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on Utility Models and Prospect Theory |
| By: | Carmelo Rodríguez-Ã lvarez (Instituto Complutense de Análisis Económico (ICAE), Universidad Complutense de Madrid (Spain).) |
| Abstract: | We examine social choice correspondences (SCCs) -mappings from preference profiles to sets of alternatives- that satisfy strategy-proofness and unanimity when individuals are endowed with single-peaked preferences over alternatives, preferences over sets are consistent with Expected Utility Theory, uniform prior probabilities, and Bayesian Updating. Leveraging the relation between SCCs and probabilistic decision schemes -mappings from preference profiles to lotteries over alternatives- we extend the results by Ingalagavi and Sadhukhan (2023, Journal of Mathematical Economics 109, 102912). In one-dimensional spaces of alternatives, only the union of two single-valued strategy-proof SCCs satisfy strategy-proofness and unanimity. In multi-dimensional convex spaces of alternatives, only unions of up to two dictatorships satisfy both properties. |
| Keywords: | Strategy-Proofness; Single-Peaked Preferences; Social Choice Correspondences. |
| JEL: | C71 C78 D71 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ucm:doicae:2402 |
| By: | Monica Billio (Ca’ Foscari University of Venice); Massimo Guidolin (Bocconi University, GREEN; Baffi-CAREFIN Centre); Francesco Rocciolo (Nazarbayev University, Graduate School of Business) |
| Abstract: | We propose a theory of responsible investing under conditions of ambiguity induced by climate uncertainty in which a representative agent is ambiguity averse. This new theory delivers three novel insights. First, in our setting, the climate-related ambiguity perceived for asset returns is a strictly decreasing function of the environmental sustainability of the firm issuing the security. Second, we show the conditions under which ambiguity aversion endogenously lead to the expression of preferences that make an agent environmentally motivated. In particular, we show that in an economy with climate change uncertainty, environmentally motivated agents allocate their wealth according to a three-dimensional, mean-variance-ambiguity efficient frontier as well as to their attitudes towards risk and ambiguity, exactly as an ambiguity averse decision-maker would do. Third, we prove that the agents rationally select "green" portfolios in order to reduce their exposure towards ambiguity and maximize their ambiguity-adjusted Sharpe ratio. Our theoretical predictions are consistent with the empirical literature on the realized rewards-to-risks trade-off of responsible investing. |
| Keywords: | Ambiguity, Uncertainty, Asset Pricing, Portfolio Choice, Climate Uncertainty, Environmental Awareness, ESG, Sustainable Investing |
| JEL: | D81 G11 G12 Q50 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ven:wpaper:2024:15 |
| By: | Ikuto AIBA; Atsushi TADOKORO |
| Abstract: | We provide more generalized properties of gains from trade and trade liberalization in monopolistic competition models featuring firm heterogeneity characterized as Paretodistributed productivity and variable markups associated with pro-competitive effects. For a large class of utility functions thatwe consider, firmheterogeneity alters the nature of markup distortion that should be addressed by the pro-competitive effects. Our finding implies that the pro-competitive effects of trade are not effective in correcting such markup distortion unique to heterogeneous firm frameworks. As a result, gains from trade in our framework are characterized as consumption variety expansion and selection effects without efficiency gains. We provide rich insights into the varying impacts of trade and trade liberalization across countries with differences in factors such as market size, technology, and geography. |
| Keywords: | Monopolistic competition, Firm heterogeneity, Efficiency, Pro-competitive effect, Gains from trade comparative analysis (fsQCA) |
| JEL: | D43 D61 F12 L13 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:kue:epaper:e-24-007 |
| By: | Jonathan Chapman; Erik Snowberg; Stephanie W. Wang; Colin Camerer |
| Abstract: | We introduce DOSE—Dynamically Optimized Sequential Experimentation—to elicit preference parameters. DOSE starts with a model of preferences and a prior over the parameters of that model, then dynamically chooses a customized question sequence for each participant according to an experimenter-selected information criterion. After each question, the prior is updated, and the posterior is used to select the next, informationally-optimal, question. Simulations show that DOSE produces parameter estimates that are approximately twice as accurate as those from established elicitation methods. DOSE estimates of individual-level risk and time preferences are also more accurate, more stable over time, and faster to administer in a large representative, incentivized survey of the U.S. population (N = 2, 000). By reducing measurement error, DOSE identifies a stronger relationship between risk aversion and cognitive ability than other elicitation techniques. DOSE thus provides a flexible procedure that facilitates the collection of incentivized preference measures in the field. |
| JEL: | C81 C9 D03 D81 D9 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33013 |
| By: | Anna Carroll; Dennis Guignet; O. Ashton Morgan |
