GOLLIER Christian

This thesis proposes empirical and theoretical methods for optimizing public policies and applies them to subsidies for renewable energy and infectious disease control measures. In particular, my thesis focuses on non-linear policies, which in many applications are more effective than linear policies. The main challenge in designing optimal nonlinear policies is how citizens respond to them. Theoretically, I address this question by characterizing these policies in terms of observable statistics. Empirically, I propose new quasi-experimental estimators that estimate citizens' reactions. The thesis is organized into three chapters.

Since Fishburn and Proter [1976], it has been known that a change in the return distribution of the risky asset that is dominated in the sense of first-order stochastic dominance does not necessarily generate a reduction in demand for that asset. To obtain unambiguous comparative statics results, one is forced to make additional restrictions on the change in risk. We show here that the so-called "monotone probability ratio" criterion satisfies this property. This criterion contains as a special case the better known "monotone likelihood ratio".

In the standard model of portfolio choice, a change in the distribution of the return on the risky asset is "portfolio-dominated" if it reduces the demand for the risky asset by all risk-averse investors, regardless of the risk-free asset rate. This paper presents the necessary and sufficient condition of portfolio-dominance. Portfolio-dominance is stronger than stochastic dominance of the second degree.

In this paper we study a natural restriction on utility functions. More specifically, we look for utility functions such that any undesirable risk can never become desirable by the introduction of another independent risk of negative or zero expectation. This condition - called "weakly prope" - generalizes the concept of "properness" and "standardness". An important property of this family of utility functions is that the introduction of an underlying risk to an agent's wealth necessarily makes this agent more riscophobic. We present the necessary and sufficient condition to describe this family. The set of utility functions with decreasing and convex absolute aversion belongs to this family.

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In this paper, we examine Pareto-efficient risk allocations in the presence of constraints on contract form. In a first model, there are two sources of risk, but risk sharing can only be done on the first one. We look for conditions such that it is Pareto-efficient for the agent who bears the non-transferable risk to receive less than 50% of the transferable risk. We show that the decrease in absolute prudence is necessary and sufficient. In a second model, we study risk sharing in a mutual insurance company in which some members do not have access to the financial markets that allow partial diversification.

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For better or for worse, in our hyper-financialized society, markets guide the behavior of savers, companies and governments. Today, financial experts are questioning the compatibility of their decisions with the general interest, which has become unavoidable in a world facing major challenges such as climate change and rising inequalities. How can an investment project or a public policy be evaluated in terms of the "common good"? How can we direct global capital towards projects that generate societal value? In this precise and accessible book, Christian Gollier develops an innovative method for transforming our moral aspirations into effective financial management tools and thus builds a salutary bridge between the modern theory of finance, the economics of the common good and the theory of social choice.

The French abstract was not provided by the author.

Most integrated models of the covid pandemic have been developed under the assumption that the policy-sensitive reproduction number is certain. The decision to exit from the lockdown has been made in most countries without knowing the reproduction number that would prevail after the deconfinement. In this paper, I explore the role of uncertainty and learning on the optimal dynamic lockdown policy. I limit the analysis to suppression strategies where the SIR dynamics can be approximated by an exponential infection decay. In the absence of uncertainty, the optimal confinement policy is to impose a constant rate of lockdown until the suppression of the virus in the population. I show that introducing uncertainty about the reproduction number of deconfined people reduces the optimal initial rate of confinement.

Assuming that there is no other solution than herd immunity in front of the current pandemic, on which groups of citizens should we build this herd immunity? Given the fact that young people face a mortality rate which is at least a thousand times smaller than people aged 70 years and more, there is a simple rational to build it on these younger generations. The transfer of some mortality risk from the elderly to younger people raises difficult ethical issues. However, none of the familiar moral or operational guidelines (equality of rights, VSL, QALY, .) that have been used in the Western world over the last century weights the value of young lives 1000 times or more than the lives of the elders. This suggests that Society could offer covid protection to the elders by recommending them to remain confined as long as this herd immunity has not been attained by the younger generations. This would be a potent demonstration of intergenerational solidarity towards the most vulnerable people in our community. The welfare gain of this age-specific deconfinement strategy is huge, as it can reduce the global death toll by more than 80% as compared to a strategy of non-targeted herd immunity.

