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on Utility Models and Prospect Theory |
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Issue of 2022‒06‒13
24 papers chosen by |
| By: | Abdelali Gabih; Hakam Kondakji; Ralf Wunderlich |
| Abstract: | This paper investigates well posedness of utility maximization problems for financial markets where stock returns depend on a hidden Gaussian mean reverting drift process. Since that process is potentially unbounded well posedness cannot be guaranteed for utility functions which are not bounded from above. For power utility with relative risk aversion smaller than those of log-utility this leads to restrictions on the choice of model parameters such as the investment horizon and parameters controlling the variance of the asset price and drift processes. We derive sufficient conditions to the model parameters leading to bounded maximum expected utility of terminal wealth for models with full and partial information. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.08614&r= |
| By: | Dian Yu; Jianjun Gao; Weiping Wu; Zizhuo Wang |
| Abstract: | Prediction markets are long known for prediction accuracy. However, there is still a lack of systematic understanding of how prediction markets aggregate information and why they work so well. This work proposes a multivariate utility (MU)-based mechanism that unifies several existing prediction market-making schemes. Based on this mechanism, we derive convergence results for markets with myopic, risk-averse traders who repeatedly interact with the market maker. We show that the resulting limiting wealth distribution lies on the Pareto efficient frontier defined by all market participants' utilities. With the help of this result, we establish both analytical and numerical results for the limiting price for different market models. We show that the limiting price converges to the geometric mean of agents' beliefs for exponential utility-based markets. For risk measure-based markets, we construct a risk measure family that meets the convergence requirements and show that the limiting price can converge to a weighted power mean of agent beliefs. For markets based on hyperbolic absolute risk aversion (HARA) utilities, we show that the limiting price is also a risk-adjusted weighted power mean of agent beliefs, even though the trading order will affect the aggregation weights. We further propose an approximation scheme for the limiting price under the HARA utility family. We show through numerical experiments that our approximation scheme works well in predicting the convergent prices. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.08913&r= |
| By: | Haoge Chang; Yusuke Narita; Kota Saito |
| Abstract: | We obtain a necessary and sufficient condition under which parametric random-coefficient discrete choice models can approximate the choice behavior generated by nonparametric random utility models. The condition turns out to be very simple and tractable. For the case under which the condition is not satisfied (and hence, where some stochastic choice data are generated by a random utility model that cannot be approximated), we provide algorithms to measure the approximation errors. After applying our theoretical results and the algorithm to real data, we found that the approximation errors can be large in practice. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.01882&r= |
| By: | Lukas Janasek (Institute of Economic Studies, Charles University & Institute of Information Theory and Automation, Czech Academy of Sciences, Prague, Czech Republic) |
| Abstract: | This paper formulates and solves an economic decision problem of the acquisition of costly information in data-driven decision making. The paper assumes an agent predicting a random variable utilizing several costly explanatory variables. Prior to the decision making, the agent learns about the relationship between the random variables utilizing its past realizations. During the decision making, the agent decides what costly variables to acquire and predicts using the acquired variables. The agent´s utility consists of the correctness of the prediction and the costs of the acquired variables. To solve the decision problem, we split the decision process into two parts: acquisition of variables and prediction using the acquired variables. For the prediction, we propose an approach for training a single predictive model accepting any combination of acquired variables. For the acquisition, we propose two methods using supervised machine learning models: a backward estimation of the expected utility of each variable and a greedy acquisition of variables based on a myopic estimate of the expected utility. We evaluate the methods on two medical datasets. The results show that the methods acquire the costly variables efficiently. |
| Keywords: | costly information, data-driven decision-making, machine learning |
| JEL: | C44 C45 C52 C73 D81 D83 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2022_10&r= |
| By: | Marcus Pivato (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université) |
