The Effect of Communicating Ambiguous Risk Information on Choice

Decision makers are frequently confronted with ambiguous risk information about activities with potential hazards. This may be a result of conflicting risk estimates from multiple sources or ambiguous risk information from a single source. The paper considers processing ambiguous risk information and its effect on the behavior of a decision maker with a-maximin expected utility preferences. The effect of imprecise risk information on behavior is related to the content of information, the decision maker’s trust in different sources of information, and his or her aversion to ambiguity.a-Maximin Expected Utility, aggregation of expert opinions, ambiguity, Knightian uncertainty, risk communication, trust in information source, Risk and Uncertainty,

Interactions between Explicit and Implicit Contracting: Evidence from California Agriculture

We examine interactions among explicit and implicit contracting practices for a sample of 385 intermediaries in California fruit and vegetable markets. Explicit practices are measured with an indicator for the existence of a formal contract, and with indicators for various contract specifications (e.g., target delivery date, volume, acreage). Implicit practices are measured directly with a question about the existence of an “implicit understanding,” and indirectly with questions about the extent of informal involvement in farm-level decision making. Firms that manufacture processed foods, and that grow in house a portion of their total farm input, are significantly more likely to report use of explicit and implicit contracting practices. Additionally, unobserved factors that influence the use of explicit and implicit contracting are positively correlated. These findings suggest a complementary relationship between formal and informal contracts.Agribusiness, Farm Management,

Contest with ambiguity

The paper examines contests where players perceive ambiguity about their opponents’ strategies and determines how perceptions of ambiguity and attitudes to ambiguity affect equilibrium choice. Behaviour in our contest is affected by pessimistic and optimistic traits. Which of these traits dominates determines the relationship between the equilibrium under ambiguity (EUA) and behaviour where contenders have expected utility preferences. Our model can explain experimental results such as overbidding and overspreading relative to Nash predictions

Ambiguity and the economic rhetoric of climate change

This paper examines climate-change benefit-cost analysis in the presence of scientific uncertainty in the form of ambiguity. The specific issue addressed is the robustness of benefit-cost analyses of climate-change policy alternatives to relaxation of Savage's original axioms. Two alternatives to subjective expected utility (SEU) are considered: maximin expected utility (MEU) and incomplete expected utility (IEU). Among other results, it is demonstrated that polar opposite recommendations can emerge in an ambiguous decision setting even if all agree on Society's rate of time preference, Society's risk attitudes, the degree of ambiguity faced, and the scientific primitives. We show that, for a simple numerical simulation of our model, an MEU decision maker favors policies which immediately tackle climate change while an IEU decision prefers "business as usual"

Strategic Incentives in Biosecurity Actions: Theoretical and Empirical Analyses

We model a game between two players taking biosecurity actions and characterize the Nash equilibria and their properties for the cases of strategic complements and substitutes. Implications of the theoretical model are investigated using data for biosecurity behavior among producers participating in a livestock exhibition. Biosecurity actions with own benefits and lasting impacts in home communities exhibit a positive relationship with behavior of the producers from geographically close areas. The number and probabilities of biosecurity actions taken by exhibitors are positively associated with the number of animals exhibited and they vary among commercial and hobby producers and across species/types of commercial production.California, livestock disease, livestock exhibition, strategic complements, strategic substitutes, Agribusiness,

Incomplete preferences and equilibrium in contingent markets

This paper shows that betting or speculative trading between agents with incomplete preferences is likely to occur if agents have access to convex choice sets. This contrasts sharply with endowment economy models where preference incompleteness often hinders betting, speculative trading or mutually beneficial insurance arrangements. Our results imply that decision‐makers with identical tastes and identical feasible sets will potentially gain from speculative trade for generic status quo allocations. We also develop a framework for endogenizing the status quo allocations of decision‐makers that are treated exogenously in the existing literature. Finally, we provide a tractable differential representation of status quo allocations, equilibria and conditions where speculative trade may or may not emerge

The cognitive foundations of tacit commitments : a virtual bargaining model of dynamic interactions

People often make, and are held to account for, purely tacit commitments in interactions with other people: commitments that have never been explicitly articulated or agreed. Moreover, unspoken, tacit commitments are often perceived as binding: people often stick to, and are expected to stick to, these commitments, even where it might seem against their interests to do so. If they do not stick to these commitments, they may be punished, and expect to be punished, by others as a result, even if the act of punishment is itself costly for the punisher. These commitments have been widely seen as a crucial underpinning for human collaboration and cooperation. Yet how do such commitments arise, and are they compatible with human rationality? This paper provides a formal, reasoning-based account of tacit commitments based on “virtual bargaining”—a mode of reasoning that joins elements of individualistic and collaborative reasoning. We complement existing accounts by showing that even purely self-interested individuals can, under certain conditions, tacitly commit to punishing counterparts who violate an unenforceable agreement, or to cooperating in dynamic games, including the Centipede game and the finitely repeated Prisoner’s Dilemma game

Food scares in an uncertain world

This is the accepted version of the following article: Food scares in an uncertain world. Journal of the European Economic Association, Volume 11, Issue 6, pages 1432–1456, December 2013, which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/jeea.12057/abstrac

Food scares in an uncertain world

This is the accepted version of the following article: Food scares in an uncertain world. Journal of the European Economic Association, Volume 11, Issue 6, pages 1432–1456, December 2013, which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/jeea.12057/abstrac