Most integrated models of the Covid pandemic have been developed under the assumption that the policy-sensitive reproduction number is certain. The decision to exit from the lockdown has been made in most countries without knowing the reproduction number that would prevail after the deconfinement. In this paper, I explore the role of uncertainty and learning on the optimal dynamic lockdown policy. I limit the analysis to suppression strategies. In the absence of uncertainty, the optimal confinement policy is to impose a constant rate of lockdown until the suppression of the virus in the population. I show that introducing uncertainty about the reproduction number of deconfined people reduces the optimal initial rate of confinement.

By using their financial reserves efficiently, pension funds can smooth shocks on asset returns, and can thus facilitate intergenerational risk-sharing. In addition to the primary benefit of improved time diversification, this form of risk allocation affords the additional benefit of allowing these funds to take better advantage of the equity premium, which also favors the consumers. In this paper, our aim is twofold. First, we characterize the socially efficient policy rules of a collective pension plan in terms of portfolio management, capital payments to retirees, and dividend payments to shareholders. We examine both the first-best rules and the second-best rules, where, in the latter case, the fund is constrained by a solvency ratio and by a guaranteed minimum return to workers’ contributions. Second, we measure the social surplus of the system compared to a situation in which each generation would save and invest in isolation for its own retirement. One of the main results of the paper is that better intergenerational risk-sharing does not reduce the risk born by each generation. Rather, it increases the expected return to the workers’ contributions.

The lack of efficient mass testing tools for SARS-CoV-2 virus that causes Covid-19 has contributed to the accelerated spread of the epidemic. Infected people are unaware that they are spreading the disease during the incubation period as well as in asymptomatic cases or cases with mild symptoms. To limit the number of victims of the epidemic, the strategy adopted by most affected countries is therefore social distancing or complete lockdown, a strategy that can only be beneficial for a limited time, given its economic and social cost. Today, the most feasible way out of the stalemate requires widespread screening of the population. Such screening would make it possible to isolate infected people and allow others to leave the lockdown. However, production capacity for SARS-CoV-2 tests is limited. Although production is increasing, it will not allow for sufficiently systematic and frequent screening to permit the lifting of health restrictions. We here describe how the usefulness of each test can be amplified by applying it to the mixture of samples from several individuals. This technique, called group testing, has already been successfully applied on SARS-CoV-2. We show how the group-test method must be calibrated to maximize the usefulness of each available test.

The spread of the Covid-19 epidemic is all the more rapid because it is difficult to detect the carriers of the virus. During the incubation period, and even longer in the absence of strong symptoms, they are unaware that they are spreading the disease. To limit the number of victims of the epidemic, the strategy adopted by most affected countries is therefore social distancing or even confinement, a strategy that can only be limited in time, given its economic, social and human cost. Today, the most feasible way out of the impasse seems to require generalized screening of the population. This screening would make it possible to isolate people who are carriers of the virus, and to authorize the others to leave the confinement. However, the production capacity of PCR (Polymerase Chain Reaction) tests is limited. Although they are increasing, they do not allow for sufficiently systematic and frequent screening to allow the lifting of heavy sanitary measures. The usefulness of each test can be multiplied, however, by applying it to the mixture of samples from several individuals. This technique has already been proven in another context and has been the subject of initial successful experiments on coronavirus. We show how the test method must be calibrated to maximize the utility of each available test.

As the yellow vest movement shows, many citizens think that climate change is serious, but are not ready to contribute to the collective effort to prevent it. Can businesses and the financial world replace this sleepwalking of citizens and politicians? Despite the enthusiasm for green finance, it is far from being won. Competition prevents courageous companies from committing themselves without losing market share. Moreover, when one saver or bank divests from coal, two others invest. At best, the financial markets can anticipate the emergence of an ambitious climate policy that is slow in coming. In the meantime, responsible finance actors should use an internal carbon price to optimize their portfolio.

Assuming that there is no other solution than herd immunity in front of the current pandemic, on which categories of citizens should we build this herd immunity? Given the fact that young people face a mortality rate which is at least a thousand times smaller than people aged 70 years and more, there is a simple rational to build it on these younger generations. The transfer of some mortality risk to younger people raises difficult ethical issues. However, none of the familiar moral or operational guidelines (equality of rights, VSL, QALY, .) that have been used in the Western world over the last century weights the value of young lives 1000 times or more than the lives of the elders. This suggests that Society could offer covid protection to the elders by confining them as long as this herd immunity has not been attained by the younger generations. This would be a potent demonstration of intergenerational solidarity towards the most vulnerable people in our community. The welfare gain of this age-specific deconfinement strategy is huge, as it can reduce the global death toll by more than 80%.