| Abstract: | : Many universities strive to increase enrollment but this can put a strain on local housing markets, for both students and local residents. This study implements a stated preference discrete choice experiment to investigate how students trade off different housing features in the face of increasing rent due to higher demand, and ultimately estimates the resulting welfare effects on students. Random utility models are estimated, and suggest that when faced with increasing rent, most students prefer to move to cheaper housing that is farther away from campus, while some will decide to leave the university altogether. Results indicate, for example, that rent increases of $100 per month will lead to a 7.8 percentage point increase in students who move to an apartment that is farther from campus, and result in a 0.6-1.3 percentage point increase in students who would leave the university. By shedding light on the housing decisions of students, this study helps inform local governments and university officials trying to establish affordable housing options and sustainable student population growth. Key Words: : discrete choice experiment, housing choice, student housing, student welfare |
| JEL: | O18 R21 R31 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:apl:wpaper:24-21 |
| By: | Enriqueta Aragonès |
| Abstract: | This paper analyzes the demand based causes of gender discrimination in the labor market and it aims to explain the currently existing gender gaps in terms of labor market participation and lab or income. I propose a formal model to analyze the gender discrimination that individuals face at work due to statistical discrimination and taste-based discrimination. I study the effects of discrimination on the lab or market participation, income, and utility distributions and compare these effects between the female and male sectors of the society. I show that the conditions that dissipate the gender gaps are also good to improve efficiency. However, in order to reach a first best it is necessary to eliminate all kinds of gender related idiosyncratic preferences that are based on stereotypes and conscious and unconscious biases. |
| Keywords: | statistical discrimination, taste-based discrimination, active labor market policies |
| JEL: | J7 J31 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1460 |
| By: | Dorian Jullien (Université Paris 1 Panthéon-Sorbonne, CNRS, Centre d'Economie de la Sorbonne, Paris, France); Alexandre Truc (Université Côte d'Azur, CNRS, GREDEG, France) |
| Abstract: | Existing histories of behavioral and experimental economics (BE-XP) are mostly focused on the intellectual and institutional developments of these approaches in the United States of America - and to a lesser extent in Germany. While a seminal contribution to these approaches was produced in the early 1950s in France by Maurice Allais, the literature is rather silent on how BE-XP developed subsequently in France. We propose to fill this gap by comparing the history of BE-XP in France to international trends previously identified in the literature. We show that after an ambivalent influence of the work of Allais (1953) on BE-XP in France during the 1980s, that influence rapidly faded. BE-XP in France then largely follows international trends. We nevertheless identify some heterogeneity across the French territory and the development of at least two national specificities on the measurement of utility and the modeling of social preferences. |
| Keywords: | Behavioral economics, Experimental economics, History of economics |
| JEL: | B21 B40 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2024-23 |
| By: | Muhammed Bolomope; Abdul-Rasheed Amidu; Olga Filippova; Deborah Levy |
| Abstract: | High-magnitude earthquakes are major disruptors that significantly influence property investment preference in seismic regions. Whereas rational regulatory policies are consistently proposed to enhance investors' adaptation to seismic hazards, scholars have noted that the adaptive response of property investors often deviates from the rational expectations of policymakers. Therefore, by leveraging the behavioural perspective on investment decision-making, this study explores the adaptive strategies of New Zealand Real Estate Investment Trusts (NZ REITs) to seismic disruptions. The study is based on the documentary analysis of the annual reports of NZ REITs, with forty-eight annual reports analysed for content that described how the REITs responded to high-magnitude seismic events that threatened their well-established business operation models over an extended period (from 2009 to 2019). The study findings indicate that notwithstanding the provisions of rational, seismic-related regulations, the adaptive response of NZ REITs to seismic disruption is driven by asset demand and influenced by behavioural factors such as loss aversion location bias, herding and anchoring. By highlighting the complementary significance of rational and intuitive considerations, the findings from this study suggest that NZ REITs are not only compliant but dynamic in their response to seismic disruptions. The research findings could enhance policy formulation and implementation towards ensuring a holistic response to seismic disruptions. |
| Keywords: | Adaptation; New Zealand; Real Estate Investment; Seismic Disruption |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2024-067 |