|
on Utility Models and Prospect Theory |
| By: | Wei Ma |
| Abstract: | This paper assumes each individual in society has a random discount factor and assesses an intertemporal project using rank-dependent expected utility theory. We consider both the ex ante and the ex post approaches. For the former, we show the social planner's discount factor is a convex combination of those of the individuals under the standard Pareto condition. For the latter, we propose a method for determining the social planner's discount factor distribution from the individuals' distributions, which are possibly heterogenous. We demonstrate that relative to expected utility, overweighing of small probabilities can substantially accelerate the decline of the social discount rate. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.17978 |
| By: | Elżbieta Babula (UG - University of Gdańsk); Juhyun Park (LaMME - Laboratoire de Mathématiques et Modélisation d'Evry - ENSIIE - Ecole Nationale Supérieure d'Informatique pour l'Industrie et l'Entreprise - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, ENSIIE - Ecole Nationale Supérieure d'Informatique pour l'Industrie et l'Entreprise) |
| Abstract: | Tversky and Kahneman's cumulative prospect theory assumes symmetric probability cumulation with regard to the reference point in decision weights. Theoretically, this model should be fixed despite a change in the direction of probability cumulation. We investigate this phenomenon by proposing an alternative model with one-direction probability cumulation. By doing so, we create a reference model that allows us to verify the parameter interactions in cumulative prospect theory specifications. We apply the simultaneous parametric fitting of utility and weighting functions using binary choice data from our own incentivized choice experiment (N = 70). We consider two parametric forms of probability weighting functions, namely, the one-parameter Tversky–Kahneman and two-parameter Prelec functions. We find that the Prelec function is sufficiently flexible to make these two models equivalent, thereby preserving the stability of the utility parameters. We also observe parameter interactions in the other specifications, especially with the Tversky–Kahneman weighting function. |
| Keywords: | parameter interactions, rank-dependent utility, decision weights, cumulative prospect theory |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05231129 |
| By: | Miller, Anne |
| Abstract: | This paper explores the labour supply and consumer demand equations derived from a utility function created by adding two S-shaped utilities. An S-shaped cardinal utility for a commodity represents the individual’s experience of fulfilment of a need – deprivation (increasing marginal utility (MU)), subsistence (a point of inflection), sufficiency (diminishing MU), and either satiation at finite consumption with the possibility of surfeit, or satiation at infinite consumption. The utilities of commodities fulfilling the same need are weakly separable (multiplicative) and those of two commodities fulfilling different needs are strongly separable (additive). Functional forms are derived from a utility function created by adding two normal distribution functions with satiation at infinity, the parameters of which have meaningful psychological interpretations. The indifference map, demand and Engels curve diagrams are explored. The main outcomes: • Concave- (dysfunctional poverty) and convex-to-the-origin indifference curves are separated by a straight-line indifference curve, (an absolute poverty line). • Budget movements on the indifference curve map reveal: corner solutions and disequilibrium associated with dysfunctional poverty; optimisation occurs elsewhere, even with deprivation in one or other need. • The derived functional forms are functions of only the real wage rate and endowments of unearned consumption. • The derived functional form diagrams display: involuntary unemployment, disjointed curves, sticky wages and prices, wage- and price-elasticity associated with deprivation in a need, inferior normal and inferior-Giffen responses, and envelope curves. • The slope of the straight-line indifference curve, (defined by the relative-intensities-of-need), and its intercept on the endowment axis, play significant and dramatic roles in both Engels diagrams. |
| Keywords: | S-shaped cardinal utility includes increasing marginal utility expressing deprivation; additive utilities represent separate needs; dysfunctional poverty causes involuntary unemployment and disequilibrium; absolute poverty line; sticky wages. |
| JEL: | D11 J22 |
| Date: | 2025–08–08 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125699 |
| By: | Charles Gauthier |
| Abstract: | This paper derives a novel representation of the exponential discounting model that allows one to assess departures from the model via a measure of efficiency. The approach uses a revealed preference methodology that does not make any parametric assumption on the utility function and allows for unrestricted heterogeneity. The method is illustrated using longitudinal data from checkout scanners and gives insights into sources of departure from exponential discounting. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.20249 |
| By: | Xiaoyu Cheng |