It is well-known that group testing is an efficient strategy to screen for the presence of a virus. It consists of pooling n individual samples with a single test using RT-PCR. If no individual in the group is infected, the group test is negative. Thus, a single test may reveal this crucial information. We show how group testing can be optimised in three applications to multiply the power of tests against Covid-19: Estimating virus prevalence to measure the evolution of the pandemic, bringing negative groups back to work to exit the current lockdown, and testing for individual infectious status to treat sick people. For an infection level around 2%, group testing could multiply the power of testing by a factor of 20. The implementation of this strategy in the short run requires limited investments and could bypass the current immense shortage of testing capacity.

I calibrate a Multiple‐Risk Susceptible–Infected–Recovered model on the covid pandemic to analyze the impact of the age‐specific confinement and polymerase chain reaction (PCR) testing policies on incomes and mortality. Two polar strategies emerge as potentially optimal. The suppression policy would crush the curve by confining 90% of the population for 4 months to eradicate the virus. The flatten‐the‐curve policy would reduce the confinement to 30% of the population for 5 months, followed by almost 1 year of free circulation of the virus to attain herd immunity without overwhelming hospitals. Both strategies yield a total cost of around 15% of annual gross domestic product (GDP) when combining the economic cost of confinement with the value of lives lost. I show that hesitating between the two strategies can have a huge societal cost, in particular if the suppression policy is stopped too early. Because seniors are much more vulnerable, a simple recommendation emerges to shelter them as one deconfines young and middle‐aged people to build our collective herd immunity. By doing so, one reduces the death toll of the pandemic together with the economic cost of the confinement, and the total cost is divided by a factor 2. I also show that expanding the mass testing capacity to screen people sent back to work has a large benefit under various scenarios. This analysis is highly dependent upon deeply uncertain epidemiologic, sociological, economic, and ethical parameters.

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The back cover states: "For better or for worse, in our hyper-financialized society, markets guide the behavior of savers, companies and governments. Today, financial companies are questioning the compatibility of their decisions with the general interest, which has become essential in a world facing major challenges such as climate change and rising inequalities. How can an investment project or a public policy be assessed against the "common good"? In this precise and accessible book, Christian Gollier develops an innovative method for transforming our moral aspirations into effective financial management tools and thus builds a salutary bridge between the modern theory of finance, the economics of the common good and the theory of social choice.

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This thesis consists of four self-contained chapters aimed at contributing to a better understanding of asset price formation and dynamics in a consumption-based model of financial asset pricing (C-MEDAF). Chapter 1 examines the term structure of stock returns in the main C-MEDAF models and shows that allowing consumption and dividend flows to be negatively affected by volatility shocks as observed empirically ("leverage effect") could make short-term assets riskier than long-term assets as recently found in some empirical studies. This modification gives these models more flexibility to capture different forms of the term structure of risky asset rates of return while respecting the observed levels of the risk premium and the risk-free rate of return. Chapter 2 proposes a regime-switching model to accommodate the changing behavior of the slope of the term structure of risky asset returns as observed in the data. We show that such a model allows combining regime-specific properties of one-regime models such as a positive or negative average slope of the term structure of returns, and gives more flexibility in the shape of the term structure of risky asset returns. Chapter 3 studies the equity market expectations hypothesis. According to this hypothesis, current returns on long-term assets are a weighted average of the expectation of future short-term returns. This test was mainly performed on the Treasury bill market and in many cases rejected. This hypothesis is not rejected in the equity market, but future returns are also predictable. Chapter 4 examines estimation and inference in the long-run risk model using the generalized method of moments.

How does climate-change mitigation affect the aggregate consumption risk borne by future generations? In other words, what is the ‘climate beta’? In this paper we argue using a combination of theory and integrated assessment modelling that the climate beta is positive and close to unity for maturities of up to about one hundred years. This is because the positive effect on the climate beta of uncertainty about exogenous, emissions-neutral technological progress overwhelms the negative effect on the climate beta of uncertainty about the carbon-climate-response, particularly the climate sensitivity, and the damage intensity of warming. Mitigating climate change therefore has no insurance value to hedge the aggregate consumption risk borne by future generations. On the contrary, it increases that risk, which justifies a relatively high discount rate on the expected benefits of emissions reductions. However, the stream of undiscounted expected benefits is also increasing in the climate beta, and this dominates the discounting effect so that overall the net present value of carbon emissions abatement is increasing in the climate beta.

