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on Utility Models and Prospect Theory |
| By: | James Andreoni; Michael Callen; Yasir Khan; Karrar Jaffar; Charles Sprenger |
| Abstract: | We use structural estimates of time preferences to customize incentives for a sample of polio vaccinators during a series of door-to-door immunization drives in Pakistan. Our investigation proceeds in three stages. First, we measure time preferences using intertemporal allocations of vaccinations. Second, we derive the mapping between these structural estimates and individually optimal incentives given a specific policy objective. Third, we experimentally evaluate the effect of matching contract terms to individual discounting patterns in a subsequent experiment with the same vaccinators. This exercise provides a test of the specific point predictions given by structural estimates of time preference. We document present bias among vaccinators and find that tailored contracts achieve the intended policy objective of smoothing intertemporal allocations of effort. The benefits of customized incentives in terms of achieving the policy objective are largest for vaccinators allocating when present bias is relevant to the decision. |
| JEL: | D03 I1 O1 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22019&r=upt |
| By: | Ghassan, Hassan B.; Al-Jefri, Essam H. |
| Abstract: | This paper aims to develop an Islamic intertemporal model of the current account based on the prevailing theoretical and empirical literature of PVMCA (Obstfeld and Rogoff 1996, Cerrato et al. 2014). The proposed model is based on the budget constraint of the present and future consumption, which depend on the obligatory Zakat from the income and assets, the return rate on the owned assets, the inheritance linking previous to subsequent generation. Using logarithmic utility function, featured by an unitary elasticity of intertemporal substitution and an unitary coefficient of relative risk aversion, we show through Euler equation of consumption that there is an inverse relationship between consumption growth from the last age to first one and the Zakat rate on assets. The outcomes of this result are that the Zakat on assets disciplines the consumer to have more rationality in consumption, and allows additional marginal assets for future generations. By assuming an unitary subjective discount rate, we indicate that more the return rate on assets is high, more the consumption growth between today and tomorrow will be fast. Through the budget constraint, if Zakat rate on the Zakatable assets is greater than Zakat rate on income, this leads to a relative expansion in private consumption of the wealthy group. Besides, we point out that an increase in return rate on assets, can drive to increasing or decreasing current consumption, because the substitution and income effects work in opposite ways. يهدف البحث إلى صياغة إسلامية لنموذج داخلي الزمن للحساب الجاري انطلاقا من النموذج النظري داخلي الزمن السائد في أدبيات الاقتصاد التحليلي والتطبيقي (Obstfeld and Rogoff 1996, Cerrato et al. 2014). يعتمد النموذج المقترح على صياغة قيد الميزانية للإستهلاك الحاضر والمستقبلي وذلك على أساس فرضية الزكاة على الدخل والأصول وعائد التوظيف المالي للأصول الممتلكة وفرضية عدم ترك الذرية عالة على المجتمع لربط الجيل السابق بالجيل اللاحق. باستخدام دالة المنفعة اللوغاريتمية والتي تتسم بأحادية مرونة الاستبدال الداخلي الزمن في الاستهلاك وبأحادية معامل نبذ المخاطرة النسبية، نبين عبر معادلة Euler للإستهلاك وجود علاقة عكسية بين نمو الاستهلاك بين آخر العمر وأوله من جهة، ومعدل الزكاة على الأصول من جهة أخرى. ويتضح من هذه النتيجة أن الزكاة على الأصول تساعد وتؤدب المستهلك على الرشد في الاستهلاك، كما تتيح أصولا حدية إضافية للأجيال المقبلة. وعند افتراض أحادية معامل التفضيل الزمني، نبين أنه كلما كان معدل العائد على الأصول مرتفع، سيكون نمو الاستهلاك بين اليوم والغد سريعا. وتبعا لمعادلة قيد الميزانية، إذا كان معدل الزكاة على الأصول القابلة للزكاة أكبر من معدل الزكاة على الدخل، فيؤدي إلى توسيع نسبي في الاستهلاك خاصة لدى الفئة الغنية. ونشير أيضا إلى أن زيادة معدل العائد على الأصول، يمكن أن يؤدي إلى زيادة أو انخفاض الاستهلاك الجاري، لأن أثري الاستبدال والدخل يعملان في اتجاهات عكسية. |
| Keywords: | Current account, Intertemporal Islamic Model, Smoothed Consumption, Zakat, Utility |
| JEL: | D11 D9 F21 Z12 |
| Date: | 2015–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:69963&r=upt |
| By: | Hammitt, James; Herrera, Daniel; Rheinberger, Christoph |
| Abstract: | We present an integrated valuation model for diseases that pose some chance of death. The model extends the standard one-period value-of-statistical-life model to three health prospects: healthy, ill, and dead. We derive willingness-to-pay values for preven- tion eorts that reduce a disease’s incidence rate as well as for treatments that lower the corresponding health deterioration and mortality rates. We find that the demand value of prevention always exceeds that of treatment. People often overweight small risks and underweight large ones. We use the rank dependent utility framework to explore how the demand for prevention and treatment alters when people evaluate probabilities in a non-linear manner. For incidence and mortality rates associated with common types of cancers, the inverse-S shaped probability weighting found in experimental studies leads to a significant increment in the demand values of both treatment and prevention. |
