalizes the concept of “prudence” introduced by Kimball [12]. For large risks, we show that decr...