Le 1er rabat de jaquette indique : "For all of their focus on asset prices, financial economists rarely ask if assets are priced ethically—that is, if their prices are compatible with the public good. Yet in a world facing major, possibly catastrophic problems—global warming, for instance, and growing inequality—it is now more important than ever that we allocate capital to projects that will benefit society as a whole, not just today but far into the future. In this book, Christian Gollier develops a powerful method for transforming our societal goals of collective prosperity into the cornerstone of our financial decision making. Ethical Asset Valuation and the Good Society starts by stating transparent moral principles and, from these, derives simple rules that can be used to evaluate saving and investment decisions in terms of the public good. Rather than trying to explain observed asset prices, Gollier derives what these prices ought to be in order to direct capital toward socially desirable investments. He focuses especially on the two prices that drive most financial decisions—the price of time as reflected in the interest rate and the price of risk—and explores the role these play in our long-term planning. If investment projects in renewable energy could be financed at a lower interest rate than those linked to fossil fuels, for instance, the energy transition would be easier to accomplish. Building on criticism of the short-term thinking of financial markets, Gollier suggests ways to shift investment toward the future through the discounting of the valuation of assets and investments with long-term benefits. In this sophisticated but accessible work, Gollier builds a bridge between welfare economics and finance theory to provide a framework for ethical valuation capable of establishing what asset prices should be on the basis of our shared moral values.".

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We assume that the ex-post utility of an agent facing a menu of lotteries depends upon the actual payoff together with its forgone best alternative, thereby allowing for the expost emotion of regret. An increase in the risk of regret is obtained when the actual payoff and its forgone best alternative are statistically less concordant in the sense of Tchen (1980). The aversion to any such risk of regret is thus equivalent to the supermodularity of the bivariate utility function. We show that more regret-risk-averse agents are more willing to choose the risky act in a one-risky-one-safe menu, in particular when the payoff of the risky choice is highly skewed. This is compatible with the "possibility effect" that is well documented in prospect theory. Symmetrically, we define the aversion to elationrisk that can prevail when the ex-post utility is alternatively sensitive to the forgone worst payoff. We show that elation-risk-seeking is compatible with the "certainty effect". We finally show that regret-risk-averse and elation-risk-seeking people behave as if they had rank-dependent utility preferences with an inverse-S shaped probability weighting function that reproduces estimates existing in the literature.

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Do we do enough for the future? This question is related to many different current issues, from the reduction of sovereign debt in Europe, to the pension reform, the fight against climate change, the preservation of natural resources, the level of public investment in infrastructure, or the fiscal treatment of long-term savings for example. Our social responsibility towards future generations is decentralized through the choice of the discount rate, which determines the tradeoff between present sacrifices and future benefits. How should we define the efficient level of long-termism? In this paper, I summarize the most important evolutions in the economic analysis of this question in recent years. Given the strong uncertainties that prevail concerning the long term evolution of our society, I recommend to use a discount rate ranging from 2 times the anticipated growth rate of consumption for short time horizons, going down to 1 % for time horizons above 100 years. The systematic risk premium should also have a term structure, starting at around 1 % for short maturities to 3 % for extra-long ones.

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The aim of this paper is to examine the impact of inequalities and economic convergence on the efficient discount rate when international credit and risk-sharing markets are inefficient. We consider an economy in which initial consumption levels and growth expectations are heterogeneous. In the benchmark case in which relative inequalities are permanent and relative risk aversion is constant, inequalities do not affect the discount rate. We derive necessary and sufficient conditions under which permanent inequalities reduce the discount rate. We also show that the anticipation of economic convergence raises the efficient discount rate when relative prudence is larger than unity.

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Under which condition does the set of desirable uncertain prospects expand when wealth increases? We show that the decreasing concavity (DC) of the utility function u is necessary and sufficient in the alpha-maxmin expected utility model. in the smooth ambiguity aversion model with the ambiguity valuation function phi, the DC of u and of phi o u is is necessary and sufficient. An alternative classical definition of decreasing aversion is based on the hypothesis that the investment in a risky asset is increasing in wealth. We show that this hypothesis does not hold in general under ambiguity aversion, and that one needs to constrain the structure of ambiguity to obtain unambiguous results.

