New Economics Papers
on Neuroeconomics
Issue of 2010‒02‒13
four papers chosen by

  1. Conditioning and Updating under Cumulative Prospect Theory By Alex Stomper; Marie-Louise Vierø
  2. Modelling Addiction in Life-Cycle Models: Revisiting the Treatment of Latent Stocks and Other Unobservables By Biørn, Erik
  3. Genetic Markers as Instrumental Variables:An Application to Child Fat Mass and Academic Achievement By Stephanie von Hinke Kessler Scholder; George Davey Smith; Debbie A. Lawlor; Carol Propper; Frank Windmeijer
  4. Our Grandparents, Our Parents, Our Future Selves: Optimizing Function in Old Age. Syracuse Seminar Series on Aging. By Thomas M. Gill

  1. By: Alex Stomper (MIT and IAS Vienna); Marie-Louise Vierø (Queen's University)
    Abstract: This paper derives conditions under which the well-known decomposition of unconditional expected utility into marginal probabilities and conditional expected utility generalizes to Cumulative Prospect Theory, as well as updating rules for probability weighting functions. The results are, for example, of interest for empirical and experimental work, when available choice data is for situations where payoffs given the conditioning events are random.
    Keywords: Cumulative Prospect Theory, probability weighting functions, conditioning, updating
    JEL: D80 D84
    Date: 2009–12
  2. By: Biørn, Erik (Dept. of Economics, University of Oslo)
    Abstract: Dynamic modeling of demand for goods whose cumulated stocks enter an intertemporal utility function as latent variables, is discussed. The issues include: how represent addiction, how handle unobserved expectations and changing plans, how deal with `dynamic inconsistency'? Arguments are put forth to give all optimizing conditions attention, not only those in which all variables are observable. If the latter, fairly common, `limited information-reduced dimension' strategy is pursued, problems are shown to arise in attempting to identify coe±cients of the preference structure and to test for addictive stocks. Examples, based on quadratic utility functions, illustrate the main points and challenge the validity of testing the `rational addiction' hypothesis, by using linear, single- equation autoregressive models, as suggested by Becker, Grossman, and Murphy (1994) and adopted in several following studies.
    Keywords: Life-cycle model. Addiction. Identi¯cation. Latent stocks; Perfect foresight; Ra- tional expectations; Dynamic inconsistency
    JEL: C32 C51 D91 I12
    Date: 2009–12–15
  3. By: Stephanie von Hinke Kessler Scholder; George Davey Smith; Debbie A. Lawlor; Carol Propper; Frank Windmeijer
    Abstract: The use of genetic markers as instrumental variables (IV) is receiving increasing attention from economists. This paper examines the conditions that need to be met for genetic variants to be used as instruments. We combine the IV literature with that from genetic epidemiology, with an application to child adiposity (fat mass, determined by a dual-energy X-ray absorptiometry (DXA) scan) and academic performance. OLS results indicate that leaner children perform slightly better in school tests compared to their more adipose counterparts, but the IV findings show no evidence that fat mass affects academic outcomes.
    Keywords: Instrumental variables; Mendelian randomization; Genetic variant; Potential outcomes; Academic performance; Educational attainment; Adiposity; Fat mass; Body Mass Index; ALSPAC
    JEL: I1 I2 J24
    Date: 2010–01
  4. By: Thomas M. Gill (Professor of Medicine, Epidemiology, and Investigative Medicine, and the Humana Foundation Professor of Geriatric Medicine, Adler Geriatric Center, 20 York Street, Yale University, New Haven, Connecticut 06510.)
    Abstract: Most of my research at Yale University School of Medicine over the past several years has focused on identifying older adults at risk of functional decline and disability, identifying events that may precipitate the transition from functional independence to disability, and developing strategies to postpone or reduce frailty and disability. As a result of the Precipitating Events Project (PEP) and other research conducted by the Yale Center on Aging/Pepper Center, we now realize that age is only a proxy for other factors that lead to disability, and that some of these factors can be modified to reduce the risk of disability. In fact, disability rates have been steadily declining among older adults for decades.
    Keywords: geriatrics, aging, gerontology, disability, precipitating event, functional decline, vulnerability, compression of morbidity, reserve organ capacity, exercise, physical activity, falls, Yale PREHAB study, lifestyle interventions, independence, elders, FICSIT trial, frailty
    JEL: H51 I12 J14
    Date: 2010–01

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.