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on Utility Models and Prospect Theory |
| By: | Wahid Faidi |
| Abstract: | This article studies the problem of utility maximization in an incomplete market under a class of nonlinear expectations and general constraints on trading strategies. Using a $g$-martingale method, we provide an explicit solution to our optimization problem for different utility functions and characterize an optimal investment-consumption strategy through the solutions to quadratic BSDEs. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2501.17193 |
| By: | Chen Ziyi; Gu Jia-wen |
| Abstract: | We study expected utility maximization problem with constant relative risk aversion utility function in a complete market under the reinforcement learning framework. To induce exploration, we introduce the Tsallis entropy regularizer, which generalizes the commonly used Shannon entropy. Unlike the classical Merton's problem, which is always well-posed and admits closed-form solutions, we find that the utility maximization exploratory problem is ill-posed in certain cases, due to over-exploration. With a carefully selected primary temperature function, we investigate two specific examples, for which we fully characterize their well-posedness and provide semi-closed-form solutions. It is interesting to find that one example has the well-known Gaussian distribution as the optimal strategy, while the other features the rare Wigner semicircle distribution, which is equivalent to a scaled Beta distribution. The means of the two optimal exploratory policies coincide with that of the classical counterpart. In addition, we examine the convergence of the value function and optimal exploratory strategy as the exploration vanishes. Finally, we design a reinforcement learning algorithm and conduct numerical experiments to demonstrate the advantages of reinforcement learning. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.01269 |
| By: | Reda Chhaibi; Ibrahim Ekren; Eunjung Noh |
| Abstract: | We investigate a Kyle model under Gaussian assumptions where a risk-averse informed trader has imperfect information on the fundamental price of an asset. We show that an equilibrium can be constructed by considering an optimal transport problem that is solved under a measure that renders the utility of the informed trader martingale and a filtering problem under the historical measure. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2501.16488 |
| By: | Jean-Bernard Chatelain (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Kirsten Ralf (ESCE, International Business School - ESCE) |
| Abstract: | Using the second order Taylor expansion of the Lagrangian of the Ramsey model of optimal savings, wealth is included in the quadratic loss function, and not only consumption. Its weight is given by the degree of concavity of the decreasing returns to scale production function times the marginal utility of consumption. The weight of consumption is given by the degree of concavity of the utility function. This quadratic loss function implies that the speed of convergence is explicitly driven by the trade-off between wealth smoothing (fostering convergence, related to technology) versus consumption smoothing (delaying convergence, related to preferences). By contrast, the second order Taylor expansion of the utility instead of the Lagrangian leads to a quadratic loss function with a weight of wealth equal to zero, which is false for a decreasing returns to scale production function. |
| Abstract: | En utilisant le développement limité de Taylor à l'ordre deux du Lagrangien du modèle d'épargne optimale de Ramsey, la richesse est prise en compte dans la fonction de perte quadratique et pas seulement la consommation. La pondération de la richesse est donnée par le degré de concavité de la fonction de production à rendements décroissants multiplié par l'utilité marginale de la consommation. La pondération de la consommation est donnée par le degré de concavité de la fonction d'utilité. Cette fonction de perte quadratique implique que la vitesse de convergence vers l'équilibre dépend de l'arbitrage entre le lissage de la richesse (qui accélère la convergence) et le lissage de la consommation (qui retarde la convergence). En revanche, le développement limité de Taylor à l'ordre deux de l'utilité (au lieu du Lagrangien) met un poids de la richesse égal à zéro dans la fonction de perte quadratique, ce qui est faux si la fonction de production est à rendements strictement décroissants. |
| Keywords: | Linear quadratic approximation, Wealth, Consumption, Savings, Negative feedback, Speed of convergence, Richesse, Consommation, Epargne, Rétroaction négative, Vitesse de convergence, Approximation linéaire quadratique |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:halshs-04612845 |
| By: | Chiaki Hara (Kyoto University); Sujoy Mukerji (QMUL - Queen Mary University of London); Frank Riedel (Universität Bielefeld = Bielefeld University, UJ - University of Johannesburg [South Africa]); Jean-Marc Tallon (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We study efficient allocations when consumers have heterogeneous smooth ambiguity preferences, face model uncertainty, and consider a common set of identifiable models. Aggregate endowment is ambigu- ous. We characterize economies where the representative consumer is of the smooth ambiguity type and find efficient sharing rules. With heterogeneous ambiguity aversion, sharing rules exhibit systematic de- partures from those in vNM-economies and the representative consumer's nature departs from the typical single-consumer assumption, making for more compelling asset-pricing predictions. We focus on the case where models are point-identified but show that the insights extend when models are only partially-identified. |
