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Scientific progress and irreversibility: an economic interpretation of the 'Precautionary Principle' a , a b,c Abstract We consider the problem of the optimal use of a good whose consumption can produce damages in the future. Scientific progress is made over time that provides information on the distribution of the intensity of damages. We show that this(More)
Accurate measurements of probabilistic beliefs have become increasingly important both in practice and in academia. Introduced by statisticians in the 1950s to promote truthful reports in simple environments, Proper Scoring Rules (PSR) are now arguably the most popular incentivized mechanisms to elicit an agent's beliefs. This paper generalizes the analysis(More)
We explore the effect of the timing of the resolution of income uncertainty on consumption. An agent faces uncertainty about his income at date t + 2. What is the effect of being informed that the uncertainty will be resolved at date t + 1 on the consumption at date t? We show that the effect is positive if and only if marginal utility is convex (prudence),(More)
This paper offers interpretative properties of the " fear of ruin " coefficient u/u 0 (Aumann and Kurz, 1977, Econometrica). This coefficient controls the behavior of expected utility maximizers towards the risk of losing their entire wealth. It is shown that this coefficient also captures risk-aversion motives in first-price auctions model. Equivalent(More)
We present how uncertainty and learning are classically studied in economic models. Specifically, we study a standard expected utility model with two sequential decisions, and consider two particular cases of this model to illustrate how uncertainty and learning may affect climate policy. While uncertainty has generally a negative effect on welfare,(More)
This article illustrates how the joint elicitation of subjective probabilities and preferences may help understand behavior in games. We conduct an experiment to test whether biased probabilistic beliefs may explain overbidding in first-price auctions. The experimental outcomes indicate that subjects underestimate their probability of winning the auction,(More)