| Abstract: | How should we aggregate the ex ante preferences of Bayesian agents with heterogeneous beliefs? Suppose the state of the world is described by a random process that unfolds over time. Different agents have different beliefs about the probabilistic laws governing this process. As new information is revealed over time by the process, agents update their beliefs and preferences via Bayes rule. Consider a Pareto principle that applies only to preferences which remain stable in the long run under these updates. I show that this "eventual Pareto" principle implies that the social planner must be a utilitarian. But it does not impose any relationship between the beliefs of the individuals and those of the planner, except for a weak compatibility condition |
| Keywords: | Subjective expected utility,Utilitarian,Ex ante Pareto,Stochastic process |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03637877&r= |
| By: | Thibault Fally |
| Abstract: | This paper examines demand systems where the demand for a good depends on other prices only through a common price aggregator (a scalar function of all prices). We refer to this property as ``generalized separability'' and provide the functional forms of demand that this property implies when demand is rational, i.e., derived from utility maximization. Generalized separability imposes restrictions on either income or price effects, and greater flexibility is obtained by adding indirect utility as an additional aggregator. We provide examples and applications which encompass a large variety of examples from the literature. In particular, generalized separability can be used in simple general-equilibrium models to obtain a more tractable framework and yet generate a wider range of effects of market size and productivity on firm size, entry, and prices. |
| JEL: | D11 D40 L13 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29997&r= |
| By: | Giuseppe Attanasi (Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome]); Claire Rimbaud (University of Innsbruck); Marie Villeval (CNRS - Centre National de la Recherche Scientifique, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics) |
| Abstract: | We investigate whether a player's guilt aversion is modulated by the co-players' vulnerability or whether it is only activated by the willingness to avoid disappointing them. We also explore whether the nature of vulnerability (ex-post vs. ex-ante) matters. Ex-post vulnerability arises when a player's material payoff depends on another player's action (e.g., recipients in a dictator games). Ex-ante vulnerability arises when her initial endowment can be entrusted to another player (e.g., trustors in trust games). Treatments vary whether trustees can condition their decision on the belief of another player who is ex-post and/or ex-ante vulnerable. We find that trustees' guilt aversion is insensitive to the nature of the co-player's vulnerability and to the role of the co-player. Guilt is activated even absent vulnerability of co-players. It is mainly triggered by the willingness to respond to others' expectations, regardless of their responsibility or the kindness of their intentions. |
| Keywords: | Guilt Aversion,Vulnerability,Psychological Game Theory,Trust Game,Experiment |
| Date: | 2022–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03620418&r= |
| By: | Nikhil Agarwal; Paulo J. Somaini |
| Abstract: | Consumer choices are constrained in many markets due to either supply-side rationing or information frictions. Examples include matching markets for schools and colleges; entry-level labor markets; limited brand awareness and inattention in consumer markets; and selective admissions to healthcare services. Accounting for these choice constraints is essential for estimating consumer demand. We use a general random utility model for consumer preferences that allows for endogenous characteristics and a reduced-form choice-set formation rule that can be derived from models of the examples described above. The choice-sets can be arbitrarily correlated with preferences. We study non-parametric identification of this model, propose an estimator, and apply these methods to study admissions in the market for kidney dialysis in California. Our results establish identification of the model using two sets of instruments, one that only affects consumer preferences and the other that only affects choice sets. Moreover, these instruments are necessary for identification. We find that dialysis facilities are less likely to admit new patients when they have higher than normal caseload and that patients are more likely to travel further when nearby facilities have high caseloads. Finally, we estimate consumers' preferences and facilities' rationing rules using a Gibbs sampler. |
| JEL: | C50 I11 L0 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29993&r= |
| By: | Vanessa Oltra (BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Modern economic approaches of empathy and sympathy aim at adding an altruistic dimension to the standard economic decision theory. The purpose of the introduction of another regarding dimension, in addition to the sole personal interest, is to try to explain prosocial preferences or behaviours. In this article, we show how and why the economic literature tries to grasp those concepts, but in a way that is very far from the original Smithian sympathy developed in his Theory of Moral Sentiments (TSM). We argue that, by remaining in the framework of methodological individualism and instrumental rationality, economic approaches, particularly in the field of experimental and behavioural economics, tend to reduce and to intrumentalize the concepts of sympathy and empathy. Such approaches seem to us not consistent with the Smithian social philosophy of human nature and interpersonal relationships. |