| JEL: | D11 D81 I10 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:30267&r=upt |
| By: | Bernado Moreno (Department of Economic Theory, Universidad de Málaga); María del Pino Ramos-Sosa (Department of Economic Theory, Universidad de Málaga); Ismael Rodríguez-Lara (Department of Economics, Middlesex University London) |
| Abstract: | We induce conformity in a binary-decision voting game by assuming that agents may derive some utility by voting the same option that others. Theoretically, we show that truthful voting is the unique equilibrium without conformity. Introducing conformity enlarges the set of equilibria, which includes voting profiles in which agents do not necessarily vote for their preferred option. If agents are informed that others will vote truthfully, truthful voting is more pervasive in equilibrium. In our setting, the effects of conformity and information depend on the voting rule and the preferred option of each agent. We provide empirical support for our theoretical predictions by means of a laboratory experiment. |
| Keywords: | Issue-Silence; truthful voting, conformity, information, experimental evidence. |
| JEL: | C91 C92 D71 D72 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:mal:wpaper:2016-1&r=upt |
| By: | Barbara Broadway (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; and ARC Centre of Excellence for Children and Families Over the Life Course); Guyonne Kalb (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; ARC Centre of Excellence for Children and Families Over the Life Course; Institute for the Study of Labour (IZA)); Jinhu Li (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; and ARC Centre of Excellence for Children and Families Over the Life Course); Anthony Scott (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne) |
| Abstract: | This paper analyses doctors’ supply of after-hours care, and how it is affected by personal and family circumstances as well as the earnings structure. We use detailed survey data from a large sample of Australian General Practitioners to estimate a structural, discrete-choice model of labour supply and after-hours care. This allows us to jointly model how many daytime-weekday hours a doctor works, and his or her probability of providing after-hours care. The underlying utility function varies across individual and family characteristics. We simulate labour supply responses to an increase in doctors’ hourly earnings, both in a daytime-weekday setting and for after-hours care. Among doctors overall, men and women increase their daytime-weekday working hours if their hourly earnings in this setting increases, but only to a very small extent. Men’s labour supply elasticities do not change if their family circumstances change, but for women the small behavioural response disappears completely if they have preschool-aged children. Doctors are somewhat more likely to provide after-hours care if their hourly earnings in that setting increases, but again the effect is very small and is only evident in some sub-groups. Moreover, higher earnings in weekday-daytime practice reduces the probability of providing after-hours care, particularly for men. Increasing doctors’ earnings appears to be at best relatively ineffective in encouraging increased provision of after-hours care, and may even prove harmful if incentives are not well-targeted. |
| Keywords: | Labour supply, after-hours care, wage elasticity, health workforce, MABEL |
| JEL: | I11 J22 J44 J21 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:iae:iaewps:wp2016n12&r=upt |
| By: | Robert Kollmann |
| Abstract: | This paper analyzes the effects of output volatility shocks and of risk appetite shocks on the dynamics of consumption, trade flows and the real exchange rate, in a two-country world with recursive preferences and complete financial markets. When the risk aversion coefficient exceeds the inverse of the intertemporal substitution elasticity, then an exogenous rise in a country’s output volatility triggers a wealth transfer to that country, in equilibrium; this raises its consumption, lowers its trade balance and appreciates its real exchange rate. The effects of risk appetite shocks resemble those of volatility shocks. In a recursive preferences-complete markets framework, volatility and risk appetite shocks account for a noticeable share of the fluctuations of net exports, net foreign assets and the real exchange rate. These shocks help to explain the high empirical volatility of the real exchange rate and the disconnect between relative consumption growth and the real exchange rate. |
| Keywords: | external balance; exchange rate; volatility; risk appetite; consumption-real exchange rate anmaly |
