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on Utility Models and Prospect Theory |
| By: | Tadashi SEKIGUCHI; Katsutoshi WAKAI |
| Abstract: | Game theory proves the existence of a stronger punishment than the Nash reversion in the repeated games. Recent empirical ndings in Oligopoly, how- ever, suggest the implementation of the Nash reversion. In a standard repeated game setting, we propose a potential answer for this empirical puzzle by using a re ned version of the discounted utility that exhibits gain/loss asymmetry, where players discount gains more than losses. Our main result is as follows: among gain/loss robust subgame perfect equilibria, the Nash reversion o¤ers the strongest punishment. The robustness is based on the assumption that players are unsure about their own level of gain/loss asymmetry and choose only the strategies that are subgame perfect for any level of gain/loss asymmetry they can perceive as possible. |
| Keywords: | Gain/loss asymmetry, optimal penal code, repeated game, re-cursive utility, utility smoothing |
| JEL: | C73 D20 D90 L13 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:kue:epaper:e-24-009 |
| By: | Michael Cuna; Lenka Fiala; Min Sok Lee; John List; Sutanuka Roy |
| Abstract: | This study examines how mothers' risk and ambiguity preferences affect early childhood investments and outcomes by assessing over 6, 000 mothers in Rajasthan, India. Results show that more risk and ambiguity averse mothers make greater investments in their children's nutrition between ages 0-6. These investments correlate with superior cognitive and non-cognitive skills in children, even after controlling for socioeconomic factors. Notably, higher maternal risk and ambiguity aversion can mitigate negative impacts of socioeconomic disadvantages (maternal illiteracy, belonging to historically discriminated groups, limited media access) on all measures of early-life skills, highlighting the importance of understanding preferences in addressing inequities. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:feb:artefa:00810 |
| By: | Santiago Burone;; Lukas Leitner; |
| Abstract: | Willingness to pay (WTP) has become an important tool in economic analysis, despite the difficulty to obtain reliable estimates. This paper investigates the occurrence of starting point bias when eliciting WTP for health, a domain where this phenomenon has received limited attention, and illustrates its effect on equivalent consumption, a preference-based well-being measure. In an online experiment, three experimental groups responded to two dichotomous choice questions, with varying initial bids. The treatment groups then provided exact estimates for their WTP in an open-ended question. We find strong evidence for the existence of the bias using both non-parametric and parametric tests, and estimate a sizeable overall effect. Different parametric specifications yield point estimates between 29 and 43 percent for the first bid, whereas the effect of the second bid, which we estimate using an instrumental variable approach, is not statistically different from zero. We propose two ex post approaches to address this effect when using WTP data for interpersonal well-being comparisons. Although the percentage of rankings reversals is relatively small across all feasible comparisons, it becomes notable when examining comparisons for individuals within the same consumption deciles. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:hdl:wpaper:2501 |