| Abstract: | Cheng (2025) establishes that in a persuasion game where both the sender and the receiver have Maxmin Expected Utility (MEU) preferences, the sender never strictly benefits from using ambiguous communication strategies over standard (non-ambiguous) ones. This note extends the analysis to environments with prior ambiguity, i.e., pre-existing ambiguity about the payoff-relevant state, and shows that, in the binary state and binary action case, the same no-gain result continues to hold. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.18603 |
| By: | Kensei Nakamura |
| Abstract: | When aggregating Subjective Expected Utility preferences, the Pareto principle leads to an impossibility result unless the individuals have a common belief. This paper examines the source of this impossibility in more detail by considering the aggregation of a general class of incomplete preferences that can represent gradual ambiguity perceptions. Our result shows that the planner cannot avoid ignoring some individuals unless there is a probability distribution that all individuals agree is most plausible. This means that even if individuals have similar ambiguity perceptions, the impossibility persists as long as some individual's most plausible belief differs even slightly from those of others. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.12542 |
| By: | Jingyuan Li; Zhou Lin |
| Abstract: | This paper introduces Flexible First-Order Stochastic Dominance (FFSD), a mathematically rigorous framework that formalizes Herbert Simon's concept of bounded rationality using the Lean 4 theorem prover. We develop machine-verified proofs demonstrating that FFSD bridges classical expected utility theory with Simon's satisficing behavior through parameterized tolerance thresholds. Our approach yields several key results: (1) a critical threshold $\varepsilon |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.07052 |
| By: | Seongbeom Park |
| Abstract: | The profile-based matching problem is the problem of finding a matching that optimizes profile from an instance $(G, r, \langle u_1, \dots, u_r \rangle)$, where $G$ is a bipartite graph $(A \cup B, E)$, $r$ is the number of utility functions, and $u_i: E \to \{ 0, 1, \dots, U_i \}$ is utility functions for $1 \le i \le r$. A matching is optimal if the matching maximizes the sum of the 1st utility, subject to this, maximizes the sum of the 2nd utility, and so on. The profile-based matching can express rank-maximal matching \cite{irving2006rank}, fair matching \cite{huang2016fair}, and weight-maximal matching \cite{huang2012weight}. These problems can be reduced to maximum weight matching problems, but the reduction is known to be inefficient due to the huge weights. This paper presents the condition for a weight function to find an optimal matching by reducing profile-based matching to the maximum weight matching problem. It is shown that a weight function which represents utilities as a mixed-radix numeric system with base-$(2U_i+1)$ can be used, so the complexity of the problem is $O(m\sqrt{n}(\log{n} + \sum_{i=1}^{r}\log{U_i}))$ for $n = |V|$, $m = |E|$. In addition, it is demonstrated that the weight lower bound for rank-maximal/fair/weight-maximal matching, better computational complexity for fair/weight-maximal matching, and an algorithm to verify a maximum weight matching can be reduced to rank-maximal matching. Finally, the effectiveness of the profile-based algorithm is evaluated with real data for school choice lottery. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.00047 |
| By: | Sarang Shah |
| Abstract: | Economics has long been a science of static equilibria, in which time is a second-order rather than first-order concern. Without time, economic modelers may neglect or obscure the role of time-dependent phenomena, e.g. path-dependency, and limit their ability to compare agnostically the model results with empirical observations. In this article, I outline a dynamic, signals-based recipe for building microeconomic models from traditional static models. I demonstrate this recipe using a classic "desert island" Robinson Crusoe (RC) model of consumption. Starting from a classic static derivation, I then move to a dynamic view, using the utility function as a generator of force on consumption. Finally, I show that the resulting dynamic model may be expressed in Lagrangian and Hamiltonian terms. I conclude by suggesting a recipe for scientific iteration using these alternate mechanical formulations, and the alternative explanations these dynamic models may suggest compared to employing a static approach to modeling. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.20268 |
| By: | Fabrizio Lillo; Piero Mazzarisi; Ioanna-Yvonni Tsaknaki |
| Abstract: | The Kelly criterion provides a general framework for optimizing the growth rate of an investment portfolio over time by maximizing the expected logarithmic utility of wealth. However, the optimality condition of the Kelly criterion is highly sensitive to accurate estimates of the probabilities and investment payoffs. Estimation risk can lead to greatly suboptimal portfolios. In a simple binomial model, we show that the introduction of a European option in the Kelly framework can be used to construct a class of growth optimal portfolios that are robust to estimation risk. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.18868 |
| By: | Atilla Aras |
