Getting Carried Away in Auctions as Imperfect Value Discovery

Bidders in auctions must decide whether and when to incur the cost of estimating the most they are willing to pay. This can explain why people seem to get carried away, bidding higher than they had planned before the auction and then finding they had paid more than the object was worth to them. Even when such behavior is rational, ex ante, it may be perceived as irrational if one ignores other situations in which people revise their bid ceilings upwards and are happy when that enables them to win the auction.

When Does Extra Risk Strictly Increase an Option's Value?

It is well known that risk increases the value of options. This paper makes that precise in a new way. The conventional theorem says that the value of an option does not fall if the underlying option becomes riskier in the conventional sense of the mean-preserving spread. This paper uses two new definitions of "riskier" to show that the value of an option strictly increases (a) if the underlying asset becomes "pointwise riskier," and (b) only if the underlying asset becomes "extremum riskier."

A Reputation Model of Quality in North-South Trade

Countries have different comparative advantages in quality. These might be due to technological differences, or to reputation differences of the sort described in Klein & Leffler (1981). Reputation differences are particularly interesting, since good reputations are a form of “social capital” that is amenable to modelling. They can explain why firms in these industries like to export even if the foreign price is no higher than the domestic one, and why governments would like to have large “high- value” sectors.

When Does Extra Risk Strictly Increase the Value of Options?

It is well known that risk increases the value of options. This paper makes that precise in a new way. The conventional theorem says that the value of an option does not fall if the underlying option becomes riskier in the conventional sense of the mean-preserving spread. This paper uses two new definitions of ``riskier'' to show that the value of an option strictly increases (a) if the underlying asset becomes ``pointwise riskier,'' and (b) only if the underlying asset becomes ``extremum riskier.''options, risk, mean-preserving spread,calls

An Economic Approach to Adultery Law

A long-term relationship such as marriage will not operate efficiently without sanctions for misconduct, of which adultery is one example. Traditional legal sanctions can be seen as different combinations of various features, differing in who initiates punishment, whether punishment is just a transfer or has real costs, who gets the transfer or pays the costs, whether the penalty is determined ex ante or ex post, whether spousal rights are alienable, and who is punished. Three typical sanctions, criminal penalties for adultery, the tort of alienation of affections, and the self-help remedy of justification are formally modelled. The penalties are then discussed in a variety of specific applications to past and present Indiana law . In fact, there is no warranty at all. And if there are blank lines after this, well that is too bad bec as you will see they are not needed nor wanted and if I have been really careful, they will disappear just like the indentations.adultery, crime, marriage, self-help

Strategic Implications of Uncertainty Over One’s Own Private Value in Auctions

Suppose a bidder must decide whether and when to incur the cost of estimating his own private value in an auction. This can explain why a bidder might increase his bid ceiling in the course of an auction, and why a bidder would like to know the private values of other bidders. It also can explain sniping — flurries of bids at the end of auctions with deadlines — as the result of other bidders trying to avoid stimulating the uninformed bidder to examine his value.