Professor of Economics • Curriculum vitae

Division of the Humanities and Social Sciences

California Institute of Technology

1200 East California Boulevard,

Pasadena, California, 91125

E-mail: luciano@caltech.edu

**Teaching:**

SS201c: Analytical Found. of Social Sciences

SS211c: Advanced Economic Theory

Two lectures on strategic forecasting: [1][2]

**Research interests:**

Microeconomic theory. Economics of risk and uncertainty. Theories of information.

Strategic forecasting. Bayesian and interactive epistemology.

- Monotone Additive Statistics

with Xiaosheng Mu, Philipp Strack, and Omer Tamuz.

The expectation is an example of a descriptive statistic that is monotone with respect to stochastic dominance, and additive for sums of independent random variables. We provide a complete characterization of such statistics, and explore a number of applications to models of individual and group decision-making. These include a representation of stationary, monotone time preferences, extending the work of Fishburn and Rubinstein (1982) to time lotteries, as well as a characterization of risk-averse preferences over monetary gambles that are invariant to mean-zero background risks.

- Background Risk and Small-Stakes Risk Aversion

with Xiaosheng Mu, Philipp Strack, and Omer Tamuz.

We show that under plausible levels of background risk, no theory of choice under risk---such as expected utility theory, prospect theory, or rank dependent utility---can simultaneously satisfy the following three economic postulates: (i) Decision makers are risk-averse over small gambles, (ii) they respect stochastic dominance, and (iii) they account for background risk.

- The Cost of Information

with Philipp Strack and Omer Tamuz.

We develop an axiomatic theory of costly information acquisition. Our axioms capture the idea of constant marginal costs in information production: the cost of generating two independent signals is the sum of their costs, and the cost of generating a signal with probability half equals half the cost of generating it deterministically. Together with a monotonicity and a continuity conditions, these axioms completely determine the cost of a signal up to a vector of parameters, one for each pair of states of nature. These parameters have a clear economic interpretation and determine the difficulty of distinguishing between different states. The resulting cost function, which we call log-likelihood ratio cost, is a linear combinations of the Kullback-Leibler divergences (i.e., the expected log-likelihood ratios) between the conditional signal distributions. We argue that this cost function is a versatile modeling tool, and that in various examples of information acquisition it leads to more realistic predictions than the approach based on Shannon entropy.

- Stable Matching under Forward-Induction Reasoning

Theoretical Economics, forthcoming. - Twofold Multiprior Preferences and Failures of Contingent Reasoning

with Federico Echenique, Masaki Miyashita, Yuta Nakamura, Jamie Vinson, Journal of Economic Theory, 2022. - Model and Predictive Uncertainty: A Foundation for Smooth Ambiguity Preferences

with Tommaso Denti, Econometrica, 2022. - From Blackwell Dominance in Large Samples to Rényi Divergences and Back Again

with Xiaosheng Mu, Philipp Strack, and Omer Tamuz, Econometrica, 2021. - Testable Forecasts

Theoretical Economics, 2021. - Aggregate Risk and the Pareto Principle

with Nabil Al-Najjar, Journal of Economic Theory, 2020. - Stochastic Dominance under Independent Noise

with Philipp Strack and Omer Tamuz, Journal of Political Economy, 2020 - An Abstract Law of Large Numbers

with Nabil Al-Najjar, Sankhya, Series A, 2020. - An Axiomatic Theory of Inductive Inference

with Alvaro Sandroni, Philosophy of Science, 2018. - Choice under Aggregate Risk

with Nabil Al-Najjar, Theory and Decision, 2016. - Claim Validation

with Nabil Al-Najjar and Alvaro Sandroni, American Economic Review, 2014. - Merging and Testing Opinions

with Nabil Al-Najjar and Alvaro Sandroni, Annals of Statistics, 2014.