| Keywords: | Ambiguity sharing, Model uncertainty, Ambiguity aversion, Identifiability, Linear risk tolerance, Pricing kernel |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:hal:psewpa:halshs-04598577 |
| By: | Stefano Clò; Gianluca Iannucci; Alessandro Tampieri |
| Abstract: | This paper compares two forms of Renewable Energy Communities by assessing their impact on long-run social welfare from the perspective of a local public administration. By maximising the intertemporal utility of a representative prosumer, we assess how different REC organisations affect utility under different energy market, incentive and technology conditions. The results show that while consumption and pollution levels remain constant across REC types, differences in prosumers’ utility arise due to different financial costs and benefits. In particular, high energy market prices, higher incentive levels and increased energy capacity favour bottom-up RECs, while higher coordination costs and higher prosumer incentive weights favour top-down RECs. Our findings highlight the economic trade-offs that influence REC adoption decisions. |
| Keywords: | Energy community, Mean-variance expected utility, Optimal choice. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:frz:wpaper:wp2024_29.rdf |
| By: | Alain Chateauneuf (UP1 - Université Paris 1 Panthéon-Sorbonne); José Heleno Faro (Instituto de Ensino e Pesquisa (Brazil) - Insper Institute of Education and Research); Jean-Marc Tallon (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Vassili Vergopoulos (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - Université Paris-Panthéon-Assas) |
| Abstract: | This paper offers a novel perspective on the α-maxmin model, taking its components as originating from distinct selves within the decision maker. Drawing from the notion of multiple selves prevalent in inter-temporal decision-making contexts, we present an aggregation approach where each self possesses its own preference relation. Contrary to existing interpretations, these selves are not merely a means to interpret the decision maker's overall utility function but are considered as primitives. Through consistency requirements, we derive an α-maxmin representation as an outcome of a convex combination of the preferences of two distinct selves. We first explore a setting involving objective information and then move on to a fully subjective derivation. |
| Keywords: | Maxmin, Dual self, Aggregation |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:hal:psewpa:halshs-04589094 |
| By: | Dorian Jullien (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Alexandre Truc (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur) |
| 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: | Scientometrics, Behavioral economics, Experimental economics, History of economics |
| Date: | 2024–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:halshs-04810987 |
| By: | Jean-Marc Bonnisseau (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, UP1 - Université Paris 1 Panthéon-Sorbonne); Alain Chateauneuf (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Paris 1 Panthéon-Sorbonne); Jean-Pierre Drugeon (CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | This article is interested in future allocations of scarce resources in an environment where upper bounds and lower bounds are fixed on the stream of consumptions or extractions of the scarce resource. It is shown that we can compute the optimal planning of consumptions independently from an explicit sequence of discounting factors as soon as they are decreasing at a rate smaller than a bound linked to the concavity of the utility function and the choice of the sequences of lower and upper bounds. The optimal solution is unique and exhibits two regimes with a pivotal period in the middle. Therefore, one gets plans satisfying some kind of intergenerational fairness: while the highest e ort is supported by the first generations, it then decreases for the remaining ones. The argument is then extended to partially renewable resources. Finally, we consider the role of the horizon and of a potential regret after a revision for the bounds. |
| Keywords: | intertemporal allocation, scarce or renewable resources, multiple regimes, discount rates, fairness |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:cesptp:halshs-04916616 |
| By: | Marc Fleurbaey (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Stéphane Zuber (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Suppose that, for whatever reason, it is decided that inequalities within countries are more offensive than inequalities between countries, and that inequalities between populations living together are more offensive than inequalities between generations living in different times. Can a social welfare function express that preference? We show that it is actually difficult to incorporate such a localist preference into a social welfare function, except in a limited way (i.e., from a situation of specific similarity between countries). We also show that in order to obtain such preferences, the relative size of inequality aversion within and between countries may be counter-intuitive in some relevant cases, in the sense that a greater inequality aversion may happen to be required across countries than within countries. This research highlights new social welfare functions that aggregate the outcomes of evaluations over pairs of agents. |