| Keywords: | Smithian sympathy,Empathy,Theory of moral snetiments,behavioural economics |
| Date: | 2022–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03623609&r= |
| By: | Stefan Nagel; Zhengyang Xu |
| Abstract: | We examine subjective risk premia implied by return expectations of individual investors and professionals for aggregate portfolios of stocks, bonds, currencies, and commodity futures. While in-sample predictive regressions with realized excess returns suggest that objective risk premia vary countercyclically with business cycle variables and aggregate asset valuation measures, subjective risk premia extracted from survey data do not comove much with these variables. This lack of cyclicality of subjective risk premia is a pervasive property that holds in expectations of different groups of market participants and in different asset classes. A similar lack of cyclicality appears in out-of-sample forecasts of excess returns, which suggests that investors’ learning of forecasting relationships in real time may explain much of the cyclicality gap. These findings cast doubt on models that explain time-varying objective risk premia inferred from in-sample regressions with countercyclical variation in perceived risk or risk aversion. We further find a link between subjective perceptions of risk and subjective risk premia, which points toward a positive risk-return tradeoff in subjective beliefs. |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9693&r= |
| By: | Kirby Nielsen; Luca Rigotti |
| Abstract: | We design an experiment to detect incomplete preferences in a domain of monetary gambles with subjective uncertainty. To do this, we use subjects' choices to estimate their preferences, and pay them based on their estimated preferences rather than the choices they make. We find 39\% of subjects express incompleteness. We provide evidence on the extent of incompleteness and the nature of gambles that are incomparable, and demonstrate how incompleteness is distinct from indifference. Incompleteness remains at approximately the same levels for individuals with certain beliefs and in an environment with objective uncertainty, suggesting that most incompleteness can be attributed to imprecise tastes rather than imprecise beliefs. We compare these choices to an environment where we force individuals to decide, as in standard experiments. Forced choice leads to more inconsistencies in preferences. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.08584&r= |
| By: | Assia Kamoune (ENCG - Ecole Nationale de Commerce et de Gestion - UH2MC - Université Hassan II [Casablanca]); Nafii Ibenrissoul (ENCG - Ecole Nationale de Commerce et de Gestion - UH2MC - Université Hassan II [Casablanca]) |
| Abstract: | According to traditional finance theorists, in an efficient market, investors think and behave "rationally" when trading, buying, and selling stocks, and each investor considers carefully all available information before making any trading or investment decisions. The theory of the financial market efficiency or efficient market hypothesis (EMH) corresponds to the theory of competitive equilibrium applied to the financial securities market. Indeed, efficiency assumes the atomicity of the market actors and that all the participants are in active competition with the aim of maximizing profits, so that none of them can alone influence the level of prices which will establish themselves in the market. However, behavioral finance, whose main purpose is to study the real behavior of investors in the financial markets, based on social and cognitive psychology, has come to demonstrate with convincing evidence that investors make major systematic errors and that psychological biases affect investors' investment decision-making. In other words, behavioral finance claims that investors tend to have psychological and emotional biases that lead to making irrational investment decisions. In this article, we will try in thefirst part to examine the nature and the extent of knowledge on the theory of the financial markets efficiency, one of the fundamental paradigms in traditional finance. Despite its considerable contribution to economic and financial theory, it has been hotly contested in recent years. In the second part,we will focus on the theory of behavioral finance, its main theory (prospect theory), its main biases and heuristics as well as its contribution and its limits. |