| JEL: | F31 F32 F36 F41 F43 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/220899&r=upt |
| By: | Hanno Lustig; Adrien Verdelhan |
| Abstract: | Compared to the predictions of exchange rate models with complete spanning in financial markets, actual exchange rates are puzzlingly smooth and only weakly correlated with macro-economic fundamentals. This paper derives an upper bound on the effects of incomplete spanning in international financial markets. We introduce stochastic wedges between the exchange rate's rate of appreciation and the difference between the marginal utility growth rates of the countries' stand-in investors without violating the foreign investors' Euler equations for the domestic risk-free assets. The wedges always lower the volatility of no-arbitrage exchange rates and can help to match the volatility of exchange rates in the data, provided that the wedges are as volatile as the maximum Sharpe ratio, but the wedges cannot deliver exchange rates that are uncorrelated with macro-fundamentals without largely eliminating currency risk premia. |
| JEL: | F31 G12 |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22023&r=upt |
| By: | Ariel Pakes; Jack Porter |
| Abstract: | We propose a new approach to semiparametric analysis of multinomial choice models with fixed effects and a group (or panel) structure. A traditional random utility framework is employed, and the key assumption is a group homogeneity condition on the disturbances. This assumption places no restrictions on either the joint distribution of the disturbances across choices or within group (or across time) correlations. This work follows a substantial nonlinear panel literature (Manski 1987, Honore 1992, Abrevaya 1999, 2000) with the distinction that multiple covariate index functions now determine the outcome. A novel within-group comparison leads to a set of conditional moment inequalities that provide partial identifying information about the parameters of the observed covariate index functions, while avoiding the incidental parameter problem. We extend our framework to allow for: certain types of endogenous regressors (including lagged dependent variables and conditional heteroskedasticity), set-valued covariates, and parametric distributional information on disturbances. |
| JEL: | C14 C23 C25 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21893&r=upt |
| By: | Anastasios Dosis (ESSEC - ESSEC Business School - Essec Business School - Economics Department - Essec Business School, THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | I analyse a market with adverse selection in which companies competè a la Bertrand by offering menus of contracts. Contrary to Rothschild and Stiglitz (1976), I allow for any finite number of types and states and more general utility functions. I define the generalised Rothschild-Stiglitz Profile of Actions (RSPA), and I show that, in every possible market, if the RSPA is efficient, it is also a pure strategy Nash equilibrium profile of actions. On the contrary, I show that in markets in which the RSPA is not efficient, preferences admit an expected utility representation with strictly increasing and strictly concave VNM utilities and a weak sorting condition holds, no pure strategy Nash equilibrium exists. |
| Keywords: | Nash Equilibrium,Adverse Selection, Bertrand Competition |
| Date: | 2016–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01285185&r=upt |
| By: | Beatriz Martínez, Beatriz Martínez; Hipòlit Torró, Hipòlit Torró |
| Abstract: | In many futures markets, trading is concentrated in the front contract and positions are rolled-over until the strategy horizon is attained. In this paper, a pair-wise comparison between the conventional risk premium and the accrued risk premium in rolled-over positions in the front contract is carried out for UK natural gas futures. Several novel results are obtained. Firstly, and most importantly, the accrued risk premium in rollover strategies is significatively larger than conventional risk premiums and increases with the time to delivery. Specifically, for strategy horizons between three and six months, this difference increases from 1% to 10%. Secondly, it is the first time that risk premium in day-ahead futures has been measured in this market. The average value of the day-ahead risk premium is 0.5% per day and it is statistically significant. Thirdly, all risk premiums are significantly larger and more volatile in winter. Finally, risk premium time-variation is analyzed using a regression model. It is shown that reservoirs, weather, liquidity, volatility, skewness, and seasons are able in all cases to explain between 21% and 59% of the risk premium time-variation (depending on the futures maturity and sub-period). |
| Keywords: | Natural Gas Market, Futures Premium, Rollover, Seasonal Risk Premiums, Environmental Economics and Policy, G13, L95, |
| Date: | 2016–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemes:232212&r=upt |