| Abstract: | The article's aim is to provide a solution to the Equity Premium Puzzle with a derived model. The derived model which depends on Consumption Capital Asset Pricing Model gives a solution to the puzzle with the values of coefficient of relative risk aversion around 4.40 by assuming the subjective time discount factors as 0.97, 0.98 and 0.99. These values are found compatible with empirical literature. Moreover, the risk-free asset and equity investors are determined as insufficient risk-loving investors in 1977, which can be considered a type of risk-averse behavior. The risk attitude determination also confirms the validity of the model. Hence, it can be stated that calculated values and risk behavior determination demonstrate the correctness of the derived model because test results are robust. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.17996 |
| By: | Noemí Navarro (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Róbert F. Veszteg (Waseda University [Tokyo, Japan]) |
| Abstract: | This paper investigates the robustness of equal-split outcomes in unstructured bargaining environments, expanding on classic two-person settings to include payoff transfers and multi-party bargaining. Drawing from experimental data, we find that equal splits persist as a focal solution in two-person bargaining with payoff transfers, even when some potential efficiency gains are left unexploited, likely due to limitations in participants' cognitive and strategic sophistication. In three-person settings (without payoff transfers), while agreements align closely with equality, they tend to do so only as long as efficiency and stability criteria are met. Our results suggest that bargaining parties prioritize equality when efficient solutions are complicated to find, but prioritize efficiency when efficient solutions are easily accessible. Also, in multilateral bargaining, coalitional stability becomes a primary concern, whereas it remains a softer constraint in simpler, bilateral negotiations. |
| Keywords: | Economics, Multilateral bargaining, Experiments, Nash bargaining solution, Equal-split solution, Individual rationality, Microeconomics, Robustness (evolution), Sophistication, Stochastic game, Negotiation, Bilateral bargaining |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05240606 |
| By: | Thomas O. Hancock; Stephane Hess; Charisma F. Choudhury |
| Abstract: | Choice models for large-scale applications have historically relied on economic theories (e.g. utility maximisation) that establish relationships between the choices of individuals, their characteristics, and the attributes of the alternatives. In a parallel stream, choice models in cognitive psychology have focused on modelling the decision-making process, but typically in controlled scenarios. Recent research developments have attempted to bridge the modelling paradigms, with choice models that are based on psychological foundations, such as decision field theory (DFT), outperforming traditional econometric choice models for travel mode and route choice behaviour. The use of physiological data, which can provide indications about the choice-making process and mental states, opens up the opportunity to further advance the models. In particular, the use of such data to enrich 'process' parameters within a cognitive theory-driven choice model has not yet been explored. This research gap is addressed by incorporating physiological data into both econometric and DFT models for understanding decision-making in two different contexts: stated-preference responses (static) of accomodation choice and gap-acceptance decisions within a driving simulator experiment (dynamic). Results from models for the static scenarios demonstrate that both models can improve substantially through the incorporation of eye-tracking information. Results from models for the dynamic scenarios suggest that stress measurement and eye-tracking data can be linked with process parameters in DFT, resulting in larger improvements in comparison to simpler methods for incorporating this data in either DFT or econometric models. The findings provide insights into the value added by physiological data as well as the performance of different candidate modelling frameworks for integrating such data. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.18068 |
| By: | Kragt, Marit Ellen; Sarmiento, Jon Marx; Rola-Rubzen, Maria Fay |
| Abstract: | This review synthesises applications of behavioural science approaches to farmer decision making and risk management. First, we identify key behavioural science concepts that have been found to influence the ways in which people make decisions, with illustration from the agricultural sector. These concepts include dispositional factors (e.g. risk preferences, loss and ambiguity aversion, time discounting), social factors (e.g. social norms), and cognitive factors (e.g. biases, heuristics, framing effects). Knowing how these various concepts influence attitudes towards risk helps to (a) better understand why people make decisions the way they do, and (b) design more effective risk management strategies and decision support tools. We present four behavioural science frameworks that can be used as a reference when designing behavioural interventions: the MINDSPACE framework, the EAST framework, the Behavioural Change Wheel model, and the Theory of Planned Behaviour. Key messages from these frameworks are the importance of making the desired option easy, social norms and the influence of peers, making information salient to the individual, and the role that emotions play in our decision process. The RiskWi$e project offers a unique opportunity to apply behavioural science knowledge in research design and extension to help agricultural risk management. |
| Keywords: | Institutional and Behavioral Economics, Risk and Uncertainty |
| Date: | 2025–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:ags:uwauwp:369057 |
| By: | Tomohiro Hirano; Joseph E. Stiglitz |