| Abstract: | Selon les théoriciens de la finance traditionnelle, dans un marché efficient, les investisseurs pensent et se comportent « rationnellement » lorsqu'ils négocient, achètent et vendent des actions, et chaque investisseur tient soigneusement compte de toutes les informations disponibles avant de prendre des décisions d'investissement. La théorie de l'efficience des marchés financiers correspond à la théorie de l'équilibre concurrentiel appliquée au marché des titres financiers. En effet, l'efficience suppose l'atomicité des agents et que les participants sont en concurrence active dans le but de réaliser des profits, de telle sorte qu'aucun d'entre eux ne puisse à lui seul influencer sur le niveau des prix qui s'établiront sur le marché.Cependant, la finance comportementale, ayant pour finalité l'étude des comportements réels des investisseurs au niveau des marchés financiers, en se basant sur la psychologie sociale etcognitive, est venue démontrer avec des preuves convaincantes que les investisseurs commettent des erreurs systématiques majeures et que les biais psychologiques affectent la prise de décision d'investissement des investisseurs. En d'autres termes, la finance comportementale prétend que les investisseurs ont tendance à avoir des préjugés psychologiques et émotionnels qui conduisent à l'irrationalité. Dans cet article, nous allons essayer dans une première partie d'examiner la nature et l'étendue des connaissances sur la théorie de l'efficience des marchés financiers l'un des paradigmes fondamentaux en finance traditionnelle. En dépit de son apport considérable à la théorie économique et financière, elle se trouve vivement contestée depuis ces dernières années. En deuxième partie, nous allons nous focaliser sur la théorie de la finance comportementale, sa principale théorie (théorie des perspectives), ses principaux biais et heuristiques ainsi que son apport et ses limites. |
| Keywords: | Standard finance,Behavioral finance,Efficient market theory,Prospect theory,behavioral biases. |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03634756&r= |
| By: | Mark Schneider (Culverhouse College of Business, University of Alabama); Timothy Shields (Argyros School of Business and Management, Economic Science Institute, Chapman University) |
| Abstract: | We investigate the motives for cooperation in the one-shot Prisoner’s Dilemma (PD). A prior study finds that cooperation rates in one-shot PD games can be ranked empirically by the social surplus from cooperation. That study employs symmetric payoffs from cooperation in simultaneous PD games. Hence, in that setting, it is not possible to discern the motives for cooperation since three prominent social welfare criteria, social surplus (efficiency) preferences, Rawlsian maximin preferences, and inequity aversion make the same predictions. In the present paper, we conduct an experiment to identify which of these social preferences best explains differences in cooperation rates and to study the effects of the risk of non-cooperation. |
| Keywords: | Cooperation; Prisoner’s Dilemma; Inequity aversion; Social surplus; Social preferences |
| JEL: | C92 D82 D81 M40 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:22-07&r= |
| By: | Savvakis C. Savvides (Visiting Lecturer, John Deutsch Institute for the Study of Economic Policy, Queen’s University, Canada) |
| Abstract: | The question of what is really risk in capital investments is posed and discussed. It suggests that the almost total acceptance of the concept that volatility constitutes a good measure of risk is wrong and leads towards a misallocation of economic resources. It is argued that that the Expected Loss of a capital investment project should be used as a measure of risk. It is further illustrated how the risk aversion attitudes of potential investors can be taken into consideration in the decision to invest or not. The pursuit of return without risk inevitably leads to the transfer of wealth through a failing banking system which collaborates with an unregulated financial market who constantly seek low risk and relatively safe returns for the benefit of their wealthy clients. It is further argued that wasteful finance impairs the real economy and inevitably brings about financial crises and economic recessions. The promise of a “return without the risk†leads financial intermediaries in the direction of an elusive quest whereby the only way to attain this is through directing funding towards the capture of existing assets rather than investing in the real economy to create new wealth. |
| Keywords: | Economic development, repayment capability, project evaluation, corporate lending, credit risk. |
| JEL: | D61 G17 G21 G32 G33 H43 |
| Date: | 2022–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:qed:dpaper:4584&r= |
| By: | Inderst, Roman; Thomas, Stefan |
| Abstract: | The failure to fully internalize externalities from production and consumption, including on future generations, is supposed to be at the core of the perceived failure to ensure (ecological) sustainability within the realm of antitrust enforcement. As policymakers put increasing pressure on competition agencies to account for sustainability in their enforcement practice, it becomes pivotal to define whether and, if so, how such externalities can be incorporated into competition analysis. Rather than positing that sustainability should constitute a goal in itself, we explore how sustainability can be incorporated within a consumer welfare analysis. Our paper makes a key distinction between what we term an individualistic and a collective consumer welfare analysis. Within an individualistic consumer welfare analysis, consumers’ willingness-to-pay is measured ceteris paribus, holding other consumers’ choices fixed. We explore how, e.g., through contingent valuation and conjoint analysis, consumers’ appreciation of sustainability benefits and with it the reduction of externalities on others can be elicited. Specifically, we discuss how the context-sensitivity of extracted willingness-to-pay provides both challenges and opportunities for antitrust enforcement in the context of sustainability measures. In a collective consumer welfare analysis, consumers may express their willingness-to-pay also for the choices of others and, thereby, also for the reduction of externalities on themselves. Borrowing from environmental and resource economics, we also discuss more indirect ways of incorporating such externalities. And we critically assess the possibility of “laundering” consumers’ sustainability preferences in the light of supposed biases and cognitive limitations. |
