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on Utility Models and Prospect Theory |
| By: | Kin Chung Lo (Department of Economics, York University) |
| Abstract: | Machina (2007) formulates a number of experiments, and shows that they can be used to test the Choquet expected utility model. We show that one of them can also be used to test the class of maxmin expected utility preferences in Klibanoff (2001). Those preferences are not Choquet expected utility preferences, and they are not consistent with Choquet expected utility preferences in Machina’s experiment. |
| Keywords: | Choquet expected utility,Ellsberg Paradox,Maxmin expected utility,Stochastic independence,Uncertainty |
| JEL: | D81 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:yca:wpaper:2007_8&r=upt |
| By: | Giuseppe De Nadai (Department of Applied Mathematics, University of Venice); Paolo Pianca (Department of Applied Mathematics, University of Venice) |
| Abstract: | In this note using the rules of stochastic dominance of the second order and the recent cumulative prospect theory for classified, according to their performance, a set of common funds. The criteria used are closely linked to the preferences of decision maker and refer to either hypothesis of aversion and of seeking to risk both hypothesis on the sign of derived second of the function which characterizes the losses and gains. |
| JEL: | G11 C44 C63 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:vnm:wpaper:157&r=upt |
| By: | Frode Brevik; Stefano d'Addona |
| Abstract: | We study information processing in a simple endowment economy where the mean consumption growth rate are governed by a hidden state variable and agents have recursive preferences. We show that for typical parameter values, there is a strong incentive to commit to ignoring future information on the state of the economy, but that such commitment raises time-inconsistency problems. We estimate the model on postwar US data and find that the representative consumer can achieve a utility gain equivalent to a 20% increase in lifetime consumption simply by not paying attention to the state of the economy. |
| Keywords: | Recursive preferences, Epstein-Zin preferences, Uncertainty aversion,Information processing, Time inconsistency |
| JEL: | D83 D84 E32 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:usg:dp2007:2007-40&r=upt |
| By: | Anat Bracha; Donald J Brown |
| Date: | 2007–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levrem:122247000000001676&r=upt |
| By: | John D. Hey; Andrea Morone; Ulrich Schmidt |
| Abstract: | In the context of eliciting preferences for decision making under risk, we ask the question: “which might be the ‘best’ method for eliciting such preferences?”. It is well known that different methods differ in terms of the bias in the elicitation; it is rather less well-known that different methods differ in terms of their noisiness. The optimal trade-off depends upon the relative magnitudes of these two effects. We examine four different elicitation mechanisms (pairwise choice, willingness-to-pay, willingness-to-accept, and certainty equivalents) and estimate both effects. Our results suggest that economists might be better advised to use what appears to be a relatively inefficient elicitation technique (i.e. pairwise choice) in order to avoid the bias in better-known and more widely-used techniques. |
| Keywords: | pairwise choice, WTP, WTA, errors, noise, biases |
| JEL: | C91 C81 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1386&r=upt |
| By: | Alan Mehlenbacher (Department of Economics, University of Victoria) |
| Abstract: | I have developed a multiagent system platform that provides a valuable complement to the alternative auction research methods. The platform facilitates the development of heterogeneous agents and provides an experimental environment that is under the experimenter's complete control. Simulations with alternative learning methods results in impulse balance learning as the most promising approach for auctions. |
| Keywords: | Axiomatic bargaining, resource monotonicity, transferable utility, risk aversion; Agent-based computational economics, agent learning |
| JEL: | C71 D13 D63 C15 C72 D83 |
| Date: | 2007–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:vic:vicddp:0706&r=upt |
| By: | Alan Mehlenbacher (Department of Economics, University of Victoria) |
| Abstract: | This study uses a multiagent system to investigate how sealed-bid auction results vary across twodimensional value signals from pure private to pure common value. I find that several auction outcomes are significantly nonlinear across the two-dimensional value signals. As the common value percent increases, profit, revenue, and efficiency all decrease monotonically, but they decrease in different ways. Finally, I find that forcing revelation by the auction winner of the true common value may have beneficial revenue effects when the common-value percent is high and there is a high degree of uncertainty about the common value. |
| Keywords: | Axiomatic bargaining, resource monotonicity, transferable utility, risk aversion; Agent-based computational economics, multi-dimensional value signals, sealed-bid auctions, impulse balance learning |
| JEL: | C71 D13 D63 C15 C72 D83 |
| Date: | 2007–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:vic:vicddp:0707&r=upt |
| By: | Alan Mehlenbacher (Department of Economics, University of Victoria) |
| Abstract: | This study uses a multiagent system to investigate English auctions with two-dimensional value signals and agents that learn a signal-averaging factor. I find that signal averaging increases nonlinearly as the common value percent increases, decreases with the number of bidders, and decreases at high common value percents when the common value signal is more uncertain. Using signal averaging, agents increase their profit when the value is more uncertain. The most obvious effect of signal averaging is on reducing the percentage of auctions won by bidders with the highest common value signal. |
| Keywords: | Axiomatic bargaining, resource monotonicity, transferable utility, risk aversion; Agent-based computational economics, multi-dimensional value signals, English auctions, signal averaging |
| JEL: | C71 D13 D63 C15 C72 D83 |
| Date: | 2007–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:vic:vicddp:0708&r=upt |
| By: | Alan Mehlenbacher (Department of Economics, University of Victoria) |
| Abstract: | This study uses a multiagent system to determine which payment rule provides the most revenue in Treasury auctions that are based on Canadian rules. The model encompasses the when-issued, auction, and secondary markets, as well as constraints for primary dealers. I find that the Spanish payment rule is revenue inferior to the Discriminatory payment rule across all market price spreads, but the Average rule is revenue superior. For most market-price spreads, Uniform payment results in less revenue than Discriminatory, but there are many cases in which Vickrey payment produces more revenue. |
| Keywords: | Axiomatic bargaining, resource monotonicity, transferable utility, risk aversion; Agent-based computational economics, treasury auctions, auction context |
| JEL: | C71 D13 D63 C15 C72 D83 |
| Date: | 2007–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:vic:vicddp:0709&r=upt |