| Abstract: | This paper examines the simplest OLG models with capital accumulation, demonstrating three results that stand in marked contrast to those of the standard model: first, the possibility of multiple steady states; second, the possibility of multiple momentary equilibria under rational expectations; third, one of implications of multiple momentary equilibria is that dynamics may be marked by complex fluctuations (lacking even periodicity), but still within well-defined bounds. We provide quite general conditions (with general utility and production functions) under which in the simplest of OLG models, there can be multiple steady states, multiple momentary equilibria, and complex dynamics. Furthermore, we present a simple illustration of wobbly growth by incorporating credit friction. |
| JEL: | C61 E32 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34193 |
| By: | Shiladitya Kumar |
| Abstract: | How can voters induce politicians to put forth more proximate (in terms of preference) as well as credible platforms (in terms of promise fulfillment) under repeated elections? Building on the work of Aragones et al. (2007), I study how reputation and re-election concerns affect candidate behavior and its resultant effect on voters' beliefs and their consequent electoral decisions. I present a formal model where, instead of assuming voters to be naive, I tackle the question by completely characterizing a set of subgame-perfect equilibria by introducing non-naive (or strategic) voting behavior into the mix. I find that non-naive voting behavior, by using the candidate's reputation as an instrument of policy discipline after the election, aids in successfully inducing candidates to put forth their maximal incentive-compatible promise (among a range of such credible promises) in equilibrium. Through the credible threat of punishment in the form of loss of reputation for all future elections, non-naive voters gain a unanimous increase in expected utility relative to when they behave naively. In fact, comparative statics show that candidates who are more likely to win are more likely to keep their promises. In this framework, voters are not only able to bargain for more credible promises but also end up raising their expected future payoffs in equilibrium. Including such forms of strategic behavior thus reduces cheap talk by creating a credible electoral system where candidates do as they say once elected. Later, I present an analysis that includes limited punishment as a political accountability mechanism. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.08249 |
| By: | Jose Blanchet; Jiayi Cheng; Hao Liu; Yang Liu |
| Abstract: | We consider a Bayesian diffusion control problem of expected terminal utility maximization. The controller imposes a prior distribution on the unknown drift of an underlying diffusion. The Bayesian optimal control, tracking the posterior distribution of the unknown drift, can be characterized explicitly. However, in practice, the prior will generally be incorrectly specified, and the degree of model misspecification can have a significant impact on policy performance. To mitigate this and reduce overpessimism, we introduce a distributionally robust Bayesian control (DRBC) formulation in which the controller plays a game against an adversary who selects a prior in divergence neighborhood of a baseline prior. The adversarial approach has been studied in economics and efficient algorithms have been proposed in static optimization settings. We develop a strong duality result for our DRBC formulation. Combining these results together with tools from stochastic analysis, we are able to derive a loss that can be efficiently trained (as we demonstrate in our numerical experiments) using a suitable neural network architecture. As a result, we obtain an effective algorithm for computing the DRBC optimal strategy. The methodology for computing the DRBC optimal strategy is greatly simplified, as we show, in the important case in which the adversary chooses a prior from a Kullback-Leibler distributional uncertainty set. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.19294 |
| By: | Jingyi Cao; Dongchen Li; Virginia R. Young; Bin Zou |
| Abstract: | This paper studies an optimal dividend problem for a company that aims to maximize the mean-variance (MV) objective of the accumulated discounted dividend payments up to its ruin time. The MV objective involves an integral form over a random horizon that depends endogenously on the company's dividend strategy, and these features lead to a novel time-inconsistent control problem. To address the time inconsistency, we seek a time-consistent equilibrium dividend rate strategy. We first develop and prove a new verification lemma that characterizes the value function and equilibrium strategy by an extended Hamilton-Jacobi-Bellman system. Next, we apply the verification lemma to obtain the equilibrium strategy and show that it is a barrier strategy for small levels of risk aversion. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.12047 |
| By: | Kimiko Terai (Faculty of Economics, Keio University) |
