infonet-economy

A nudge is a paternalistic government intervention that attempts to improve choices by changing the framing of a decision problem. We propose a welfare- theoretic foundation for nudging similar in spirit to the classical revealed preference approach, by investigating a model where preferences and mistakes of an agent can be elicited from her choices under different frames. We provide…

We study targeted information in a duopoly model with differentiated products, allowing for consumers with limited attention. The presence of inattentive consumers incentivizes firms to behave as if they were mass-advertisers, despite their ability to direct their mes- sages precisely towards consumers with the strongest preferences. We show that the scope for targeting as an…

We propose that heterogeneous asset trading behavior is the result of two distinct, non-convertible mental dimensions: analytical (“quantitative”) capability and mentalizing (“perspective-taking”) capability. We develop a framework of mental capabilities that yields testable predictions about individual trading behavior, revenue distribution and aggregate outcomes. The two-…

Die Regierung von Matteo Renzi gerät durch die Bankenkrise sowie die Oppositionspartei des Komikers Beppe Grillo unter Druck. Ein Wahlsieg Grillos hätte fatale Konsequenzen.

Prior research has identified set-based design as a method that accounts for the high level of uncertainty that is associated with the design of innovative products or systems. Rather than precisely specifying a system architecture in the early design stages, set-based design builds on designing a system and its architecture in an evolutionary way. The literature on set-based design…

Midbrain dopamine neurons encode reward prediction errors. In this issue of Neuron, Takahashi et al. (2016) show that the ventral striatum provides dopamine neurons with prediction information specific to the timing, but not the quantity, of reward, suggesting a surprisingly nuanced neural implementation of reward prediction errors.

Different modes of external finance provide heterogeneous benefits for the borrowing firms. Informal finance offers informational advantages whereas formal finance is scalable. Using unique survey data from China, we find that informal finance is associated with higher sales growth for small firms but lower sales growth for large firms. We identify a complementary effect between…

We study the intra-horizon value at risk (iVaR) in a general jump diffusion setup and propose a new model of asset returns called displaced mixed-exponential model, which can arbitrarily closely approximate finite-activity jump-diffusions and completely monotone Levy processes. We derive analytical results for the iVaR and disentangle the risk contribution of jumps from diffusion.…