A note on beneficial changes in random variables

This paper is an extension of Jack Meyer's paper titled “Beneficial Changes in Random Variables Under Multiple Sources of Risk and Their Comparative Statics” published in the June 1992 issue of this journal. The extension consists of showing which of the sufficient conditions in Meyer's Theorems 1 and 3 are also necessary, and which are not. In addition, conditions are provided which are necessary and sufficient for general beneficial changes to imply a decrease in the demand for insurance.     

Consistent Planning Under Uncertain Lifetime

This paper considers the problem of intertemporal planning when changing tastes result in inconsistent plans. This problem has been considered in the literature under the assumption of a lifetime certainty. Some of the solutions proposed in the literature exhibit certain undesirable properties such as incoherence and lack of Pareto-optimality. This paper proposes a procedure for solving the intertemporal dilemma when lifetime is uncertain. The proposed solution is coherent and Pareto-optimal, and is, in fact, valid for the case of certain as well as uncertain lifetime. [020]     

A note on increased probability of loss and the demand for insurance

It is shown that the effect of increased probability of loss on the demand for insurance depends on whether both insured and insurer are aware of the change. When both insurer and insured share the same beliefs about the probability of loss (symmetric information), an increase in the loss probability may lead risk-averse agents to demandless insurance.     

Business or Basic Needs? The Impact of Loan Purpose on Social Crowdfunding Platforms

Journal of Business Ethics - Crowdfunding has created new opportunities for poor microentrepreneurs. One crucial question is the impact that the purpose of a loan—either business investment...     

Diversification of interdependent prospects

This paper extends the stochastic dominance approach to the problem of diversification of interdependent prospects. One basic result is that a risk averter should always mix any two identically distributed prospects, regardless of the nature of the interdependence between them. A similar result holds for the case of n prospects, provided all the joint distribution functions of dimension n ? 1 are identical. When the n-dimensional joint distribution function is symmetric, then the optimal strategy is to put an equal amount into each prospect. The paper also provides conditions which make diversification optimal in the absence of identical marginal distributions.     

Consistent planning with changing tastes

This paper proposes an approach to achieving a consistent consumption plan which is free of the shortcomings that characterize earlier proposals in the literature. Specifically, our consumption plan exists, is coherent, and most important, is Pareto-optimal.     

On the Market Failure in a Dixit-Stiglitz Setup with Two Trading Cities

This study discusses the reasons for market failure and its bias in an economy with two cities and two final goods: tradeable differentiated products and non‐tradeable housing. It is shown that inside the city, as in Dixit and Stiglitz (1977) , diversity (number of firms) is too small. With regard to the population partition between the cities, the paper distinguishes between a marginal and a global market bias against agglomeration or dispersion (in a second‐best context). The reasons for a marginal bias are twofold: a gap between marginal and average labor productivity and the (excessive) labor employed in housing production which vary between the large and the small cities. The source of the global bias is multiple stable equilibria. The marginal bias may be in an opposite direction to the global bias, such that more agglomeration may be marginally desirable, whereas full dispersion is (second‐best) optimal. Simulations demonstrate that the same market structure and potential source of market failure may imply bias in different directions, depending on the aggregate population size.