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We examine the characteristics of the optimal insurance contract under linear transaction cost and an ambiguous distribution of losses. Under the standard expected utility model, we know from Arrow (1965) that it contains a straight deductible. In this paper, we assume that the policyholder is ambiguity-averse in the sense of Klibanoff, Marinacci and Mukerji (2005). The optimal contract depends upon the structure of the ambiguity. For example, if the set of possible priors can be ranked according to the monotone likelihood ratio order, the optimal contract contains a disappearing deductible. We also show that the policyholder’s ambiguity aversion can reduce the optimal insurance coverage.

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When an investment project yields socio-economic net benefits that are uncertain but independent of the systematic risk of the economy, these benefits should be discounted at the risk free rate if they are disseminated among a large population of stakeholders. This may be the case of a public project whose benefits are distributed within the large population of taxpayers. This is the essence of the Arrow-Lind Theorem, which played a crucial role in the evaluation of public policies around the world since its publication in 1970. Because of the differentiated treatment of investments evaluation that this result supports, it has also been extremely controversial. By reducing the discount rate to evaluate risky projects in the public sphere, it has certainly contributed to the expansion of the public sector in several western countries over the last four decades. We hereafter explain why this has been a mistake due to a fallacious interpretation of the Theorem.

Coherent-ambiguity aversion is defined within the (Klibanoff et al., Econometrica 73:1849–1892, 2005) smooth-ambiguity model (henceforth KMM) as the combination of choice-ambiguity and value-ambiguity aversion. Five ambiguous decision tasks are analyzed theoretically, where an individual faces two-stage lotteries with binomial, uniform, or unknown second-order probabilities. Theoretical predictions are then tested through a 10-task experiment. In (unambiguous) tasks 1–5, risk aversion is elicited through both a portfolio choice method and a BDM mechanism. In (ambiguous) tasks 6–10, choice-ambiguity aversion is elicited through the portfolio choice method, while value-ambiguity aversion comes about through the BDM mechanism. The behavior of over 75 % of classified subjects is in line with the KMM model in all tasks 6–10, independent of their degree of risk aversion. Furthermore, the percentage of coherent-ambiguity-averse subjects is lower in the binomial than in the uniform and in the unknown treatments, with only the latter difference being significant. The most part of coherent-ambiguity-loving subjects show a high risk aversion.

The choice of the rate at which one should discount the long-term benefits of mitigating climate change is highly controversial. Both the level and the slope of the term structure of discount rates have been discussed intensively in relation to the determination of the social cost of carbon. Although some of the parameters of the problem are ethical and outside the scope of economic analysis, we claim that there are converging and convincing arguments in favor of using an annual real risk-free discount rate going from approximately 4% to approximately 1% for maturities going from zero to infinity. Investing in climate mitigation yields highly uncertain future benefits. Such uncertainty should also be taken into account in the selection of the discount rate, although the appropriate approach is highly controversial.

The precautionary principle is very popular today. But does it have an economic basis? We present two economic theories of precaution. The first one is based on the classical framework of utility expectation with Bayesian belief revision. The second is based on ambiguity aversion. We discuss the interest, but also the limitations of these two approaches.

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"This book updates and advances the theory of expected utility as applied to risk analysis and financial decision making. Von Neumann and Morgenstern pioneered the use of expected utility theory in the 1940s, but most utility functions used in financial management are still relatively simplistic and assume a mean-variance world. Taking into account recent advances in the economics of risk and uncertainty, this book focuses on richer applications of expected utility in finance, macroeconomics, and environmental economics. The book covers these topics: expected utility theory and related concepts. the standard portfolio problem of choice under uncertainty involving two different assets. P the basic hyperplane separation theorem and log-supermodular functions as technical tools for solving various decision-making problems under uncertainty. s choice involving multiple risks. the Arrow-Debreu portfolio problem. consumption and saving. the equilibrium price of risk and time in an Arrow-Debreu economy. and dynamic models of decision making when a flow of information on future risks is expected over time. The book is appropriate for both students and professionals. Concepts are presented intuitively as well as formally, and the theory is balanced by empirical considerations. Each chapter concludes with a problem set.".

In this paper, we derive a set of simple conditions such that ambiguity aversion always raises the demand for self-insurance and the insurance coverage, but decreases the demand for self-protection. We also characterize the optimal insurance design under ambiguity aversion, and exhibit a case in which the straight deductible contract is optimal as in the expected utility model.

We examine an important class of decision problems under uncertainty that entails the standard portfolio problem and the demand for coinsurance. The agent faces a controllable risk-his demand for a risky asset, for example-and a background risk. We determine how a change in the distribution in one of these two risks affects the optimal exposure to the controllable risk. Restrictions on first-order and second-order stochastic dominance orders are in general necessary to yield an unambiguous comparative statics property. We also review another line of research in which restrictions are made on preferences rather than on stochastic dominance orders.

