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on Utility Models and Prospect Theory |
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Issue of 2018‒05‒14
twenty papers chosen by |
| By: | Lanier, Joshua; Miao, Bin; Quah, John; Zhong, Songfa |
| Abstract: | This paper presents a nonparametric, revealed preference analysis of intertemporal consumption with risk. In an experimental setting, subjects allocate tokens over four commodities, consisting of consumption in two contingent states and at two time periods, subject to different budget constraints. With this data, one could test, using Afriat's Theorem and its generalizations, whether a subject's choices are consistent with utility maximization, and also utility maximization with various additional properties on the utility function. Our results broadly support a model where subjects maximize a utility function that is weakly separable across states but there is little support for weak separability across time. Our result sheds light on the source of the failure of the discounted expected utility model. |
| Keywords: | risk preference, time preference, revealed preference, budgetary choice, Afriat's Theorem, experiment |
| JEL: | C91 D03 D90 |
| Date: | 2018–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86263&r=upt |
| By: | Adriana Ocejo |
| Abstract: | We study the problem of utility maximization from terminal wealth in which an agent optimally builds her portfolio by investing in a bond and a risky asset. The asset price dynamics follow a diffusion process with regime-switching coefficients modeled by a continuous-time finite-state Markov chain. We consider an investor with a Constant Relative Risk Aversion (CRRA) utility function. We deduce the associated Hamilton-Jacobi-Bellman equation to construct the solution and the optimal trading strategy and verify optimality by showing that the value function is the unique constrained viscosity solution of the HJB equation. By means of a Laplace transform method, we show how to explicitly compute the value function and illustrate the method with the two- and three-states cases. This method is interesting in its own right and can be adapted in other applications involving hybrid systems and using other types of transforms with basic properties similar to the Laplace transform. |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1804.08442&r=upt |
| By: | Nathaniel Hendren |
| Abstract: | Revealed-preference measures of willingness to pay (WTP) capture the value of insurance only against the risk that remains when choosing insurance. This paper provides a method to translate observed market WTP and cost curves into an ex-ante value of insurance that can analyze the impact of insurance market policies on ex-ante expected utility. The key additional statistic required is the difference in marginal utilities between insured and uninsured, which generally requires an estimate of risk aversion. Applying the approach to previous literature, I estimate higher values of subsidies and mandates relative to methods based market surplus or "deadweight loss". |
| JEL: | H0 I11 I3 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24470&r=upt |
| By: | Groom, Ben; Maddison, David |
| Abstract: | This paper provides novel empirical evidence on the value of the elasticity of marginal utility, η, for the United Kingdom. η is a crucial component of the social discount rate (SDR), which determines the inter-temporal trade-offs that are acceptable to society. Using contemporaneous and historical data, new estimates are obtained using four revealed-preference techniques: the equal-sacrifice income tax approach, the Euler-equation approach, the Frisch additive-preferences approach and risk aversion in insurance markets. A meta-analysis indicates parameter homogeneity across approaches, and a central estimate of 1.5 for η. The confidence interval excludes unity, the value used in official guidance by the UK government. The term structure of the SDR is then estimated. The result is a short-run SDR of 4.5% declining to 4.2% in the very long-run. This is higher and flatter than the UK official guidance. The difference stems from incorrect calibration of social welfare and estimation of the diffusion of growth. Other things equal, the results suggest that current UK guidance might need to be updated. |
| Keywords: | Elasticity of marginal utility; Social rate of time preference; Social discount rate; Cost–Benefit analysis |
| JEL: | D60 D61 H24 R13 |
| Date: | 2018–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:87526&r=upt |
| By: | Brakemeier, Hendrik |
| Abstract: | In recent years, more and more information systems are proliferating that gather, process and analyze data about the environment they are deployed in. This data oftentimes refers to individuals using these systems or being located in their surroundings, in which case it is referred to as personal information. Once such personal information is gathered by an information system, it is usually out of a users’ control how and for which purpose this information is processed or stored. Users are well aware that this loss of control about their personal information can be associated with negative long-term effects due to exploitation and misuse of the information they provided. This makes using information systems that gather this kind of information a double-edged sword. One can either use such systems and realize their utility but thereby threaten ones’ own privacy, or one can keep