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on Utility Models and Prospect Theory |
| By: | Williams, Jeffery R.; Llewelyn, Richard V.; Pendell, Dustin L.; Schlegel, Alan; Troy, Dumler |
| Abstract: | This study examines the economic potential of producing a wheat (Triticum aesitivum) and grain sorghum (Sorghum bicolor (L.) Moench) rotation with three different tillage strategies compared to the Conservation Reserve Program (CRP) in a semi-arid region. This research uses stochastic efficiency with respect to a function (SERF) to determine the preferred management strategies under various risk preferences and utility-weighted certainty equivalent risk premiums. Yields, input rates, and field operations from an experimental field in western Kansas are used to calculate net returns for each tillage strategy. Although current net returns to crop production using reduced tillage and no-tillage strategies are higher than CRP, risk analysis indicates CRP would be the preferred strategy for some risk-averse managers. |
| Keywords: | Conservation Reserve Program, conservation tillage, simulation, sorghum, wheat, risk, Agricultural and Food Policy, Crop Production/Industries, Farm Management, Land Economics/Use, Risk and Uncertainty, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saeana:45985&r=upt |
| By: | Antonella Tutino |
| Abstract: | This paper studies the implications of information-processing limits on the consumption and savings behavior of households through time. It presents a dynamic model in which consumers rationally choose the size and scope of the information they want to process concerning their financial possibilities, constrained by a Shannon channel. The model predicts that people with higher degrees of risk aversion rationally choose more information. This happens for precautionary reasons since, with finite processing rate, risk averse consumers prefer to be well informed about their financial possibilities before implementing a consumption plan. Moreover, numerical results show that consumers with processing capacity constraints have asymmetric responses to shocks, with negative shocks producing more persistent effects than positive ones. This asymmetry results in more savings. I show that the predictions of the model can be effectively used to study the impact of tax reforms on consumers spending. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2008-62&r=upt |
| By: | Natalia Karelaia; Robin Hogarth |
| Abstract: | In most naturally occurring situations, success depends on both skill and chance. We compare experimental market entry decisions where payoffs depend on skill alone and combinations of skill and luck. We find more risk taking with skill and luck as opposed to skill alone, particularly for males, and little overconfidence. Our data support an explanation based on differential attitudes toward luck by those whose self-assessed skills are low and high. Making luck more important induces greater optimism for the former, while the latter maintain a belief that high levels of skill are sufficient to overcome the vagaries of chance. |
| Keywords: | Skill, luck, overconfidence, optimism, competition, gender differences, risk taking |
| JEL: | C91 D81 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1131&r=upt |
| By: | James C. Cox; Vjollca Sadiraj; Bodo Vogt |
| Abstract: | Expected value theory has been known for centuries to be subject to critique by St. Petersburg paradox arguments. And there is a traditional rebuttal of the critique that denies the empirical relevance of the paradox because of its apparent dependence on existence of credible offers to pay unbounded sums of money. Neither critique nor rebuttal focus on the question with empirical relevance: Do people make choices in bounded St. Petersburg games that are consistent with expected value theory? This paper reports an experiment that addresses that question. |
| Keywords: | St. Petersburg paradox, expected value theory, experiment |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2008-05&r=upt |