Essays on applied economics

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27 There are two different approaches for individual decision-making. One is Ascumbe-Aumann (A-A) approach, which is based on the objective lottery of some prospectus, where the probability is exogenously given. Another approach is Savage's subjective utility approach based on the preference of alternative actions, where the probability is endogenous to the preference.

28 In Zheng (2001), we relate the social preference to democratic voting equilibrium, and discuss how interest groups can influence social preference.

29 We assume, without loss of generality, that the social value is constant for such behavior. The precaution level has not any effect on the social value. For cases that the social values are functions of the precaution level, the analysis is the same.

30 Dobbs (1989) considered the case of under-compensation.

31 One study of 47 counties in US over a several-year period, median verdicts ranged from less than $10,000 in some area to as much as $204,000 in San Diego. See Daniels and Martin (1990).

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