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on Utility Models and Prospect Theory |
| By: | Ward, Patrick S.; Singh, Vartika |
| Abstract: | In this paper we conduct a series of eld experiments in rural India in order to measure preferences related to risk, loss, and ambiguity. Disaggregating by data, we nd that on average women are signicantly more risk averse and loss averse than men, though the higher average risk aversion arises due to a greater share of women who are extremely risk averse. Through a series of two empirical examples, we demonstrate how these parameters aect decisions to adopt new agricultural technologies. By combining these results with a choice experiment over new and familiar rice seeds, we nd that ambiguity averse individuals are far more likely to stick with seeds they are familiar with, while a greater degree of loss aversion generally suggests people are more willing to switch to a new variety. |
| Keywords: | uncertainty, Prospect Theory, technology adoption, India, Community/Rural/Urban Development, Consumer/Household Economics, International Development, International Relations/Trade, Research Methods/ Statistical Methods, O13, O33, C93, |
| Date: | 2013–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea13:150794&r=upt |
| By: | Luciano Andreozzi; Matteo Ploner; Ivan Soraperra |
| Abstract: | We present an axiomatic model of choice involving two agents, motivated by the experimental evidence on non-selfish preferences. We distinguish two classes of social preferences, depending on whether they are or not separable. Altruism and spite (Andreoni & Miller, 2002; Cox et al., 2007) are separable, while the various forms of inequality aversion are not (Fehr & Schmidt, 1999; Bolton & Ockenfels, 2000; Charness & Rabin, 2002). Separable and non-separable preferences give very close predictions when only sure outcomes are involved, but they make opposite predictions in choices involving lotteries. We show this by proposing a generalization of expected utility that accounts for preferences for “fair procedures”, which violate the independence axiom. An experimental test of the model reveals little evidence of ex-post inequality aversion, even when non-expected utility preferences are accounted for. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpce:1304&r=upt |
| By: | Grant, Simon; Meneghel, Idione; Tourky, Rabee |
| Abstract: | Abstract. We define and discuss Savage games, which are ordinal games that are set in L. J. Savage’s framework of purely subjective uncertainty. Every Bayesian game is ordinally equivalent to a Savage game. However, Savage games are free of priors, prob- abilities and payoffs. Players’ information and subjective attitudes toward uncertainty are encoded in the state-dependent preferences over state contingent action profiles. In the games we study player preferences satisfy versions of Savage’s sure thing principle and small event continuity postulate. An axiomatic innovation is a strategic analog of Savage’s null events. We prove the existence of equilibrium in Savage games. This result eschews any notion of objective randomization, convexity, and monotonicity. Applying it to games with payoffs we show that our assumptions are satisfied by a wide range of decision-theoretic models. In this regard, Savage games afford a tractable framework to study attitudes towards uncertainty in a strategic setting. We illustrate our results on the existence of equilibrium by means of examples of games in which players have expected and non-expected utility. |
| Keywords: | Bayesian games, multiple priors, non-expected utility, subjective uncer- tainty, existence of equilibrium, decomposable sets., Risk and Uncertainty, D81, C7, |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uqsers:151501&r=upt |
| By: | Hammond, Peter J (Department of Economics, University of Warwick,) |
| Abstract: | Harsanyi's original position treats personal identity, upon which each individual's utility depends, as risky. Pattanaik's critique is related to the problem of scaling \state-dependent" von Neumann{Morgenstern utility when determining subjective probabilities. But a unique social welfare functional, incorporating both level and unit interpersonal comparisons, emerges from contemplating an \extended" original position allowing the probability of becoming each person to be chosen. Moreover, the paper suggests the relevance of a \Harsanyi ethical type space", with types as both causes and objects of preference JEL classification: JEL codes: |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1008&r=upt |
| By: | Brunner, Christoph; Hu, Audrey; Oechssler, Jörg |
| Abstract: | In premium auctions, the highest losing bidder receives a reward from the seller. This paper studies the private value English premium auction (EPA) for different risk attitudes of bidders. We explicitly derive the symmetric equilibrium for bidders with CARA utilities and conduct an experimental study to test the theoretical predictions. In our experiment, subjects are sorted into risk-averse and risk loving groups. We find that revenues in the EPA are significantly higher when bidders are risk loving rather than risk averse. These results are partly consistent with theory and confirm the general view that bidders’ risk preferences constitute an important factor that affects bidding behavior and consequently also the seller’s expected revenue. However, individual subjects rarely follow the equilibrium strategy and as a result, revenue in our experiment is lower than in the symmetric equilibrium. |
| Keywords: | premium auction; risk preference; Holt-Laury method; experimental economics. |
| Date: | 2013–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0544&r=upt |