We investigate how a plaintiff’s present bias – the tendency to over-value immediate rewards and avoid immediate costs – and her self-awareness of this bias influence the dynamics of litigation. Plaintiffs with a stronger present bias are more likely to reduce and procrastinate litigation efforts. Counterintuitively, plaintiffs who are sophisticated about their own present bias may delay their efforts even more significantly than their naive counterparts, resulting in a particularly stark reduction in their returns. We, thus, show that strategic interaction can reverse the standard non-strategic prediction that sophistication mitigates procrastination. Our analysis concludes by demonstrating how the effect of present bias and self-awareness on total litigation effort, case accuracy, and filing behavior has varying implications for legal outcomes and social welfare, contingent on the intensity of the bias and the underlying merits of a case.
Ambiguity attitudes, which capture how behavior differs under risky situations (known probabilities) versus uncertain situations (unknown probabilities), are well-established in behavioral economics. While widely studied in theoretical settings, their role in social dilemmas such as public good provision remains underexplored. In particular, little empirical attention has been paid to how perceived ambiguity about others’ contributions shapes individual behavior in public good games. This study addresses that gap by examining the relationship between ambiguity attitudes and contribution decisions in a strategic setting. Our results indicate that notwithstanding the normative arguments for higher levels of cooperation under ambiguity aversion, individuals with more pessimistic expectations about their group members’ contributions tend to contribute less themselves.
This article examines insurance choices under different contract types through a laboratory experiment. We find that proposing a single insurance policy for multiple risks, known as bundled insurance, does not necessarily reduce the demand for coverage relative to the risk carried by the individual, as the effect depends on the level of risk aversion, in line with Expected Utility Theory predictions. In contrast, offering separate contracts increases the number of insured individuals but exposes insurers to greater adverse selection. We also test a new type of insurance called semi-bundled insurance, which lies between separate and bundled insurance and requires the insured to choose a minimum number of risks to cover. Relative to the shift from separate to bundled insurance, semi-bundled insurance produces a smaller improvement in the management of adverse selection and a smaller reduction in the number of insured individuals. It does not significantly affect relative coverage, making it a potential compromise between separate and bundled insurance. These findings provide promising perspectives for addressing individuals’ willingness to choose hazards to be covered while maintaining a minimum diversification of risk, which is essential for the sustainability of insurance.
In this paper, we consider resale in efficient auctions. The potential gains from trade arise from a delay in resale which reduces the bidders’ values. We consider two information states during resale: (a) complete information where all the values and bids are revealed and (b) incomplete information where bids and values are not revealed. Under complete information, we establish revenue equivalence between the first- and second-price auction for a family of trade rules where the market power is distributed between the reseller and buyer. We also show that, if all the market power lies with the reseller (resp., buyer), it is optimal (resp., not) to reveal information.
