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on All new papers |
| By: | Marcello Basili; Alain Chateauneuf |
| Abstract: | The paper defines a consensus distribution with respect to experts’ opinions by a multiple quantile utility model. The paper points out that the Steiner Point is the representative consensus probability. The new rule of experts’ opinions aggregation, that can be evaluated by the Shapley value in a simple way, is prudential and coherent. |
| Keywords: | Ambiguity, Aggregation, Steiner Point, Multiple Priors, Quantiles. |
| Date: | 2014–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-541&r=upt |
| By: | Hideaki Tamura (Graduate School of Economics, Kobe University); Yoichi Matsubayashi (Graduate School of Economics, Kobe University) |
| Abstract: | This paper develops a new method for solving both equity premium and risk free rate puzzles based on the standard utility function. The method for solving the equity premium puzzle in accordance with Mehra and Prescott (1985) needs to be simultaneously consistent with the method for solving the risk-free rate puzzle presented by Weil (1989). That is, the reasonable estimated values for the degree of relative risk aversion in the former solution and for the subjective discount rate in the latter solution need to plausibly fall within experiential bounds. This study indicates that a consistent solution is possible for the equity premium and risk-free rate puzzles even when there is a standard constant relative risk aversion (CRRA) type utility function. This solution is possible by formularizing the Euler equation for consumption, considering the precautionary saving effect. |
| Keywords: | equity premium puzzle, risk-free rate puzzle, uncertainty, Euler equation |
| JEL: | E21 E44 G12 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:1422&r=upt |
| By: | Ismail M.S. (GSBE) |
| Abstract: | We illustrate an equivalence between the class of two-person symmetric games and the class of decision problems with a complete preference relation. Moreover, we show that a strategy is an optimal threat strategy Nash, 1953 in a two-person symmetric game if and only if it is a maximal element in its equivalent decision problem. In particular, a Nash equilibrium in a two-person symmetric zero-sum game and a pair of maximal elements in its equivalent decision problem coincide. In addition, we show that a two-person symmetric zero-sum game can be extended to its von Neumann-Morgenstern vN-M mixed extension if and only if the extended decision problem satisfies the SSB utility Fishburn, 1982 axioms. Furthermore, we demonstrate that a decision problem satisfies vN-M utility if and only if its equivalent symmetric game is a potential game. Accordingly, we provide a formula for the number of linearly independent equations in order for the independence axiom to be satisfied which grows quadratically as the number of alternatives increase. |
| Keywords: | Noncooperative Games; |
| JEL: | C72 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2014023&r=upt |
| By: | Peter G. Moffatt (University of East Anglia); Stefania Sitzia (University of East Anglia); Daniel John Zizzo (University of East Anglia) |
| Abstract: | We analyze lottery-choice data in a way that separately estimates the effects of risk aversion and complexity aversion, and allows both both of these to vary between individuals, and also to change with experience. The data is from an experiment in which 80 subjects engage in a sequence of 54 choices between pairs of lotteries. The lotteries always have the same expected value, but they differ in terms of variance and the level of complexity. Complexity is represented by the number of different outcomes in the lottery, and is either 1 (sure win), 3 (simple), 6 (complex) or 27 (very complex). A finite mixture random effects model is estimated which assumes that a proportion of the population are complexity neutral, and we find that around 32% of the population are complexity neutral. In those subjects who do react to complexity, there is a bias towards complexity aversion at the start of the experiment, but complexity aversion reduces with experience, to the extent that the average subject is complexity neutral by the end of the experiment. Around 23% of subjects appear complexity loving. Some of these findings are consistent with switching patterns seen in the choice data. Complexity aversion is found to increase with age, and is found to be higher for non-UK students than for UK students. |
| Keywords: | complexity aversion, complexity preferences, risk preferences, mixture models, learning |
| JEL: | C91 D03 D81 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:14-06&r=upt |
| By: | Sergio Ocampo Diaz |
| Abstract: | This paper argues that, in the presence of nominal wage rigidities, the existence of Rule-of-Thumb agents and price rigidities does not cause a change in the Taylor Principle as suggested by Galí et al. (2004), and that the only rigidity relevant for this result is that faced by Rule-of-Thumb consumers. For doing so, a New-Keynesian model with Rule-of-Thumb agents is proposed. The model discriminates between both type of agents when defining wage rigidities, thus al- lowing to identify and measure the factors that affect the Taylor Principle, this also allows to drop complete markets for Rule-of-Thumb agents, and the simple use of non-separable utility functions in order to determine the incidence of the wealth effect when facing staggered wages. |
