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on Utility Models and Prospect Theory |
| By: | Quang NGUYEN (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore); Marie Claire VILLEVAL (University of Lyon, F-69007, France; CNRS, GATE, 93, ChemindesMouilles, F-69130, Ecully, France; IZA, Bonn, Germany); Hui XU (University of Lyon, F-69007, France; CNRS, GATE, 93, ChemindesMouilles, F-69130, Ecully, France. Beijing Normal University,19 XinjiekouWai Street, Beijing 100875, P. R. China.) |
| Abstract: | This study incorporates risk, time, and social preferences. We conduct a field experiment in Vietnamese villages and estimate the effect of the Cumulative Prospect Theory and of quasi-hyperbolic time preferences parameters on trust and trustworthiness. We find that both probability sensitivity and risk aversion are not related to trust. Yet, more risk averse and less present biased participants are found to be trustworthier. People with longer exposure to a collectivist economy tend to have a lower level of trust and trustworthiness. |
| Keywords: | Trust, Trustworthiness, Cumulative Prospect Theory, Risk preferences, Time preferences, Quasi–hyperbolic preferences, Vietnam, Field experiment |
| JEL: | C91 C93 D81 D90 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nan:wpaper:1301&r=upt |
| By: | Daniel Pollmann; Thomas Dohmen; Franz Palm |
| Abstract: | We present a semiparametric method to estimate group-level dispersion, which is particularly effective in the presence of censored data. We apply this procedure to obtain measures of occupation-specific wage dispersion using top-coded administrative wage data from the German IAB Employment Sample (IABS). We then relate these robust measures of earnings risk to the risk attitudes of individuals working in these occupations. We find that willingness to take risk is positively correlated with the wage dispersion of an individual’s occupation. |
| Keywords: | dispersion estimation, earnings risk, censoring, quantile regression, occupational choice, sorting, risk preferences, SOEP, IABS |
| JEL: | C14 C21 C24 J24 J31 D01 D81 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp572&r=upt |
| By: | Arcand, Jean-Louis (Graduate Institute of International and Development Studies, Geneva); Mbaye, Linguère Mously (IZA) |
| Abstract: | This paper aims to provide the first evidence concerning the relationship between time and risk preferences and illegal migration in an African context. Based upon our theoretical model and using a unique data set on potential migrants collected in urban Senegal, we evaluate a measure of time and risk preferences through the individual's intertemporal discount rate and coefficient of absolute risk aversion. Remarkably, our results show that these individual preferences matter in the willingness to migrate illegally and to pay a smuggler. |
| Keywords: | illegal migration, discount rate, risk aversion, Africa, Senegal |
| JEL: | F22 O15 O16 R23 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7517&r=upt |
| By: | Moreno-Garrido, Luis José Blas (Universidad de Alicante, Departamento de Métodos Cuantitativos y Teoría Económica) |
| Abstract: | I propose a new utility function based on the relative aversion to injustice to explain why, in classical bargaining games, classical equilibria do not hold when money is not windfall, but it is result of the effort. |
| Keywords: | Distribution; Equity; Justice; Altruism; Property Rights |
| JEL: | D30 D63 D64 P14 |
| Date: | 2013–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:ris:qmetal:2013_004&r=upt |
| By: | Salanié, Bernard; Galichon, Alfred (Département d'économie) |
| Abstract: | We investigate a model of one-to-one matching with transferable utility when some of the characteristics of the players are unobservable to the analyst. We allow for a wide class of distributions of unobserved heterogeneity, subject only to a separability assumption that generalizes Choo and Siow (2006). We first show that the stable matching maximizes a social gain function that trades off the average surplus due to the observable characteristics and a generalized entropy term that reflects the impact of matching on unobserved characteristics. We use this result to derive simple closed-form formulæ that identify the joint surplus in every possible match and the equilibrium utilities of all participants, given any known distribution of unobserved heterogeneity. If transfers are observed, then the pre-transfer utilities of both partners are also identified. We also present a very fast algorithm that computes the optimal matching for any specification of the joint surplus. We conclude by discussing some empirical approaches suggested by these results. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ner:sciepo:info:hdl:2441/5rkqqmvrn4tl22s9mc0c7apsi&r=upt |
| By: | Alex Gershkov; Benny Moldovanu; Xianwen Shi |
| Abstract: | We study dominant strategy incentive compatible (DIC) and deterministic mechanisms in a social choice setting with several alternatives. The agents are privately informed about their preferences, and have single-crossing utility functions. Monetary transfers are not feasible. We use an equivalence between deterministic, DIC mechanisms and generalized median voter schemes to construct the constrained-efficient, optimal mechanism for an utilitarian planner. Optimal schemes for other welfare criteria such as, say, a Rawlsian maximin can be analogously obtained. |
| Keywords: | Mechanism Design, Voting, Dominant Strategy, Utilitarian |
| JEL: | D82 D72 D71 |
| Date: | 2013–08–07 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-493&r=upt |
| By: | Francisco Palomino (University of Michigan); Alex Hsu (Georgia Tech) |
| Abstract: | We study term and inflation risk premia in real and nominal bonds, respectively, in an equilibrium model calibrated to United States data. Nominal wage and price rigidities, and an interest-rate monetary policy rule characterize our model economy. Wage rigidities induce positive term and inflation risk premia for permanent productivity shocks: they generate high marginal utility, expected consumption growth, inflation, and bond yields, simultaneously. Policy and inflation-target shocks increase real and nominal yield variability, respectively. Real-nominal bond return correlations are increased by the rigidities. Stronger policy responses to output and inflation reduce real term premia and increase inflation risk premia. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed013:50&r=upt |