ones’ privacy intact but forego the benefits provided by the information system. The decision whether to adopt this type of information system therefore represents a tradeoff between benefits and risks. The vast majority of information systems privacy research to date assumed that this tradeoff is dominated by deliberate analyses and rational considerations, which lead to fully informed privacy-related attitudes and behaviors. However, models based on these assumptions often fail to accurately predict real-life behaviors and lead to confounding empirical observations. This thesis therefore investigates, in how far the risk associated with disclosing personal information to privacy-invasive information systems influences user behavior against the background of more complex models of human decision-making. The results of these investigations have been published in three scientific publications, of which this cumulative doctoral thesis is comprised. These publications are based on three large-scale empirical studies employing experimental approaches and being underpinned by qualitative as well as quantitative pre-studies. The studies are guided by and focus on different stages of the process of perceiving, evaluating and mentally processing privacy risk perceptions in considerations whether to disclose personal information and ultimately use privacy-invasive information systems. The first study addresses different conceptualizations of privacy-related behaviors, which are oftentimes used interchangeably in privacy research, despite it has never been investigated whether they are indeed equivalent: Intentions to disclose personal information to an information system and intentions to use an information system (and thereby disclose information). By transferring the multiple-selves-problem to information systems privacy research, theoretical arguments are developed and empirical evidence is provided that those two intentions are (1) conceptually different and (2) formed in different cognitive processes. A vignette-based factorial survey with 143 participants is used to show, that while risk perceptions have more impact on disclosure intentions than on usage intentions, the opposite holds for the hedonic benefits provided by the information system. These have more impact on usage intentions than on disclosure intentions. The second study moves one step further by addressing systematically different mental processing of perceived risks and benefits of information disclosure when considering only one dependent variable. In particular, the assumption that the perceived benefits and risks of information disclosure possess additive utility and are therefore weighted against each other by evaluating a simple utility function like “Utility = Benefit – Cost” is investigated. Based on regulatory focus theory and an experimental pre-study with 59 participants, theoretical arguments are developed, that (1) the perception of high privacy risks evokes a state of heightened vigilance named prevention-focus and (2) this heightened vigilance in turn changes the weighting of the perceived benefits and risks in the deliberation whether to disclose personal information. Results from a second survey-based study with 208 participants then provide empirical evidence, that perceptions of high risks of information disclosure in fact evoke a prevention focus in individuals. This prevention focus in turn increases the negative effect of the perceived risks and reduces the positive effect of the perceived benefits of information disclosure on an individuals’ intention to disclose personal information. Instead of investigating the processing of risk perceptions, the third study presented in this thesis focuses on the formation of such perceptions. The focus is therefore on the process of selecting, organizing and interpreting objective cues or properties of information systems when forming perceptions about how much privacy risk is associated with using the system. Based on an experimental survey study among 233 participants the findings show, that individuals in fact have difficulties evaluating privacy risks. In particular, (1) the formation of privacy risk perceptions is dependent on external reference information and (2) when such external reference information is available, individuals are enabled to form more confident risk judgments, which in turn have a stronger impact on an individual’s privacy-related behavior. These findings suggest a reconceptualization of privacy risks as not only being characterized by an extremity (how much risk is perceived) but also the dimension of confidence in ones’ own risk perception. Overall, the research findings of the three studies presented in this thesis show, that widely accepted assumptions underlying information systems privacy research are severely oversimplified. The results therefore contribute significantly to an improved understanding of the mental processes and mechanisms leading to the acceptance of privacy-invasive information systems. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:102851&r=upt |
| By: | Heinrich, Timo; Shachat, Jason |
