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on Utility Models and Prospect Theory |
| By: | Jaroslav Borovicka |
| Abstract: | I study the long-run behavior of a two-agent economy where agents differ in their beliefs and are endowed with homothetic recursive preferences of the Duffie-Epstein-Zin type. When preferences are separable, the economy is dominated in the long run by the agent whose beliefs are relatively more precise, a result consistent with the market selection hypothesis. However, recursive preference specifications lead to equilibria in which both agents survive, or to ones where either agent can dominate the economy with a strictly positive probability. In this respect, the market selection hypothesis is not robust to deviations from separability. I derive analytical conditions for the existence of nondegenerate long-run equilibria, and show that these equilibria exist for plausible parameterizations when risk aversion is larger than the inverse of the intertemporal elasticity of substitution, providing a justification for models that combine belief heterogeneity and recursive preferences. |
| Keywords: | Consumption (Economics) |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2011-06&r=upt |
| By: | R. Anton Braun; Tomoyuki Nakajima |
| Abstract: | We provide two ways to reconcile small values of the intertemporal elasticity of substitution (IES) that range between 0.35 and 0.5 with empirical evidence that the IES is large. We do this reconciliation using a model in which all agents have identical preferences and the same access to asset markets. We also conduct an encompassing test, which indicates that specifications of the model with small values of the IES are more plausible than specifications with a large IES. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2011-13&r=upt |
| By: | Concepcion Roman; Juan Carlos Martin; Raquel Espino |
| Abstract: | In order to determine the level of satisfaction of the public transport services, the passengers jointly evaluate the various attributes that represent the different aspects of the level of service. From a methodological viewpoint this means finding the weighting that individuals use to evaluate those attributes within what is considered as the level of global satisfaction or utility. In this paper we obtain indicators that permit the aggregate measurement of the quality of the public transport bus services on Gran Canaria in Spain. The analysis focuses on obtaining the preferences using designs of Stated Preferences (SP) that give the individual the choice between the current service and a hypothetical service defined, from a combination of the most relevant variables. With this information multinomial logit models are estimated that permit us to obtain a linear representation of the utility function parameters, from which a measure of the global quality of the service is obtained. The results of the analysis demonstrate that passengers have clearly different behaviour, depending on whether they are urban or interurban users; this is especially relevant in their perception of certain attributes such as frequency, and to some extent the willingness to pay relative to the components of total travelling time. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa11p86&r=upt |