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on Utility Models and Prospect Theory |
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Issue of 2024‒02‒05
seven papers chosen by |
| By: | Valenzuela-Stookey, Quitzé |
| Keywords: | Economics, Applied Economics, Economic Theory, Drug Abuse (NIDA only), Substance Misuse, Complexity, Uncertainty, Bounded rationality, Ambiguity, Mathematical Sciences, Studies in Human Society, Human society, Mathematical sciences |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:econwp:qt4mz932j6&r=upt |
| By: | Ahmed Mohammed, Abdullahi |
| Abstract: | ABSTRACT The paper explores the principle that in Islamic perspective ethics dominates economics, which unambiguously portray the essential attribute of Islamic economics system. Similarly, Islamic economics repudiates the ground that economics is independent of ethics and the idea of value free economics propagated by Robbins and the neo-classical notion of Homo-economicus (economic man) who only considers his utility function of his selfish interest. But in replacement and discarding economic from ethical economic behavior Anas Zarqa substituted homo economics (economic man) for Homo-Islamicus (economic man with Islamic ethics). The fundamental difference between the two prototypes to Zarqa, is that the consumption behavior of Homo-Islamicus is deeply influenced by a consideration of the penalty or reward in the life after death and he embraced the Islamic ethics in regulating his economic choices and behavior. Similarly, we explore that Islamic economics is closely related Islamic jurisprudence that deals with business laws, providing general framework and premise for economic dealings and its operation in an Islamic society (fiqh mu’amalat). It draws conditions and criterion governing economic and financial relationships in an Islamic economy. We argued that economics also as normative discourse involving ethical consideration and evaluation of human behavior. Hence Economist are in the position to advocate, Condemn, and proper solution to problems within the context of social scenario and ethical point of view. Economist are called upon to prescribe solution to some of the old age economic problem of mankind like poverty, income inequality, and problem unemployment e.tc. This prescription will be uttered based on the people’s social reality, and that indicates value judgment which is normative. |
| Keywords: | Epistemology, Islamic Economics, Homo-Economicus, Homo-Islamicus, Ethics, Normative Economics |
| JEL: | A1 I3 P51 Z12 Z13 |
| Date: | 2023–08–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119630&r=upt |
| By: | Matthew Ashenfarb; Matthew Kotchen |
| Abstract: | This paper provides stated preference (SP) estimates of the average social cost of carbon (ASCC) for use in evaluation of the benefits and costs of climate policy. Based on a U.S. nationally representative survey, we find an average individual willingness-to-pay (WTP) of $1, 116 per year to keep global warming less than 2°C by 2100 compared to a business-as-usual temperature change. Combining the WTP estimate with population projections and assessments of the required emission reductions, we find a domestic ASCC of $8 per tonne of carbon dioxide (CO2). Applying a benefits transfer approach to infer WTP in other countries, we obtain an estimate of the global ASCC of $39 per tonne, with a 95-percent confidence interval of $32-$48. The estimate is insensitive to the discount rate, but it does vary with assumptions about the income elasticity of WTP and the rate of change in marginal abatement costs. Reasonable scenarios create a range of estimates between $12-$118 per tonne. We also examine the impact of distributional weighting based on the elasticity of the marginal utility of income, providing distributionally-weighted estimates of the global ASCC for use in all countries. We argue that a SP estimate of the ASCC is an useful complement to existing estimates of the marginal social cost of carbon (SCC) based on different valuation approaches. |
| JEL: | H4 Q51 Q54 Q58 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32043&r=upt |
| By: | Roland Bénabou (Princeton University, NBER, CEPR, IZA, BREAD, and briq); Armin Falk (University of Bonn); Luca Henkel (University of Chicago and University of CEMA, CESifo, JILAEE) |
| Abstract: | Choosing what is morally right can be based on the consequences (ends) resulting from the decision – the Consequentialist view – or on the conformity of the means involved with some overarching notion of duty – the Deontological view. Using a series of experiments, we investigate the overall prevalence and the consistency of consequentialist and deontological decision-making, when these two moral principles come into conflict. Our design includes a real-stakes version of the classical trolley dilemma, four novel games that induce ends-versus-means tradeoffs, and a rule-following task. These six main games are supplemented with six classical self-versus-other choice tasks, allowing us to relate consequential/deontological behavior to standard measures of prosociality. Across the six main games, we find a sizeable prevalence (20 to 44%) of non-consequentialist choices by subjects, but no evidence of stable individual preference types across situations. In particular, trolley behavior predicts no other ends-versus-means choices. Instead, which moral principle prevails appears to be context-dependent. In contrast, we find a substantial level of consistency across self-versus-other decisions, but individuals’ degree of prosociality is unrelated to how they choose in ends-versus-means tradeoffs. |
| Keywords: | morality, deontological, consequentialist, Kantian, ends-versus-means, trolley dilemma, prosocial, altruism, social preferences |
| JEL: | C91 D01 D64 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:275&r=upt |
| By: | Zhukovskaya, Lidia; Zhukovskiy, Vladislav; Mukhina, Julia |
| Abstract: | This article considers three new approaches to important problems of mathematical game theory and multicriteria choice.The first approach ensures payoff increase with simultaneous risk reduction in the Savage–Niehans sense in multicriteria choice problem and noncooperative games. The second approach allow us to stabilize coalitional structures in cooperative games without side payments under uncertainty. The third approach serves to integrate the selfish Nash equilibrium with the altruistic Berge equilibrium. Note that the investigations involve a special Germeier convolution of criteria and calculation of its saddle point in mixed strategies. |
| Keywords: | Savage–Niehans risk, minimax regret, uncertainties, multicriteria choice, Pareto consideration |
| JEL: | C00 |
| Date: | 2023–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119394&r=upt |
| By: | Ravi Kanbur (Cornell University); Matti Tuomala (Tampere University and Finnish Centre of Excellence in Tax Systems Research (FIT)) |
| Abstract: | This paper presents an analysis of the consequences for redistribution policies of achieving a more equal predistribution, that is, a more equal distribution of the predetermined income earning capabilities that individuals bring to the market. We show that optimal fiscal policies are less redistributive when the predistribution is more equal. We then quantify the value of a more equal predistribution. We show that total consumption is higher with a more equal predistribution. We also develop a money metric measure of social welfare and show that a more equal predistribution increases this measure for a Utilitarian and Prioritarian Social Welfare Function but may decrease it for the Maximin. |
| Keywords: | Predistribution, Redistribution, Optimal Non-linear Taxation, Marginal Tax Rates, Social Welfare Function |
| JEL: | D31 H21 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:fit:wpaper:19&r=upt |
| By: | Groh, Carl-Christian; Reuter, Marco |
| Abstract: | We study optimal mechanisms for a utilitarian designer who seeks to assign a finite number of goods to a group of ex ante heterogeneous agents with unit demand. The agents have heterogeneous marginal utilities of money, which may naturally arise in environments where agents have different wealth levels or financing conditions. We show that the utilitarian optimal allocation rule deviates from the ex post efficient allocation rule in two ways, namely by (1) allocating the good to agents with lower willingnesses to pay in certain situations and (2) by potentially keeping some units of the good unallocated. We also highlight how our mechanism can be implemented as an auction with minimum bids and bidding subsidies. |
| Keywords: | optimal mechanism design, redistribution, inequality, auctions |
| JEL: | D44 D47 D61 D63 D82 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:280984&r=upt |