Learn More
We modify the epistemic conditions for Nash equilibrium only to accommodate Gilboa and Schmeidler's [Journal of Mathematical Economics, 18 (1989), 141–153] maxmin expected utility preferences, and identify the equilibrium concept in n-player strategic games that characterizes the modified epistemic conditions. The epistemic characterization supports the(More)
This paper provides a recipe to generate definitions of possibility, which is equivalent to the standard approach of deriving possibility from belief/knowledge. Savage's notion of nonnullity is therefore an example that fits into our framework. The recipe is used to create a new definition of possibility, which is logically coherent for all weakly monotonic(More)
We consider a strategic situation in which each player may not know the probability distribution governing the information structures of his opponents, and consequently his beliefs about opponents' action choices are represented by a set of probability measures. Suppose that beliefs of all the players are common knowledge. Then for any subset of players,(More)
Firms' financial data vary considerably with the size of their operations. Such scale differences potentially confound several types of inferences, of which this paper analyzes three. This paper evaluates two potential solutions to these inference problems suggested by theory: (i) deflating the data by a proxy for scale; and (ii) including a scale proxy as(More)
Firm leverage has been documented to be a slow-moving, persistent variable, even after controlling for leverage determinants. I show that if a firm's leverage dynamics are driven by a persistent explanatory variable that is measured with error, the mismeasured explanatory variable creates leverage persistence in a Lemmon et al. portfolio sort framework. In(More)
Executive compensation is increasingly sensitive to stock returns. However, even abnormal stock returns are highly volatile, and an optimal contract shields the agent from as much variability as possible. It is not surprising then that non-stock performance measures, such as earnings and other accounting measures, are explicitly used for short-term bonus(More)