| Keywords: | Inequality aversion, Transfer principle, Within-country preference |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:halshs-04828805 |
| By: | Geir B Asheim (Department of Economics [Oslo] - Faculty of Social Sciences [Oslo] - UiO - University of Oslo); Kohei Kamaga (Sophia University [Tokyo]); Stéphane Zuber (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We examine utilitarian criteria for evaluating profiles of well-being among infinitely many individuals. Motivated by the non-existence of a natural 1-to-1 correspondence between people when alternatives have different population structures, with a different number of people in each generation, we impose equal treatment in the form of Strong Anonymity. We demonstrate how a novel criterion, Strongly Anonymous Utilitarianism, can be applied in the Ramsey model, leading to an efficient and sustainable stream. We show how the criterion is the result of combining Strong Anonymity with other regularity axioms (Monotonicity, Finite Completeness, and continuity axioms) as well as axioms of equity, population ethics, sensitivity, and separability. We relate it to other strongly anonymous utilitarian criteria. |
| Keywords: | Utilitarianism, Intergenerational equity, Population ethics |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:halshs-04828788 |
| By: | Masaaki Fukasawa; Basile Maire; Marcus Wunsch |
| Abstract: | We present a mathematical formulation of liquidity provision in decentralized exchanges. We focus on constant function market makers of utility indifference type, which include constant product market makers with concentrated liquidity as a special case. First, we examine no-arbitrage conditions for a liquidity pool and compute an optimal arbitrage strategy when there is an external liquid market. Second, we show that liquidity provision suffers from impermanent loss unless a transaction fee is levied under the general framework with concentrated liquidity. Third, we establish the well-definedness of arbitrage-free reserve processes of a liquidity pool in continuous-time and show that there is no loss-versus-rebalancing under a nonzero fee if the external market price is continuous. We then argue that liquidity provision by multiple liquidity providers can be understood as liquidity provision by a representative liquidity provider, meaning that the analysis boils down to that for a single liquidity provider. Last, but not least, we give an answer to the fundamental question in which sense the very construction of constant function market makers with concentrated liquidity in the popular platform Uniswap v3 is optimal. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.01931 |
| By: | Bardier, Pierre (Center for Mathematical Economics, Bielefeld University); Dong, Xuan Bach (Center for Mathematical Economics, Bielefeld University); Nguyen, Van-Quy (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | We propose and axiomatize a new model of incomplete preferences under uncertainty, which we call *hope-and-prepare preferences*. An act is considered more desirable than another when, and only when, both an optimistic evaluation, computed as the welfare level attained in a best-case scenario, and a pessimistic one, computed as the welfare level attained in a worst-case scenario, rank the former above the latter. Our comparison criterion involves multiple priors, as best and worst cases are determined among sets of probability distributions. We make the case that, compared to existing incomplete criteria under ambiguity, hope-and-prepare preferences address the trade-off between conviction and decisiveness in a new way, which is more favorable to decisiveness. |
| Keywords: | Decision theory, Incomplete preference, Multiple-selves, Non-obvious manipulability |
| Date: | 2025–02–18 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:701 |
| By: | Erica Ordali; Chiara Rapallini |
| Abstract: | Decades of research have assumed the stability of risk preferences across domains and ages. However, recent evidence has shown that it might not be the case since variations in the level of risks taken are, in fact, observable. Economics and Psychology literature investigated such issues, providing mixed evidence regarding age changes. This paper provides the first exhaustive meta-analytical review of the economic and psychology literature results regarding the association between aging and financial risk attitudes. We find differences in the effect mainly due to the methods used for measuring risk preferences. In particular, we find that the positive association between risk aversion and age is verified for survey data and lotteries, while psychological tasks underline the role played by the learning process and, ultimately, that cognitive abilities and health status may affect preferences. The meta-regression on effect sizes derived from studies based on surveys shows that cognitive abilities and healthstatus explain a significant part of the heterogeneity of this sample of studies. |
| Keywords: | Ageing, financial risk-taking, meta-analysis, survey data, lottery, task |
| JEL: | J1 D91 D81 D01 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:frz:wpaper:wp2024_27.rdf |
| By: | Yukun Cheng; Xiaotie Deng; Yunxuan Ma |
