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on Utility Models and Prospect Theories |
| By: | David Masclet (CREM - Centre de Recherche en Economie et Management - [CNRS : UMR6211] - [Université Rennes I][Université de Caen], CIRANO - [Centre Interuniversitaire de Recherche en ANalyse des Organisations]); Youenn Loheac (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I]); Laurent Denant-Boemont (CREM - Centre de Recherche en Economie et Management - [CNRS : UMR6211] - [Université Rennes I][Université de Caen]); Nathalie Colombier (CREM - Centre de Recherche en Economie et Management - [CNRS : UMR6211] - [Université Rennes I][Université de Caen]) |
| Abstract: | This paper focuses on decision making under risk, comparing group and individual risk preferences in a lottery-choice experiment inspired by Holt and Laury (2002). The experiment presents subjects with a menu of unordered lottery choices which allows us to measure risk aversion. In the individual treatment, subjects make lottery choices individually ; in the group treatment, each subject was placed in an anonymous group of three, where unanimous lottery choice decisions were made via voting. Finally, in a third treatment, called the choice treatment, subjects could choose whether to be on their own or in a group. Our main findings are that groups are more likely than individuals to choose safe lotteries for decisions with low winning percentages. Moreover, groups converge toward less risky decisions because subjects who were relatively less risk averse were more likely to change their vote in order to conform to the group average decision ; more risk-averse individuals were less likely to change their preferences. Finally our results reveal a positive relationship between preference for risk and willingness to decide alone. |
| Keywords: | Experiment, decision rule, individual decision, group decision. |
| Date: | 2006–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00118973_v1&r=upt |
| By: | Wang, Cheng |
| Abstract: | In a dynamic model of the labor market with moral hazard, equilibrium layoff is modeled as termination of an optimal long-term contract. Termination, together with compensation (current and future), is used as an incentive device to induce worker efforts. I then use the model to study analytically the effects of a firing tax on termination and worker compensation and utility. There are three layers to the impact of a firing tax on layoff and worker utility. A higher firing tax could either reduce aggregate termination and increase worker utility, or increase aggregate termination and reduce worker utility, depending on the structure of the environment. |
| Date: | 2006–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:12704&r=upt |
| By: | Marius Boldea (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I]) |
| Abstract: | In this paper I study a discrete-time version of the Lucas model with the endogenous leisure but without physical capital. Under standard conditions I prove that the optimal human capital sequence is increasing. If the instantaneous utility function and the production function are Cobb-Douglas, I prove that the human capital sequence grow at a constant rate. I finish by studying the existence and the unicity of the equilibrium in the sense of Lucas or Romer. |
| Keywords: | Lucas Model, human capital, externalities, optimal growth, equilibrium. |
| Date: | 2006–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00118829_v1&r=upt |
| By: | Andersson, Patric (Dept. of Business Administration, Stockholm School of Economics); Engelberg, Elisabeth (Dept. of Business Administration, Stockholm School of Economics) |
| Abstract: | This paper was motivated by a paucity of research addressing how consumer decision-making is related to beliefs about money and different modes of reasoning. To investigate this issue, data were collected from 142 participants, who filled out questionnaires involving scales aimed to measure affective and rational purchase approaches, intuitive and analytical decision-making styles, as well as money attitudes. One finding was that consumers interchangeably rely on affective and rational approaches when interacting with the marketplace. Another finding was that those approaches were not only related to either intuitive or analytical decision-making styles but also to money attitudes. The findings are argued to provide an impetus to continuous investigation of the role of decision-making styles and money beliefs for consumer choice modes. |
| Keywords: | affect; attitudes to money; consumer choice; decision-making; intuition; shopping orientation; reasoning |
| Date: | 2006–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhb:hastba:2006_013&r=upt |
| By: | Ariel Rubinstein; Yuval Slalant |
| Date: | 2006–12–08 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levrem:321307000000000624&r=upt |
| By: | Lionel Page; Louis Lévy-Garboua; Claude Montmarquette |
| Abstract: | The explanation of social inequalities in education is still a debated issue in economics. Recent empirical studies tend to downplay the potential role of credit constraint. This article tests a different potential explanation of social inequalities in education, specifically that social differences in aspiration level result in different educational choices. Having existed for a long time in the sociology of education, this explanation can be justified if aspiration levels are seen as reference points in a Prospect Theory framework. In order to test this explanation, this article applies the method of experimental economics to the issue of education choice and behaviour. One hundred twenty-nine individuals participated in an experiment in which they had to perform a task over fifteen stages grouped in three blocks or levels. In order to continue through the experiment, a minimum level of success was required at the end of each level. Rewards were dependent on the final level successfully reached. At the end of each level, participants could either choose to stop and take their reward or to pay a cost to continue further in order to possibly receive higher rewards. To test the impact of aspiration levels, outcomes were either presented as gains or losses relative to an initial sum. In accordance with the theoretical predictions, participants in the loss framing group choose to go further in the experiment. There was also a significant and interesting gender effect in the loss framing treatment, such that males performed better and reached higher levels. <P>Expliquer les inégalités sociales en éducation demeure un défi pour les économistes. Des études récentes tendent à indiquer que les contraintes de crédit ne joueraient pas un rôle déterminant dans l’explication. Notre étude examine l’importance de niveaux d’aspirations sociales différentes pour expliquer les différences observées dans les choix éducationnels. Cette explication trouve sa logique en associant les aspirations sociales à des points de référence dans le cadre de la théorie des perspectives (prospect theory). Notre article mobilise l’économie expérimentale pour étudier la question des choix éducationnels dans ce contexte. Cent trente-neuf sujets ont participé à une expérience dans laquelle ils devaient réaliser une tâche distribuée sur quinze étapes regroupées en blocs ou niveaux. Pour poursuivre l’expérience, un minimum de succès dans les tâches réalisées devait être atteint. À la fin de chaque niveau, les participants choisissaient d’arrêter et d’encaisser leurs gains acquis ou de poursuivre contre un tarif donné pour espérer réaliser des gains supérieurs. Pour tester l’impact des différents niveaux d’aspirations, les résultats étaient mesurés comme des gains ou des pertes relativement à un montant donné. En conformité avec les prédictions théoriques, les participants dans le traitement perte ont choisi de poursuivre plus souvent l’expérience que ceux dans le traitement gain. Nous avons également noté un effet lié au genre du participant dans le traitement perte, avec les hommes performant mieux que les femmes et atteignant des niveaux supérieurs. |
| Keywords: | education inequality, prospect theory, experimental economics, inégalité en éducation, théorie de la prospective, économie expérimentale |
| JEL: | I21 D80 J24 C91 |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2006s-27&r=upt |