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on Utility Models and Prospect Theory |
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Issue of 2020‒04‒27
five papers chosen by |
| By: | Talpur, Musharaf; Brouwer, Roy; Koetse, Mark |
| Abstract: | In this study, we assess the convergent validity of preferences and willingness-to-pay (WTP) values for beach quality improvements from a gender perspective by isolating opt-out forced-choice effect from the SP1 DCE data (that is a forced-choice situation when a respondent was asked to select among the competing labelled alternatives if they chose an opt-out). Following this approach, we combine the RP discrete choice model and SP1 DCE datasets by splitting them into female and male sub-samples and then investigate whether estimated preferences and WTP values are susceptible to this effect from a gender perspective. Using the multinomial logit (MNL) models, we find that female visitors’ preferences are compatible across RP and SP1 data if the forced-choice effect is isolated from SP1 data, whereas this is not true for the male visitors. However, WTP values appear similar for both the female and male RP and SP1 sub-samples. Also, the sources of opt-out forced choices appear more promising for females than those of male counterparts in the estimated binary logit models. Our results, therefore, suggest that preferences’ similarity is a gender-specific if the opt-out forced-choice effect is isolated, but WTP similarity is not. |
| Keywords: | Revealed preference; Discrete choice model, Discrete choice experiments; Opt-out forced-choice effect; Gender perspective |
| JEL: | Q5 Q51 Q57 |
| Date: | 2019–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99631&r=all |
| By: | Olivier Baguelin (EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Most important economic problems such as coordinating individual activities or providing correct incentives arise "far" from economic equilibrium; this is especially true within a context of general interdependence. And yet, the walrasian General equilibrium theory, as dominant legatee of neoclassical economics, is only coherent in the close neighborhood of some equilibrium (Foley, 2010). The marshallian approach is an appealing alternative to deal with "general disequilibrium" situations while incorporating neoclassical concepts. The trouble is that it betrays part of the neoclassical legacy when questioning an ordinal interpretation of utility. This paper draws the attention on Allais' General theory of surpluses (1981) as a valuable platform to coherently arrange fundamental neoclassical achievements. It offers a basic but integrative analytical framework: not only does it accommodate disequilibrium situations but it allows connections to such an important development in economic theory as the institutional approach. |
| Keywords: | surplus,loss,general equilibrium,transaction costs JEL codes: D3,D5,D6 |
| Date: | 2020–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02541406&r=all |
| By: | Anthony Newell |
| Abstract: | The ability to make a beneficial financial choice varies greatly among individuals. One of the ways this variability may present itself is through probability weighting, where on aggregate small probabilities are overweighted and large probabilities are underweighted. This paper investigates if the combination of risk literacy and the neuro-biological concept of interoception plays a role in mediating the over and under-weighting of a prospects likelihood. I find that high risk literacy increases the perception of changes in probability and as such reduces underweighting/overweighting while high interoceptive ability reduces overoptimism towards gambles in males but induces pessimism towards gambles for females. |
| Keywords: | Behavioural finance, Interoception, probability weighting, neuro-economics, lottery choice, revealed preference. |
| JEL: | D81 D91 |
| Date: | 2020–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:qut:qubewp:wp058&r=all |
| By: | Alberto Prati (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Claudia Senik (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics, UP4 - Université Paris-Sorbonne) |
| Abstract: | Can people remember correctly their past well-being? We study three national surveys of the British, German and French population, where more than 50,000 European citizens were asked questions about their current and past life satisfaction. We uncover systematic biases in recalled subjective well-being: on average, people tend to overstate the improvement in their well-being over time and to understate their past happiness. But this aggregate figure hides a deep asymmetry: while happy people recall the evolution of their life to be better than it was, unhappy ones tend to exaggerate its worsening. It thus seems that feeling happy today implies feeling better than yesterday. These results offer an explanation of why happy people are more optimistic, perceive risks to be lower and are more open to new experiences. |
| Keywords: | life satisfaction,remembered utility,memory biases,intra-personal comparisons |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-02545228&r=all |
| By: | Igor V. Evstigneev (University of Manchester - Economics, School of Social Sciences); Thorsten Hens (University of Zurich - Department of Banking and Finance; Norwegian School of Economics and Business Administration (NHH); Swiss Finance Institute); Valeriya Potapova (University of Manchester - Economics, School of Social Sciences); Klaus Reiner Schenk-Hoppé (University of Manchester - Department of Economics; Norwegian School of Economics (NHH) - Department of Finance) |
| Abstract: | This paper analyzes a dynamic stochastic equilibrium model of an asset market based on behavioral and evolutionary principles. The core of the model is a non-traditional game-theoretic framework combining elements of stochastic dynamic games and evolutionary game theory. Its key characteristic feature is that it relies only on objectively observable market data and does not use hidden individual agents' characteristics (such as their utilities and beliefs). A central goal of the study is to identify an investment strategy that allows an investor to survive in the market selection process, i.e., to keep with probability one a strictly positive, bounded away from zero share of market wealth over an infinite time horizon, irrespective of the strategies used by the other players. The main results show that under very general assumptions, such a strategy exists, is asymptotically unique and easily computable. |
| Keywords: | Evolutionary finance, Behavioral finance, Stochastic dynamic games, DSGE, survival portfolio rules. |
| JEL: | C73 D53 D58 G11 G02 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2019&r=all |