| JEL: | C68 E32 E37 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:idb:wpaper:idb-wp-400&r=upt |
| By: | Grolleau, Gilles; Kocher, Martin G.; Sutan, Angela |
| Abstract: | Does the extent of cheating depend on a proper reference point? We use a real effort task that implements a two (gain versus loss frame) times two (monitored performance versus unmonitored performance) between-subjects design to examine whether cheating is reference-dependent. Our experimental findings show that self-reported performance in the unmonitored condition is significantly higher than actual performance in the monitored condition - a clear indication for cheating. However, the level of cheating is by far higher in the loss frame than in the gain frame. Furthermore, men are much more strongly affected by the framing than women. |
| Keywords: | Cheating; Lying; Loss aversion; Experiment |
| JEL: | C91 D03 |
| Date: | 2014–08–25 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:21387&r=upt |
| By: | Masafumi Kozuka (Graduate School of Economics, Kobe University) |
| Abstract: | In this paper, we employ a cointegration approach to empirically analyze consumer behavior related to service expenditure in Japan. The model we employ is a CRRA utility function considering service and non-durable expenditures. The ratio of service expenditure reached 50% in the 1980s in Japan, and it has been increasing. It indicates that service expenditure is an important factor in analyzing consumer behavior. The empirical results show that the intertemporal elasticity of substitution of service expenditure is positive, significant and greater than that of non-durable expenditure. These results are caused by the growing ratio of selective service expenditure. |
| Keywords: | Service expenditure, intertemporal elasticity of substitution, cointegration |
| JEL: | C32 E21 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:1421&r=upt |
| By: | Daniele Pacifico |
| Abstract: | The aim of this paper is to analyse the impact of unobserved preference heterogeneity in empirical applications of discrete choice models of labour supply. Typically, unobserved heterogeneity is estimated either with continuous or discrete mixture models. However, in order to avoid estimation difficulties, most of the empirical analysis assumes a relatively constrained mixture, standard examples being models where only few coefficients are allowed to vary with independent normal distributions or with discrete distributions with few mass points. We compare labour supply elasticities obtained with these typical specifications of unobserved heterogeneity with those from a more general model that we are able to estimate through an EM algorithm for the nonparametric estimation of mixed models. Results show that labour supply elasticities change significantly with respect to a basic model without unobserved heterogeneity only when the joint distribution of the varying tastes is left completely unspecified. |
| Keywords: | labour supply, unobserved heterogeneity, mixed logit models, EM algorithm |
| JEL: | J22 H31 H24 C25 C14 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:itt:wpaper:2014-6&r=upt |
| By: | Silvia Angerer; Daniela Glätzle-Rützler; Philipp Lergetporer; Matthias Sutter |
| Abstract: | We study in a sample of 1,070 primary school children, aged seven to eleven years, how altruism in a donation experiment is related to children’s risk attitudes and intertemporal choices. Examining such a relationship is motivated by theories of reciprocal altruism that provide a cornerstone for understanding human social behavior. We find that higher risk tolerance and patience in intertemporal choice increase, in general, the level of donations, albeit the effects are non-linear. We confirm earlier results that altruism increases with age during childhood and that girls are more altruistic than boys. Having older brothers makes subjects less altruistic. |
| Keywords: | Altruism, donations, risk attitudes, intertemporal choices, experiment, children |
| JEL: | C91 D03 D63 D64 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2014-21&r=upt |
| By: | Crosetto, P.; Gaudeul, A. |
| Abstract: | We report the results of an original experiment that was designed to test the strength and robustness of the attraction effect. Rather than the usual simple tests for this effect, we consider a conceptually simple consumer purchasing task where alternatives are however difficult to evaluate. For the attraction effect to be observed, the consumer must go through two steps: the first is to find out that two or more options are comparable, which leads him to exclude the dominated alternatives. The second is to favor the dominant option over those that are not comparable. Our experiment allows us to determine whether and how many individuals stop before each of those two steps. The results confirm the existence of an attraction effect in our setting, but the effect is not strong. Indeed, only a minority of subjects perform the second step. The effect is not robust to introducing larger differences in prices among options and to widening the range of options to choose from. We conclude by showing that our subjects would benefit from relying more on performing asymmetric dominance editing rather than on their skills in the purchasing task. |
| Keywords: | ASYMMETRIC DOMINANCE EDITING;ATTRACTION EFFECT;COMPARABILITY;CONSUMER CHOICE;EXPERIMENTAL ECONOMICS;PRICING FORMATS |
| JEL: | C91 D12 D83 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:2014-04&r=upt |