| Abstract: | This study investigates interjurisdictional tax competition aimed at attracting foreign creditors' portfolio investments in sovereign bonds and corporate loans. In each of two jurisdictions with lower and higher capital, governments seek to maximize workers' expected utility by determining the volume of sovereign bond issuance to fund public inputs, the tax rate on creditors' interest income, and the extent of compliance with bilateral treaty provisions concerning the exchange of information on creditors' income. Under a bilateral treaty mandating only information exchange, the jurisdiction with initially lower capital tends to set a lower tax rate and exhibits less compliance effort, effectively functioning as a tax haven. Conversely, the jurisdiction with higher capital imposes a higher tax rate and demonstrates greater compliance, benefiting from the residence principle due to its substantial global interest income. Alternatively, under a bilateral treaty that includes provisions of both information exchange and withholding tax at the source for foreign creditors, the jurisdiction with lower capital sets a higher tax rate on domestic creditors and allocates more resources to public inputs than its wealthier counterpart, even at the risk of increasing sovereign default potential. These findings suggest that the specific design of international tax cooperation agreements significantly influences jurisdictions' fiscal behaviors, leading to divergent outcomes despite a shared objective of implementing residence-based taxation. |
| Keywords: | tax haven, interest income tax, sovereign default, Tax Information Exchange Agreement, Double Taxation Agreement |
| JEL: | H26 H54 H63 H73 |
| Date: | 2025–07–18 |
| URL: | https://d.repec.org/n?u=RePEc:keo:dpaper:dp2025-016 |
| By: | Dietz, Simon; Bodirsky, Benjamin; Crawford, Michael; Kanbur, Ravi; Leip, Debbora; Lord, Steven; Lotze-Campen, Hermann; Popp, Alexander |
| Abstract: | The global food system provides nourishment to most of the world’s eight billion people, generates trillions of dollars of goods and services, and employs more than one billion people. On the other hand, it generates substantial dietary health costs and environmental harms. Policymakers are asking about the overall contribution of the global food system to social welfare and how much larger it might be on a sustainable path. This paper describes our efforts to answer these questions. We couple multiple domain-specific models into a large-scale integrated assessment modelling framework capable of quantifying the outcomes of different food-system scenarios for incomes, health and the environment up to 2050, at a highly disaggregated level. We take these multi-dimensional outcomes and value them using a system of nested utility functions, building on recent work in environmental economics. We find that, relative to current trends, the bundle of measures in a Food System Transformation scenario would provide a large boost to global social welfare equivalent to increasing global GDP by about 7%. Changes in income, environment and health all contribute positively. Measures to change diets are particularly beneficial, although a caveat is that our welfare estimates exclude possible consumer disutility from dietary changes. The results are robust to changes in key utility/damage parameters. |
| Keywords: | global food system; sustainable development; social welfare; integrated assessment modelling; food policy |
| JEL: | Q01 Q18 Q24 Q56 Q57 |
| Date: | 2026–01–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129161 |
| By: | Georgy Lukyanov |
| Abstract: | When does reputation make experts play it safe, and what policy reverses that? I isolate a single lever - visibility of outcomes. In a two-page model with binary signals and outcomes, I show: (i) with an uninformative safe option and symmetric visibility, career concerns alone do not generate conservatism; (ii) increasing failure visibility (as in Registered Reports) weakens high-reputation caution and relaxes selection. I provide a necessary-and-sufficient local sign test, agnostic about utility curvature and allowing informative safe actions, and an identification map suitable for staggered RR adoption. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.04037 |
| By: | Dylan Laplace Mermoud; Victor Roca i Lucio |
| Abstract: | The main goal of this paper is to settle a conceptual framework for cooperative game theory in which the notion of composition/aggregation of games is the defining structure. This is done via the mathematical theory of algebraic operads: we start by endowing the collection of all cooperative games with any number of players with an operad structure, and we show that it generalises all the previous notions of sums, products and compositions of games considered by Owen, Shapley, von Neumann and Morgenstern, and many others. Furthermore, we explicitly compute this operad in terms of generators and relations, showing that the M\"obius transform map induces a canonical isomorphism between the operad of cooperative games and the operad that encodes commutative triassociative algebras. In other words, we prove that any cooperative game is a linear combination of iterated compositions of the 2-player bargaining game and the 2-player dictator games. We show that many interesting classes of games (simple, balanced, capacities a.k.a fuzzy measures and convex functions, totally monotone, etc) are stable under compositions, and thus form suboperads. In the convex case, this gives by the submodularity theorem a new operad structure on the family of all generalized permutahedra. Finally, we focus on how solution concepts in cooperative game theory behave under composition: we study the core of a composite and describe it in terms of the core of its components, and we give explicit formulas for the Shapley value and the Banzhaf index of a compound game. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.01969 |
