Emergency Preparation and Uncertainty Persistence

• 成果类型: Article
• 署名作者: Sundaresan, Savitar
• 署名单位: Imperial College London
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4836
• 发表日期: 2024
• 关键词: economics; behavior and behavioral decision making; finance; asset pricing

摘要

Unusual events trigger persistent spikes in uncertainty. Standard models cannot match these dynamic patterns. This paper presents a unified framework, motivated by the literature on inattention. Agents choose whether and how to prepare for different possible states of the world by collecting information. Agents optimally ignore sufficiently unlikely events, so the occurrence of such events does not resolve, but rather increases, uncertainty. Uncertain agents have dispersed beliefs, making it harder to focus future preparation. Thus, uncertainty begets uncertainty for an inattentive agent, endogenously persisting. In a financial application, this framework matches patterns in volatility, volume of trade, belief dispersion, and spreads.