| Abstract: | This study experimentally evaluates the risk preferences of children and adolescents living in an urban Chinese environment. We use a simple binary choice task that tests risk aversion as well as prudence. This is the first test for prudence in children and adolescents. Our results reveal that subjects from grades 5 to 11 (10 to 17 years) make mostly risk averse and prudent choices. With respect to risk aversion behavior of 3rd graders (8 to 9 years) does not differ statistically from risk neutrality. We also find 3rd graders to make mostly prudent choices. We also find evidence for a transmission of preferences: risk aversion is significantly correlated between children and their parents. Also, prudence is significantly correlated between girls (but not boys) and their parents. |
| Keywords: | risk aversion; prudence; transmission of preferences; age effects; experimental economics; children |
| JEL: | C93 D81 J13 |
| Date: | 2018–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86456&r=upt |
| By: | Oliver Richters (University of Oldenburg, Department of Economics); Erhard Gloetzl (Institute for the Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria;) |
| Abstract: | In monetary Stock-Flow Consistent (SFC) models, accounting identities reduce the number of behavioral functions to avoid an overdetermined system of equations. We relax this restriction using a differentialalgebraic equation framework of constrained dynamics. Agents exert forces on the variables according to their desire, for instance to gradually improve their utility. The parameter ‘economic power’ corresponds to their ability to assert their interest. In analogy to Lagrangian mechanics, system constraints generate additional constraint forces that lead to unintended dynamics. We exemplify the procedure using a simple SFC model and reveal its implicit assumptions about power relations and agents’ preferences. |
| Keywords: | Economic models; Disequilibrium Dynamics; Stock-Flow Consistent Models; Post Keynesian; Constrained Dynamics; Lagrangian Mechanics; Procedural Rationality. |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:old:dpaper:409&r=upt |
| By: | Matheus Assaf; Pedro Garcia Duarte |
| Abstract: | The present-day standard textbook narrative on the history of growth theory usually takes Robert Solow’s 1956 contribution as a key starting point, with extensions on the savings decision (done by David Cass and Tjalling Koopmans in 1965) being the next important development. However, such account is historically misleading because it organizes past developments based on theoretical concerns. Our goal is to tell a richer story about the developments of growth theory from the 1950s to the mid 1960s, in the activity analysis literature that started before Solow’s model and never had him as a central reference. We stress the role played by Edmond Malinvaud, and take his travel from the French milieu of mathematical economics to the Cowles Commission in 1950-1951 and back to France as a guiding line. The rise of turnpike theory in the end of the 1950s generated a debate on the choice criteria of growth programs, opposing the productive efficiency typical of these models to the utilitarian approach supported by Malinvaud and Koopmans. The Vatican Conference of 1963, where Koopmans presented a first version of his 1965 model, was embedded in this debate. We argue that Malinvaud’s (and Koopmans’s) contributions were crucial to steer the activity analysis literature towards a utilitarian analysis of growth paths. |
| Keywords: | Edmond Malinvaud; Optimal Growth; Tjalling Koopmans; History of Growth Theory |
| JEL: | B21 B22 B23 |
| Date: | 2018–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2018wpecon03&r=upt |
| By: | Douadia Bougherara; Laurent Piet |
| Abstract: | A growing number of studies in finance and economics seek to explain insurance choices using the assumptions advanced by behavioral economics. One recent example in agricultural economics is the use of cumulative prospect theory (CPT) to explain farmer choices regarding crop insurance coverage levels (Babcock, 2015). We build upon this framework by deriving willingness to pay (WTP) for insurance programs under alternative assumptions, thus extending the model to incorporate farmer decisions regarding whether or not to purchase insurance. Our contribution is twofold. First, we study the sensitivity of farmer WTP for crop insurance to the inclusion of CPT parameters. We find that loss aversion and probability distortion increase WTP for insurance while risk aversion decreases it. Probability distortion in losses plays a particularly important role. Second, we study the impact of yield distribution skewness on farmer WTP assuming CPT preferences. We find that WTP decreases when the distribution of yields moves from negatively- to positively-skewed and that the combined effect of probability weighting in losses and skewness has a large negative impact on farmer WTP for crop insurance. |
| Keywords: | crop insurance, cumulative prospect theory, premium subsidy; skewness |
| JEL: | D81 Q10 Q12 Q18 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpceem:18-08&r=upt |
| By: | Peter Katuscak; Tomas Miklanek |
| Abstract: | Fundraising for public goods by private contributions is often undermined by free-riding. One prominent mechanism suggested to alleviate problem of free-riding is a fixed-prize lottery with winning probabilities proportional to individual contri- butions (Morgan, 2000; Morgan and Sefton, 2000). Yet, as extensively documented by economic experiments, subjects often contribute even in the absence of incentives of this kind, suggesting that their contributions are driven social preferences. This raises a question of how the lottery incentive interacts with social preferences. We present an experiment in which we de-couple the contribution effect of own prize seeking from the potential crowding out effect due to the perception that the others contribute because of their prize seeking, rather than to benefit the group. Even though the lottery increases contributions relative to the voluntary contribution case, we find that it also crowds out voluntary contributions that are likely driven by social preferences. |