| Abstract: | In the digital age, resources such as open-source software and publicly accessible databases form a crucial category of digital public goods, providing extensive benefits for Internet. This paper investigates networked public goods games involving heterogeneous players and convex costs, focusing on the characterization of Nash Equilibrium (NE). In these games, each player can choose her effort level, representing her contributions to public goods. Network structures are employed to model the interactions among participants. Each player's utility consists of a concave value component, influenced by the collective efforts of all players, and a convex cost component, determined solely by the individual's own effort. To the best of our knowledge, this study is the first to explore the networked public goods game with convex costs. Our research begins by examining welfare solutions aimed at maximizing social welfare and ensuring the convergence of pseudo-gradient ascent dynamics. We establish the presence of NE in this model and provide an in-depth analysis of the conditions under which NE is unique. We also delve into comparative statics, an essential tool in economics, to evaluate how slight modifications in the model--interpreted as monetary redistribution--affect player utilities. In addition, we analyze a particular scenario with a predefined game structure, illustrating the practical relevance of our theoretical insights. Overall, our research enhances the broader understanding of strategic interactions and structural dynamics in networked public goods games, with significant implications for policy design in internet economic and social networks. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.01001 |
| By: | Michel Grabisch (Centre d'Economie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne, Paris School of Economics); Antoine Mandel (Centre d'Economie de la Sorbonne, Université Paris 1 Panthéo-Sorbonne, Paris School of Economics, Climate Finance Alpha); Agnieszka Rusinowska (CNRS, Centre d'Economie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne, Paris School of Economics) |
| Abstract: | We investigate algorithmic fairness in a model of network formation governed by recommendation algorithms. The model defines a Markov chain over network configurations, which converges towards a class of efficient networks where each agent maximizes its utility. In this setting, we measure the efficiency of a recommendation algorithm via the speed at which it reaches the recurrent class of efficient networks. We propose a micro-founded measure of fairness that coincides with the entropy of the invariant distribution associated to this Markov chain. We develop analytical and numerical methods for the computation of efficiency and fairness. We find a strong relationship between the structure of users' preferences and the properties of recommendation algorithms. In particular, we show that there is a trade-off between efficiency and fairness as the hierarchical recommendation algorithms that ensure fast convergence to efficient networks are also those that lead to high level of unfairness. We put forward a simple solution to this trade-off where the designer adapts the recommendation algorithm to the different phases of the network formation process |
| Keywords: | network formation; platform; link recommendation; algorithm; markov chain; efficiency; fairness |
| JEL: | D85 C65 D83 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:mse:cesdoc:25001 |
| By: | Polina Borisova (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Nikhil Vellodi (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | A present-biased decision maker (DM) faces a two-armed bandit problem whose risky arm generates random payoffs at exponentially distributed times. The DM learns about payoff arrivals through informative feedback. At the unique stationary Markov perfect equilibrium of the multi-self game, positive feedback supports greater equilibrium welfare than both negative and transparent feedback. Regardless of the form of feedback, the DM's behavior exhibits indecision, deriving from their desire to procrastinate. We relate our findings to the theory of self-prospection -the process of imagining future goals and outcomes when seeking motivation in the present. |
| Keywords: | Present-bias, Strategic experimentation, Motivational feedback, Self-confidence |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:hal:psewpa:halshs-04721098 |
| By: | Amory Yagar (Department of Economics, University of Arizona); Eduardo Zambrano (Department of Economics, Cal Poly University) |
| Abstract: | Tenure density (TD) denotes the ratio between tenure-track (TT) faculty and all faculty. We examine whether universities should equalize TD across units. We bring tools fromWelfare Economics into the analysis and consider utilitarian, egalitarian, and arbitrator universities. We show that utilitarians assign larger TD to larger units in terms of students, while the opposite is true for egalitarians and arbitrators. Faculty costs influence decisions for utilitarians and arbitrators but not egalitarians. None of these university objectives lead to the TDR. Only inequality-averse universities might apply TDR under specific conditions. The TDR therefore does not appear to be a universally optimal method for university resource allocation. |
| Keywords: | Economics of education, university administration, tenure density, resource allocation in university settings |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cpl:wpaper:2501 |