This paper examines how physical climate exposure affects firm performance and global supply chains. We document that heat at supplier locations reduces the operating income of suppliers and their customers. Further, customers respond to perceived changes in suppliers’ exposure: when suppliers’ realized exposure exceeds ex ante expectations, customers are 7% more likely to terminate supplier relationships. Consistent with experience-based learning, this effect increases with signal strength and repetition and decreases with country-level climate adaptation. Subsequent replacement suppliers show a lower expected and realized but similar projected heat exposure. We find similar results for suppliers’ exposure to floods.

Little is known about the motivations and outcomes of sellers in remunerated markets for human materials. We exploit dramatic growth in the U.S. blood plasma industry to shed light on the sellers of plasma. Sellers tend to be young and liquidity-constrained with low incomes and limited access to traditional credit. Plasma centers absorb demand for nontraditional credit. After a plasma center opens nearby, demand for payday loans falls by over 13% among young borrowers. Meanwhile, foot traffic increases by over 4% at nearby stores, suggesting that constrained households use plasma markets to smooth consumption without appealing to high-cost debt.

Inspired by experimental evidence, we amend the recursive utility model to let risk aversion decrease with the temporal horizon. Our pseudo-recursive preferences remain tractable and retain appealing features of the long-run risk framework, notably its success at explaining asset pricing moments. In addition, our model addresses two challenges to the standard model. Calibrating the agents’ preferences to explain the equity premium no longer implies an extreme preference for early resolutions of uncertainty. Horizon-dependent risk aversion helps resolve key puzzles in finance on the valuation of assets across maturities and captures the term structure of equity risk premiums and its dynamics.