This chapter provides a survey on optimal insurance when insurers and policyholders have symmetric information about the distribution of potential damages. Under general conditions on the policyholder risk aversion and on transaction costs, the optimal insurance contract contains full insurance of losses above a straight deductible. This is proven without assuming expected utility. The use of expected utility generates additional results, e.g., in the case of nonlinear transaction costs.

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The economic theory of decision making under risk has seen remarkable advances over the 50 years since Pratt's (1964) characterization of risk aversion under expected utility. We review developments in three key areas to which Louis Eeckhoudt has made significant contributions: (1) increases in risk and risk taking. (2) self-protection and risk aversion. and (3) higher (and lower) order derivatives of utility. For each, we identify seminal papers, puzzles, and recent developments. The saga of research on these topics reveals that important contributions were made long ago and yet significant gains in understanding continue to be made. Recent advances often have roots in early results and researchers can profit by examining the old as well as the new papers.

This thesis studies several aspects of risk, inequality and time preferences as applied to topics in environmental and resource economics. It is divided into three independent chapters. The first chapter consists of the study of the optimal extraction of a non-renewable resource under uncertainty. A stylized discrete time approach derived from the literature on precautionary saving is proposed. This approach is compared to classical Hotelling-type studies. We find that the boundedness of the utility function and in particular the assumption on U(0) leads to very different results with the two approaches. We show that the agent's prudence is no longer sufficient to ensure a more conservative extraction policy with respect to the certainty situation. Our explanation for this surprising result is that the agent considers the trade-off between today and tomorrow's consumption only for the case where he has a strictly positive quantity of the resource tomorrow. This effect counteracts the effect of prudence. On the other hand, for an infinite number of periods, the result is the opposite of before. Prudence is no longer necessary and risk aversion is sufficient for a more conservative extraction policy. In the second chapter, the optimal discount rate is studied taking into account the inequality of income between countries. We show that if income dispersion decreases over time, the global consumption discount rate should be lower than in the case without inequality, under certain conditions. Using the growth projections used in the context of climate change, we find that the discount rate should be about twice as high for short horizons as without considering inequality, nevertheless it should be decreasing over the time horizon. Moreover, these results are supported in qualitative form, allowing for different parameters for inequality aversion, risk aversion and time preference. The third chapter (co-authored with David Anthoff) analyzes the roles of the equity coefficient and the discount rate, allowing the development of a method to study their impact on the social cost of carbon separately. We apply our method using the FUND model to calculate the SCC and arrive at three conclusions. The first is that the impact of the equity coefficient is significantly reduced if the coefficients used do not change the discount rate. The second is that the weighted estimates are sensitive to the resolution of the impact estimates used. The third is that the constant damage assumption seems unreasonable in this context. If this assumption is relaxed, the weighting impact becomes less important than in previous studies.

Using experimental laboratory methodology, this thesis contributes to the debate on individuals' attitudes toward risk in three areas: the first essay presents the results of an experiment designed to elicit prudence and risk aversion. The responses reveal that a majority of subjects are cautious, and a large proportion are both risk averse and cautious, without risk aversion and cautious behavior being correlated. The second test analyzes the impact of risk on the decision to finance a public good. In theory, risk-averse individuals should reduce their contributions under uncertainty. This prediction is verified for economists, but not for non-economists, who instead increase their contributions. In the last essay, we analyze social preferences, both on individual risk and on social welfare. We find that social attitudes towards risk are similar to individual attitudes.

This thesis on the economics of risk and uncertainty consists of four essays. The first two deal with portfolio choice and the last two with the concept of Prudence. The thesis is built within the structural framework of the utility expectation model to define and study generalizations of the concept of risk aversion. The first essay studies a portfolio choice problem in the presence of a "consumption externality": the consumption of other agents enters the utility function of the agent under consideration. The second essay deals with an Arrow-Debreu portfolio choice problem in the presence of incomplete markets: the asset depends on the verifiable signal, not on the realized state. The analysis in the third essay takes the analysis of Eeckhouudt & Schlesinger (2003) and extends it to the multidimensional setting. The last essay introduces two notions of "prudence premium" and "restriction on the risk density function" to preserve the properties in expectation.