| By: | Daniel Montoya Herrera (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier); Marc Willinger (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier) |
| Abstract: | Based on a representative sample of the French population (n = 1, 154), we show that there is a positive association between risk tolerance and trust. We rely on, the World Value Survey WVS binary trust measure, and a '0 -10' scale that we decline in three domains: trust in general, family, and co-workers. We also vary the measure of risk tolerance, by considering an incentivized investment task, and a '0 -10' stated preference scale that we decline in three domains: risk tolerance in general, in finance, and health. These variations allow us to test 16 different relations, by crossing four dependent trust variables with four different risk tolerance covariates. After adjusting for multiple testing, we found nine combinations with a strong positive link between risk tolerance and trust in the general population, and that stated risk tolerance measures predict stated trust better than elicited risk measures. |
| Keywords: | risk-aversion, preferences, generalized trust, Behavioral economics |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05234962 |
| By: | Simon Finster (FAIRPLAY - IA coopérative : équité, vie privée, incitations - CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique - IP Paris - Institut Polytechnique de Paris - Criteo AI Lab - Criteo [Paris] - Centre Inria de l'Institut Polytechnique de Paris - Centre Inria de Saclay - Inria - Institut National de Recherche en Informatique et en Automatique, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique); Paul W Goldberg (Departement of Computer of Science University of Oxford - University of Oxford); Edwin Lock (Departement of Computer of Science University of Oxford - University of Oxford, Department of Economics - University of Oxford - University of Oxford) |
| Abstract: | In markets with budget-constrained buyers, competitive equilibria need not be efficient in the utilitarian sense, or maximise the seller's revenue. We consider a setting with multiple divisible goods. Competitive equilibrium outcomes, and only those, are constrained utilitarian efficient, a notion of utilitarian efficiency that respects buyers' demands and budgets. Our main contribution establishes that, when buyers have linear valuations, competitive equilibrium prices are unique and revenue-optimal for a zero-cost seller. |
| Keywords: | budget constraints, Fisher markets, product-mix auctions, arctic auction, market design, efficiency, revenue maximisation, competitive equilibrium |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05234001 |
| By: | Richard Cole; Pranav Jangir |
| Abstract: | In real-world settings of the Deferred Acceptance stable matching algorithm, such as the American medical residency match (NRMP), school choice programs, and various national university entrance systems, candidates need to decide which programs to list. In many of these settings there is an initial phase of interviews or information gathering which affect the preferences on one or both sides. We ask: which interviews should candidates seek? We study this question in a model, introduced by Lee (2016) and modified by Allman and Ashlagi (2023), with preferences based on correlated cardinal utilities. We describe a distributed, low-communication strategy for the doctors and students, which lead to non-match rates of $e^{(-\widetilde{O}(\sqrt{k}))}$ in the residency setting and $e^{(-\widetilde{O}(k))}$ in the school-choice setting, where $k$ is the number of interviews per doctor in the first setting, and the number of proposals per student in the second setting; these bounds do not apply to the agents with the lowest public ratings, the bottommost agents, who may not fare as well. We also obtain bounds on the expected utilities each non-bottommost agent obtains. These results are parameterized by the capacity of the hospital programs and schools. Larger capacities improve the outcome for the hospitals and schools, but don't significantly affect the outcomes of the doctors or students. Finally, in the school choice setting we obtain an $\epsilon$-Nash type equilibrium for the students apart from the bottommost ones; importantly, the equilibrium holds regardless of the actions of the bottommost students. We also discuss to what extent this result extends to the residency setting. We complement our theoretical results with an experimental study that shows the asymptotic results hold for real-world values of $n$. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.19345 |
| By: | Calvo, Paula (Yale University); Iyigun, Murat (University of Colorado, Boulder); Lafortune, Jeanne (Pontificia Universidad Catolica de Chile) |
| Abstract: | We show that separation has been a relevant outcome of American relationships over the last century and that separated women have worse economic outcomes than those divorced. A transferable-utility model of marriage, separation and divorce indicates that the welfare effects of divorce legislation depend on considering separation as an alternative. Empirically, the adoption of unilateral divorce laws reduced separation and increased divorce, particularly among low-educated women. A calibrated model indicates heterogeneous welfare effects of unilateral divorce with gains being concentrated among women with lower education. Desertion laws with very short duration generate similar gains for women. |
| Keywords: | female welfare, separation, divorce, marriage, gender gaps |
| JEL: | J12 J11 N32 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18093 |