| Keywords: | public good game; crowding out; social preferences; lottery; |
| JEL: | C91 D91 D03 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp617&r=upt |
| By: | Benoît, Jean-Pierre; Dubra, Juan |
| Abstract: | Numerous experiments demonstrate attitude polarization. For instance, Lord, Ross & Lepper presented subjects with the same mixed evidence on the deterrent effect of the death penalty. Both believers and skeptics of its deterrent effect became more convinced of their views; that is, the population polarized. However, not all experiments find this attitude polarization. We propose a theory of rational updating that accounts for both the positive and negative experimental findings. This is in contrast to existing theories, which predict either too much or too little polarization. |
| Keywords: | Attitude Polarization; Confirmation Bias; Bayesian Decision Making |
| JEL: | D10 D11 D12 D81 D82 D83 |
| Date: | 2018–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86173&r=upt |
| By: | Paolo Liberati; Francesco Crespi; Massimo Paradiso; Simone Tedeschi; Antonio Scialà |
| Abstract: | This paper contributes to the understanding of smokers’ responses to cigarette prices increases, with a focus on heterogeneity across individuals and over price changes. A stated preference quasi-experimental design grounded on a random utility framework is proposed, based on individual-level data drawn from a survey gathering detailed information on Italian smokers’ habits. On average, the predicted probability of reducing cigarettes consumption increases with the price variation, even though a huge heterogeneity of price responsiveness is found. In terms of potential price elasticity, a polarisation between low and high responsiveness individuals has also been identified. Finally, by comparing even and uneven price variations across price classes, it is shown that uniform across-brand price increases limit product substitutions and downtrading. Estimated heterogeneity provides information to forecast the effect on tax revenue of a tax-driven price change, and some guidance on how to design tax reforms to balance health and revenue goals. |
| Keywords: | : Smoking behaviour, Preference heterogeneity, Price elasticity, Tobacco tax, Random utility models |
| JEL: | I12 I18 C25 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:rtr:wpaper:0237&r=upt |
| By: | Broer, Tobias; Kohlhas, Alexandre |
| Abstract: | Professional forecasts are often used to gauge the expectations of households and firms. Recently, the average of such forecasts have been argued to support rational expectation formation with noisy private information. We document that individual forecasts of US GDP and inflation in the Survey of Professional Forecasters overrespond to both private and public information, contradicting, prima facie, the assumption of noisy rational expectation formation. We generalize two alternative models of forecaster behavior that focus on strategic diversification and behavioral overconfidence, respectively, to dynamic environments with noisy private information. We find that both models predict overresponses, but only the overconfidence model is simultaneously consistent with a substantial overreaction to public information. |
| Keywords: | bounded rationality; Forecaster behavior; Rational Expectations |
| JEL: | C53 D83 D84 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12898&r=upt |
| By: | Rosu, Ioanid; Sojli, Elvira; Tham, Wing Wah |
| Abstract: | We study the quoting activity of market makers in relation with trading, liquidity, and expected returns. Empirically, we find larger quote-to-trade (QT) ratios in small, illiquid or neglected firms, yet large QT ratios are associated with low expected returns. The last result is driven by quotes, not by trades. We propose a model of quoting activity consistent with these facts. In equilibrium, market makers monitor the market faster (and thus increase the QT ratio) in neglected, difficult-to-understand stocks. They also monitor faster when their clients are less risk averse, which reduces mispricing and lowers expected returns. |
| Keywords: | Liquidity; price discovery; volatility; trading volume; monitoring; neglected stocks; risk aversion; inventory; high frequency trading |
| JEL: | G12 G14 |
| Date: | 2017–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:1231&r=upt |
| By: | Luc Arrondel (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Jérôme Coffinet (Banque de France - Banque de France) |