The purpose of this thesis is to provide a study of the effects of anti-criminal behavior mechanisms applied to anti-selection problems in the insurance and credit markets. The first part of this thesis analyzes the anti-selection problem in the insurance market. Policyholders have information about the risk to be insured that is unknown to the insurers. After the risk has been realized, the insurers can perform a costly but perfect audit of the type of each insured. In the first chapter, we present a model of a competitive insurance market. The auditability of the type of insureds allows insurers to require risk statements from the insureds and impose penalties for fraud. The use of auditing and sanctions allows for increased risk coverage of low-risk insureds. In the second chapter, we consider a monopolistic insurance market. We assume that policyholders can vote on the levels of penalty the insurer can impose on a fraudster. We study the effects of these votes on equilibrium contracts. We show that the penalty voted (which maximizes the utility of the riskiest policyholders) can be more penalizing than the nullity of the contract. In the second part of the third chapter, we present a model of adverse selection in a competitive credit market. We consider the introduction of social sanctions in debt contracts when borrowers cannot provide collateral. We study the effects of these sanctions through two types of loan contracts: individual loan contracts and loan contracts binding several entrepreneurs. We show that the presence of social sanctions allows for the discrimination of projects based on their quality when contractors do not know each other. We obtain that group loan contracts can dominate individual loan contracts.

This thesis aims to make a contribution to information economics by clarifying the role of scientific uncertainty on decision making. The thesis consists of 6 chapters. Chapter 1 is a general introduction. Chapter 2 is an introduction or information structures and a collection of technical results that are used in the following chapters. Chapter 3 deals with the effect of a better information structure on the optimal level of irreversibility in a model with several technologies. In this chapter we explore the possibility that the choice of a less irreversible technology when more information is expected in the future may not be optimal in all circumstances. Chapter 4 studies the effect of information on the investment in self-protection. It is shown that if one interprets the precautionary principle as requiring more self-protection today, it is difficult to accept it as effective. Chapter 5 shows that rational and well-informed patients will reduce their preventive activities when they expect improvements in diagnostic technology. Chapter 6 studies the international trade in goods subject to scientific uncertainty about the health effects of consumers. It is shown that a new form of protectionism may arise because of scientific uncertainty.

This thesis proposes a study of insurance fraud. In particular, the analysis focuses on the means available to insurers to combat fraud. The objective of the first chapter is to show how the failure of insurers to engage in credible control measures contributes to the deterioration of the insurance system. In the context of non-commitment, we show that the strategic behavior of each party alters the insurance contract in unexpected ways. Two major results are obtained. Unlike Mookherjee and Png (1989), we show that the optimal insurance contract provides the same payoff whether the insured is controlled or not. Moreover, if the cost of the audit is too high, then the optimal insurance contract becomes a contract with over-insurance. In the second chapter, the audit is assumed to be imperfect. On the one hand, the insurer is not always able to detect fraud. On the other hand, there is an imperfection related to a wrong assessment of the damage by the insurer and thus a positive probability of unfairly sanctioning an honest insurer. The analysis reveals that the isolated effect of the first type of error does not significantly affect the shape of the optimal insurance contract. However, since the insured is adverse to the risk, the possibility of being punished by error introduces an additional risk, which may induce him not to declare his damage. This leads us to reconsider the different possible equilibria resulting from the strategic behaviors of the two parties. We then show that the possibility of being unjustly sanctioned solves the insurer's credibility problem by making the threat of the audit credible. The last chapter raises the question of the effectiveness of controls in the presence of policyholders who differ in their perception of the probability of being audited. The insurance market is a competitive market in the presence of two types of insureds, a first group that overestimates the probability of an audit, and a second group composed of insureds who underestimate it. The objective of this chapter is then to analyze how this heterogeneity in beliefs can modify the relationship between an insurer and its insureds. It appears that it may be optimal to dissuade only the most pessimistic policyholders, and let the other part of the individuals commit fraud in a systemic way.

This thesis proposes a reflection on the management of production risks in agriculture. In the first part, we analyze the preventive investments of a farmer when he faces a production risk. We characterize his optimal demand for production factors and examine the effect of a second source of risk on his demand for preventive factors (chapter 1). When his final wealth function is discontinuous, we show that a risk-neutral agent behaves as if he were risk-averse or risk-averse depending on the amount of his initial wealth (chapter 2). In the second part, we analyze the role of insurance in crop risk management. After comparing the compensation systems for farmers who are victims of agricultural disasters in France and the United States (chapter 3), we examine the insurability of crop risks. We determine the optimal form of crop risk insurance contract when the price of the product is random and when the indemnity is based on an exogenous variable such as aggregate crop yields or a climatic parameter (chapter 4). The third part is devoted to the major epidemic risks on animal production. Based on a model of the dynamics of a contagious animal disease (chapter 5), we propose an economic analysis of the collective management of epidemic risks (chapter 6). Voluntary vaccination proves to be socially preferable to compulsory vaccination, except if vaccine immunity is imperfect. Simulations are carried out using a model to evaluate the economic consequences of a foot-and-mouth disease epizootic.