| Keywords: | sustainability,externalities,willingness-to-pay |
| JEL: | A13 K21 K32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:253668&r= |
| By: | Ko, Wonsik (Johns Hopkins University, Department of Economics); Moffitt, Robert (Johns Hopkins University, Department of Economics) |
| Abstract: | Take-up of a social benefit is usually defined as receiving a benefit for which an individual or household is eligible. The take-up rate is the fraction of those eligible for a program who participate and receive a benefit or service. We survey estimates of take-up of social benefits around the world, discuss alternative theories of reasons for incomplete take-up, and survey the empirical evidence on the importance of different factors. We find a wide range of take-up rates around the world which follow some general patterns but are not easily explained. Theories of incomplete take-up include those involving low monetary or utility gains, stigma of receipt, monetary and nonmonetary costs of program participation, imperfect information, administrative barriers, and mismeasurement. The types of individuals who do and do not take up a program is argued to be determined by the joint distribution of gains and losses across those types, which ones face the largest administrative burden of participation and largest information deficits, and face more program operator error. There is a large body of evidence showing the importance of benefit gain and earnings losses from take-up but a smaller body of evidence on other factors, which shows that administrative barriers and costs, lack of information, and stigma all appear to be important for different programs. While there are no easy solutions to the problem of incomplete take-up, policies to at least lessen the problem are argued to be available, although generally not without increased government expenditure. |
| Keywords: | Keywords, Social programs, take-up |
| JEL: | I38 |
| Date: | 2022–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:jhu:papers:66936&r= |
| By: | Hammitt, James K. |
| Abstract: | The social value of decreasing health risks can be evaluated using benefit-cost analysis (BCA), cost-effectiveness analysis (CEA), or a social-welfare function (SWF). These frameworks can produce different social preference rankings of interventions depending on how their health effects and costs are distributed in a population. This paper derives social values of marginal decreases in the probability of illness, its severity (decrease in health status), lethality (conditional mortality risk), and cost under BCA, CEA, and three benchmark SWFs: utilitarian, ex ante prioritarian, and ex post prioritarian. The sensitivity of the social values of improvements in health and decreases in cost to individual circumstances are diverse. In contrast, the conditions under which a decrease in risk, severity, or lethality is socially preferred to a decrease in another of these dimensions are identical for BCA, CEA, the utilitarian and ex ante prioritarian SWFs, but can differ for the ex post prioritarian SWF. |
| Keywords: | prevention; treatment; morbidity; social-welfare function; benefit-cost analysis; value per statistical life |
| JEL: | D61 D63 D81 I10 I31 |
| Date: | 2022–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126999&r= |
| By: | Moscati, Ivan |
| Abstract: | In the philosophy of economics, the last fifteen years have witnessed an intense discussion about the epistemological status of economic models of decision making and their theoretical components, such as the concept of preference. In this article I offer a selective review of this discussion and indicate the directions in which I believe it should evolve. |
| Keywords: | behaviorism; choice; heuristics; mentalism; naturalism; Preference; scientific realism and antirealism |
| JEL: | J1 |
| Date: | 2021–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:115039&r= |
| By: | Rennert, Christian |
| Abstract: | Unternehmen sollten auf Gewinnmaximierung verzichten, um Gewinne maximieren zu können. So lautet die paradoxe Anforderung, mit der Personen konfrontiert sind, die Unternehmen im System der Wirtschaft einer modernen Gesellschaft führen. Diesem Paradoxon kommt man durch die Rekonstruktion der Logik auf die Spur, die funktionierenden Märkten und funktionierenden Organisationen zugrunde liegt. Auf diesem Wege lassen sich zehn konstitutive Funktionen marktkonformer Führung identifizieren, die eindeutige und universell gültige Orientierungspunkte für die Führung von Organisationen in wettbewerblich strukturierten Marktwirtschaften markieren und deren Ausführung die Entfaltung und Bearbeitung des Paradoxons ermöglicht. |
