Portfolio Inertia and [Epsilon]-Contaminations,

This paper analyzes platforms and rejections in two-sided markets with network externalities, using the specific context of a payment card association. We study the cooperative antitrust determination of the interchange fee by member banks. We use a framework in which banks and merchants may have market power and consumers and merchants decide rationally on whether to buy or accept a payment card developed by Rochet and Tirole (2002). After drawing the welfare implications of a cooperative determination of the interchange fee and antitrust conducts, we describe in detail the factors affecting merchant resistance, compare cooperative and for-profit business models, and make a first cut in the analysis of system competition.

Irreversibilities and the Optimal Timing of Environmental Policy under Knightian Uncertainty

In this paper, we consider a problem in environmental policy design by applying optimal stopping rules. The purpose of this paper is to analyze the optimal timings at which the government should adopt environmental policies to deal with increases in greenhouse gas concentrations and to reduce emissions of SO2 or CO2 under the continuous-time Knightian uncertainty. Furthermore, we analyze the effects of increases in Knightian uncertainty on optimal environmental policies and the reservation value.

Portfolio Inertia under Ambiguity,

We consider individual's portfolio selection problems. Introducing the concept of ambiguity, we show the existence of portfolio inertia under the assumptions that decision maker's beliefs are captured by an inner measure, and that her preferences are represented by the Choquet integral with respect to the inner measure. Under the concept of ambiguity, it is considered that a [sigma]-algebra is not necessarily an appropriate collection of events to which a decision maker assigns probabilities. Furthermore, we study the difference between ambiguity and uncertainty by considering investors' behavior.

Risk and Uncertainty in Health Investment

Extending the Grossman [12] model of health capital into a stochastic one, we analyze how the presence of Knightian uncertainty about the efficacy of health care affects the optimal health investment behavior of individuals. Using Gilboa and Schmeidler's [11] model of maxmin expected utility (MMEU) with multiple priors, we show that an agent retains the initial level of health capital if the price of health care lies within a certain range. We also show that the no-investment range expands as the degree of Knightian uncertainty rises.Health Investment, Risk, Uncertainty

Envy-Free and Truthful Cake-Cuttings Based on Parametric Flows (New Trends in Algorithms and Theory of Computation)

For the cake-cutting problem, Alijani, et al. [2, 30] and Asano and Umeda [3, 4] gave envy-free and truthful mechanisms with a small number of cuts, where the desired part of each player's valuation function is a single interval on the given cake. In this paper, based on parametric flows, we give efficient envy-free and truthful mechanisms with a small number of cuts, which are much simpler than those proposed by Alijani, et al. [2, 30] and Asano and Umeda [3, 4]. Furthermore, we show that this approach can be applied to the envy-free and truthful mechanism proposed by Chen, et al. [16], where the valuation function of each player is piecewise uniform. Thus, we can obtain an envy-free and truthful mechanism with a small number of cuts, even if the valuation function of each player is piecewise uniform

Portfolio allocation problems between risky and ambiguous assets

This paper considers a portfolio allocation problem between a risky asset and an ambiguous asset, and investigates how greater ambiguity aversion influences the optimal proportion invested in the two assets. We derive several sufficient conditions under which greater ambiguity aversion decreases the optimal proportion invested in the ambiguous asset. Furthermore, we consider an international diversification problem as an application and show that ambiguity aversion partially resolves the home bias puzzle