This thesis analyzes the economic impacts resulting from uncertainty about the quality of goods. The first chapter deals with goods whose quality is uncertain only for the producer. When a producer must determine the number of goods to produce without knowing which goods will be of good quality, his income is uncertain. Overproduction in relation to demand (by producing reserve goods) then appears as an instrument to manage these risks, this strategy being in effect a generalization of a self-protection strategy. The study of this strategy combined with an insurance strategy shows the complementarity of these two instruments. The second and third chapters of this thesis deal with goods whose quality is unknown to producers and consumers. There is then a problem of learning about the quality of these goods. In these two chapters, we want to show a strategic behavior of consumers, namely a waiting behavior to acquire information by observing the consumption of other agents. The objective of the second chapter is to analyze how this strategic behavior influences the pricing policies of two competing firms. We show that the possibility of such waiting behavior favors firms insofar as they can extract the surplus associated with the acquisition of information without waiting for this information. The use of option contracts is shown to be an effective instrument to induce waiting behavior. The third chapter analyzes the decision to introduce a new technology by a durable goods monopoly. In addition to the pricing instrument, the monopoly uses production as a vehicle for learning about the quality of its product. The monopoly can adopt a slow production rate to allow for the acquisition of information about its product, flood the market as soon as it judges that the learning is sufficient, or abandon production when the good is of too low quality.

This thesis reflects on precautionary behavior. Drawing on the definition of the precautionary principle, it examines the optimality of strategies that consist in preventing a risk without waiting for tangible information about it. This new standard of risk management - acting before knowing - is tested against the theory formalized in models of various inspirations. The first three chapters identify the basic economic concepts related to the notion of precaution that exist in the literature. Chapter 1 presents the notion of "prudence". Chapter 2 deals with the value of information. Chapter 3 is devoted to the study of the irreversibility effect. Chapter 4 proposes an application of the precautionary principle to the problem of global warming. We put in scene an agent in charge of deciding the level of CO2 emissions of the society. How does the prospect of receiving new scientific information about the risk of the greenhouse effect alter the optimal emission schedule? To date, studies on this issue have proposed simulation-based analyses. These have largely suggested the postponement of emission reductions. The model presented in this chapter makes it possible to distinguish the different effects involved. If the shape of the utility function is such that the decision-maker is "sufficiently cautious", these effects combine in such a way that they encourage immediate emission reductions, thus providing an economic basis for the precautionary principle. The last two chapters explore precautionary strategies in investment models. Chapter 5 considers the possibility of limiting present consumption for future risky investments. Chapter 6 considers the possibility of investing in an asset with a certain return to protect against financial fluctuations. In these two chapters, we show, as in chapter 4, that the overall effect of information on a sequence of financial decisions is entirely determined by the type of utility function selected.

The first essay studies the properties of the willingness-to-pay (WTP) measure proposed by Jones-Lee to evaluate the gain associated with a reduction in risk, but by modifying its model. Instead of assuming that the utility function depends on the state (and that it is more increasing and more concave in the absence of a loss), we consider that this function is identical but that a loss simply results in a decrease in wealth. In this case, we show that the cap is no longer in general a concave function of the probability reduction. In the exponential case, for example, it is even convex. We then study the link between the cap and the risk premium. We show that the cap can be considered as a generalization of the risk premium (which corresponds to the cap associated with a complete elimination of the loss) but that some of its properties do not generalize. For example, it is not true in general that the cap increases with the individual's risk aversion. We then study the possibility of aggregating the individual caps using Arrow-Debreu contingent prices. The collective cap is obtained by measuring the market value of the contingent asset corresponding to the risk reduction. In particular, it is linear with respect to the probabilities, which is not generally the case for individual caps. In the second essay, we study an adaptation of a famous model of Ehrlich and Becker to the study of preventive activities in the health field. Three instruments are used to limit this risk: primary prevention (which limits the probability of the disease), secondary prevention (which limits the severity of the occurrence) and curative medicine.