| Keywords: | Führung,neoklassische Preistheorie,Theorie der Unternehmensstrategie,Rational Choice,Interdisziplinarität,Zielrahmentheorie,Paradoxon,Zukunft der Betriebswirtschaftslehre,leadership,neoclassical economics,theory of competitive strategy,rational choice,interdisciplinary approach,goal-framing theory,paradox,future of business administration |
| JEL: | D23 D52 M10 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:mlucee:202211&r= |
| By: | Yuval Salant; Jorg L. Spenkuch |
| Abstract: | We develop a model of satisficing with evaluation errors that incorporates complexity at the level of individual alternatives. We test the model predictions in a novel data set with information on hundreds of millions of chess moves by experienced players. Consistent with the theory, complex optimal moves are chosen less frequently than simpler ones. Choice frequencies of suboptimal moves follow the opposite pattern. The former finding distinguishes satisficing from a large class of maximization-based models. We further document that skill and time moderate the adverse effect of complexity, and that they complement each other in doing so. Finally, we provide evidence that suboptimal behavior also hinges on the composition of the choice set but not its size. Our findings help to shed some of the first light on the importance of complexity outside of the laboratory. |
| JEL: | D00 D01 D03 D9 D90 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30002&r= |
| By: | Inderst, Roman; Obradovits, Martin |
| Abstract: | Manufacturers frequently resist heavy discounting of their products by retailers, especially when they are used as so-called loss leaders. Since low prices should increase demand and manufacturers could simply refuse to fund deep price promotions, such resistance is puzzling at first sight. We explain this phenomenon in a model in which price promotions cause shoppers to potentially reassess the relative importance of quality and price, as they evaluate these attributes relative to a market-wide reference point. With deep discounting, quality can become relatively less important, eroding brand value and the bargaining position of brand manufacturers. This reduces their profits and potentially even leads to a delisting of their products. Linking price promotions to increased one-stop shopping and more intense retail competition, our theory also contributes to the explanation of the rise of store brands. |
| Keywords: | loss leading,relative thinking,reference-depending preferences,product positioning,vertical differentiation,price competition,price promotion |
| JEL: | D11 D22 D43 L11 L15 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:253667&r= |
| By: | Franz Dietrich (Centre d'Economie de la Sorbonne, Paris School of Economics) |
| Abstract: | This essay discusses the difficulty to reconcile two paradigms about beliefs: the binary or categorical paradigm of yes/no beliefs and the probabilistic paradigm of degrees of belief. The possibility for someone to hold beliefs of both types simultaneously is challenged by the lottery paradox, and more recently by a general impossibility theorem. The nature, relevance, and implications of the tension are explained and assessed. A more technical elaboration can be found in Dietrich and List (2018, 2021)s |
| Keywords: | logic vs. rational choice theory; yes/no belief vs. subjective probabilities; lottery paradox; general impossibility theorem |
| JEL: | D80 D83 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:21032r&r= |
| By: | Benjamin Prissé (LoyolaBehLab, Universidad Loyola Andalucía); Diego Jorrat (LoyolaBehLab, Universidad Loyola Andalucía) |
| Abstract: | We ran an experiment to study whether lack of control, meaning not controlling the experimental environment, has an effect on experimental results. Subjects were recruited following standard procedures and randomly assigned to complete the experiment online or in the laboratory. The experimental design is otherwise identical between conditions. Results suggest that there are no differences between conditions, except for a larger percentage of online subjects donating nothing in the Dictator Game. |
| Keywords: | Time Preferences, CTB, Experiments. |
| JEL: | C91 C93 D15 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:137&r= |
| By: | Charles Shaw; Silvio Vanadia |
| Abstract: | How should we think of the preferences of citizens? Whereas self-optimal policy is relatively straightforward to produce, socially optimal policy often requires a more detailed examination. In this paper, we identify an issue that has received far too little attention in welfarist modelling of public policy, which we name the "hidden assumptions" problem. Hidden assumptions can be deceptive because they are not expressed explicitly and the social planner (e.g. a policy maker, a regulator, a legislator) may not give them the critical attention they need. We argue that ethical expertise has a direct role to play in public discourse because it is hard to adopt a position on major issues like public health policy or healthcare prioritisation without making contentious assumptions about population ethics. We then postulate that ethicists are best situated to critically evaluate these hidden assumptions, and can therefore play a vital role in public policy debates. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.01957&r= |