| Abstract: | In this paper, we assess how the factors explaining the holdings of stocks have evolved through the financial crisis. We rely on the data collected in surveys conducted among French households during the period 2004-2014. There are three main modes for investing in stocks: buying shares directly; purchasing them through mutual funds; and finally taking out unitlinked life insurance. Obviously, these three ways to invest in stocks do not involve the same investment behaviours since, besides the risk and return characteristics, they differ in their transaction costs, management fees and taxation. As a result, there is no a priori reason to consider that portfolio choice decisions by households on these modes of stockownership are equivalent and correspond to the same individuals’ characteristics. We show that the holding of risky assets and of individual direct shares decreased during the period, and especially between 2009 and 2014. At the end of the period, the profile of direct equity holders was refocused towards profiles with greater risk tolerance. Other factors of direct stockholdings include: better education, gifts and inheritances, parents holding securities, singles, high-wealth households and high-income groups. Conditionally on holdings, the proportion of risky assets increases with risk tolerance and the holding of securities by parents. It also decreases at the end of the period. Our paper also shows that shareholders have gradually moved towards preferential ownership of shares in life insurance rather than direct share ownership, especially between 2009 and 2014. The estimation of a simultaneous model shows the specific characteristics of stockholders depending on the chosen support (direct, indirect or on life insurance): those who invest directly in stocks are richer, more educated and less risk averse; those who hold mutual funds are a little richer but more risk averse and do not appear the most educated; finally, for ownership in stocks on life insurance contracts, the position in the life cycle plays an important role as well as the social category. |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-01785324&r=upt |
| By: | Kukushkin, Nikolai S.; von Mouche, Pierre H.M. |
| Abstract: | We study a rather simplified game model of competition for status. Each player chooses a scalar variable (say, the level of conspicuous consumption), and then those who chose the highest level obtain the "high" status, while everybody else remains with the "low" status. Each player strictly prefers the high status, but they also have intrinsic preferences over their choices. The set of all feasible choices may be continuous or discrete, whereas the strategy sets of different players can only differ in their upper and lower bounds. The resulting strategic game with discontinuous utilities does not satisfy the assumptions of any general theorem known as of today. Nonetheless, the existence of a (pure strategy) Nash equilibrium, as well as the "finite best response improvement property," are established. |
| Keywords: | status game; Cournot tatonnement; Nash equilibrium |
| JEL: | C72 |
| Date: | 2018–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86178&r=upt |
| By: | Klaus Neusser |
| Abstract: | The Multiplicative Ergodic Theorem provides a novel general method- ology to analyze rational expectations models with stochastically vary- ing coecients. The approach is applied for the first time to economics and analyzes the canonical New Keynesian model with a Taylor rule which switches randomly between an aggressive and a passive reaction to in ation. The paper delineates the trade-o of the central bank of being passive in some periods and aggressive in others. Moreover, it is shown how this trade-o depends on the stochastic process governing the randomness in the central bank's policy. Finally, explicit solution formulas are derived in the case of determinateness as well as inde- terminateness. In doing so he paper considerably extends the current approach. |
| Keywords: | time{varying rational expectations models, New Keynesian model, Taylor rule, Lyapunov exponents, multiplicative ergodic theorem |
| JEL: | C02 C61 E40 E52 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp1801&r=upt |
| By: | Matej Opatrny (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic) |
| Abstract: | We combine the Critical Cost Efficiency Index and the Houtman Maks Index to evaluate the consistency of subjects in a set of choice data from budgets. We show that by simply allowing subjects for one significant mistake (by removing the worst observation), the mean Critical Cost Efficiency Index in a set of choices from an online experiment with the general population increases by 6 percentage points. Furthermore, we find that by excluding the worst observation per subject, the fraction of subjects wasting 5% or less of their budget increases from 45% to 64%. The highest improvement in terms of efficiency can be seen among retired and 65+ aged subjects which indicates that their low level of effciency is largely due to a single mistake. |
| Keywords: | Critical Cost Efficiency Index, Houtman Maks Index, Socio-economic groups, observation |
| JEL: | D12 D14 D81 D83 D91 G11 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2018_11&r=upt |
| By: | Sonnenschein, Katja Rabea |
