CEU Preferences and Dynamic Consistency

This paper investigates the dynamic consistency of CEU preferences. A decision maker is faced with an information structure represented by a fixed filtration. If beliefs are represented by a convex capacity, we show that a necessary and sufficient condition for dynamic consistency is that beliefs be additive over the final stage in the filtration.

CEU preferences and dynamic consistency

This paper investigates the dynamic consistency of CEU preferences. A decision maker is faced with an information structure represented by a fixed filtration. If beliefs are represented by a convex capacity, we show that a necessary and sufficient condition for dynamic consistency is that beliefs be additive over the final stage in the filtration

Equivalence between best responses and undominated

For games with expected utility maximizing players whose strategy sets are finite, Pearce (1984) shows that a strategy is strictly dominated by some mixed strategy, if and only if, this strategy is not a best response to some belief about opponents' strategy choice. This note generalizes Pearce's (1984) equivalence result to games with expected utility maximizing players whose strategy sets are arbitrary compact sets.

The Uncontrolled Social Utility Hypothesis Revisited

The experiment disentangles communication and social effect in face−to−face communication. The results question the previous interpretation of communication effects in ultimatum bargaining, and suggest that separate processes, both of a strategic and of an affective−social nature induce cooperative outcomes.

Investment Behavior under Ambiguity: The Case of Pessimistic Decision Makers

We define pessimistic, respectively optimistic, investors as CEU (Choquet expected utility) decision makers who update their pessimistic, respectively optimistic, beliefs according to a pessimistic (Dempster-Shafer), respectively optimistic, update rule. This paper then demonstrates that, in contrast to optimistic investors, pessimistic investors may strictly prefer investing in an illiquid asset to investing in a liquid asset. Key to our result is the dynamic inconsistency of CEU decision making, implying that a CEU decision maker ex ante prefers a different strategy with respect to prematurely liquidating an uncertain long-term investment project than after learning her liquidity needs. Investing in an illiquid asset then serves as a commitment device guaranteeing an ex ante favorable outcome.

Endogenous Inflation - The Role of Expectations and Strategic Interaction

Macroeconomic fluctuations always are the result of complex interactive processes. For this reason, our challenge of the widely used New Keynesian Phillips Curve builds on Taylor's (1979) version, which provides room for a richer sequential and interactive structure. We show that the Taylor model can be fruitfully complemented by the assumption of a �timeless� optimizing central bank. The macroeconomic equilibrium exhibits a significant degree of inflation inertia which is an endogenous economic result and not merely the consequence of exogenous persistence in aggregate real activity. This result is in stark contrast to earlier work by Kiley (2002) who found the New Keynesian Phillips curve to show more persistent reactions than its Taylor (1979) companion when being exposed to an exogenous monetary shocks.

Equivalence between best responses and undominated

For games with expected utility maximizing players whose strategy sets are finite, Pearce (1984) shows that a strategy is strictly dominated by some mixed strategy, if and only if, this strategy is not a best response to some belief about opponents' strategy choice. This note generalizes Pearce's (1984) equivalence result to games with expected utility maximizing players whose strategy sets are arbitrary compact sets

Imputing total expenditures from a non-exhaustive

General purpose surveys typically refrain from using an exhaustive list of consumption expenditure items since the gain of more precise data on consumption is usually more than offset by the large increase in interview time and respondent effort which reduces response willingness. An alter¬native is to ask respondents a non-exhaustive list of consumption expenditure items and use those items to impute total consumption by the use of an external data source. This paper uses the SAVE (internal) and EVS (external) data sets to apply such a procedure.

Methodological aspects of the SAVE data set

This paper describes the general design of the SAVE survey: the design of the questionnaire, inter-viewer and interviewee motivation, and the sampling designs of the various subsamples collected in 2001 and 2003. It discusses the representativeness of the data, explains the construction of weights, and provides probit regressions to analyse potential selectivity problems. The paper finishes by discussing implications for the use of the SAVE data in various estimation procedures.

Measures for savings and saving rates in the German SAVE data set

Saving is frequently measured using a one-shot question for total annual saving during the preceding year. This type of one-shot recall question might cause severe measurement errors since saving is a complicated concept which consists of various components, many of which respondents might not be fully aware of. This paper uses the SAVE data to analyze potential errors generated by this kind of questioning and provides remedies in order to construct the most of reliable saving measure given the information at hand.