| Abstract: | Nowadays, information technology (IT) has become an integral part of our everyday life. In both the private and business context, we extensively use different IT systems for data production, data organization, data analysis, and communication with others. Due to the extensive usage of IT, the amount of digitalized personal and organizational information is rapidly and incessantly rising — making both private individuals and organizations attractive targets for attackers. The necessity to effectively protect sensitive data from IT security incidents is highly discussed in practice and research, it attracts high media attention, and our society should be actually aware of the importance of IT security in today’s digital world. However, recent reports demonstrate that organizations as well as private individuals — even though they are afraid of the rapid evolution of IT security risks — still often refrain from adopting the necessary IT security safeguards. To better prepare our society for the ongoing risks arising from extensive IT usage, a better understanding of how IT security is perceived by private individuals and managers is required. Motivated by the findings and theoretical underpinnings from previous research, this thesis addresses several research questions with respect to IT security perceptions and behaviors of private individuals and managers in organizations. By conducting four studies — one among private individuals and three among managers in organizations — the thesis not only contributes to the current research but also provides useful recommendations for practice. Suppliers of IT and IT security products as well as managers in customer organizations can especially learn from the findings of the studies. First, research paper A is focused on the private context and analyzes the gender differences in mobile users’ IT security perceptions and protective behaviors. Drawing on Gender Schema Theory and Protection Motivation Theory, a mixed-method study (survey, experiment, and interviews) under laboratory conditions is conducted. The results show that IT security perceptions of females and males are based on different downstream beliefs and indicate that females are more likely to translate their intention to take precautionary actions into actual behavior than males. The studies presented in research papers B, C, and D are conducted within the business context and focus on the IT security perceptions and behaviors of managers in organizations. Research paper B analyzes top managers’ IT security awareness. Since previous research predominantly investigated IT security awareness at the employee level, a comprehensive conceptualization of IT security awareness at the management level is currently missing. To address this research gap, a structured literature review and expert interviews are performed in order to develop and test a comprehensive conceptualization — including both individual and organizational factors — of top managers’ IT security awareness. Within research paper C, managers’ willingness to pay for IT security is in the focus of the investigation. Previous research largely neglected that various IT security safeguards might be differently evaluated by organizations, for example, due to different IT security requirements. By drawing on Kano’s Theory, the study takes into account that — depending on the organization’s individual IT security requirements — the implementation of IT security safeguards can also be associated with disadvantages. Based on interviews and an empirical study among managers, the study reveals that IT security safeguards are differently evaluated and that these different evaluations are associated with different levels of managers’ willingness to pay. Finally, research paper D analyzes managers’ Status Quo-Thinking in risk perception. Based on Prospect Theory, Status Quo Bias research, and an empirical study among managers, the findings indicate that managers’ risk evaluations and decisions to adopt new technologies are highly dependent on their assessments of the systems currently used in the organization. Moreover, the results implicate that the impact of Status Quo-Thinking on managers’ risk assessments and intentions to adopt new technologies is stronger the less experienced a manager is with a new technology, probably resulting in an incorrect risk assessment and inappropriate adoption behavior. Implications for research and practice are discussed in more detail within each research paper and summarized in the final chapter of the thesis. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:102853&r=upt |
| By: | Tetsuya Shinkai (School of Economics, Kwansei Gakuin University); Takao Ohkawa (Faculty of Economics, Ritsumeikan University); Makoto Okamura (Faculty of Economics, Gakushuin University) |
| Abstract: | This paper investigates the changes in local content requirement (LCR) and exchange rate volatility on an international oligopolistic market in a foreign country that accepts n affiliates firms through FDI from a home country. The subordinate firms are forced to procure a proportion of their intermediate products from the foreign firms under the LCR of the foreign government. We derive a Cournot equilibrium of the oligopolistic foreign market, in which affiliate firms compete with the foreign firms under foreign exchange rate uncertainty for when the number of affiliates, n, is either exogenous or endogenous. In the former case, we show the affiliates aggressively expand their outputs and the ex-post expected profits of the affiliates decrease but their ex-ante certainty equivalent of expected profits increases with the volatility of the exchange rate when the relative risk aversion coefficient is not high at equilibrium. In the latter case, we show LCR tightening from the foreign government always accelerates the exit of the affiliates from the foreign market and if the extent of the relative risk aversion of the international firms is not high, the entry of affiliates onto the foreign market can be urged as the risk of exchange rate increases. |
| Keywords: | risk aversion, exchange rate volatility, local content requirements, FDI, and Cournot oligopoly |
| JEL: | G32 L13 L12 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:180&r=upt |