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on Utility Models and Prospect Theory |
| By: | Sebastian Grauwin (Université de Lyon, Lyon, F-69007, France, Institut rhônalpin des systèmes complexes, IXXI, Lyon, F-69007, France, ENS-LYON, Laboratoire de Physique, UMR 5672, Lyon, F-69007, France); Florence Goffette-Nagot (Université de Lyon, Lyon, F-69007, France, CNRS, GATE Lyon-St Etienne, UMR 5824, Ecully, F-69130); Pablo Jensen (Université de Lyon, Lyon, F-69007, France, Institut rhônalpin des systèmes complexes, IXXI, Lyon, F-69007, France, ENS-LYON, Laboratoire de Physique, UMR 5672, Lyon, F-69007, France, CNRS, Laboratoire d'Economie des Transports (LET), UMR 5593, Lyon, F-69363, France) |
| Abstract: | We propose an analytical resolution of Schelling segregation model for a general class of utility functions. Using evolutionary game theory, we provide conditions under which a potential function, which characterizes the global configuration of the city and is maximized in the stationary state, exists. We use this potential function to analyze the outcome of the model for three utility functions corresponding to different degrees of preference for mixed neighborhoods. Schelling original utility function is shown to drive segregation at the expense of collective utility. If agents have a strict preference for mixed neighborhoods but still prefer being in the majority versus in the minority, the model converges to perfectly segregated configurations, which clearly diverge from the social optimum. Departing from earlier literature, these conclusions are based on analytical results. These results pave the way to the analysis of many structures of preferences, for instance those based on empirical findings concerning racial preferences. As a by-product, our analysis builds a bridge between Schelling model and the Duncan and Duncan segregation index. |
| Keywords: | Residential segregation, Schelling, dynamic model, potential function, social preferences |
| JEL: | C63 C72 C73 D62 J15 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1017&r=upt |
| By: | Jacob Ladenburg (Danish Institute of Governmental Research); Søren Bøye Olsen (Institute of Food and Resource Economics, University of Copenhagen) |
| Abstract: | Hypothetical bias remains a major problem when valuing non-market goods with stated preference methods. Originally developed for Contingent Valuation studies, Cheap Talk has been found to effectively reduce hypothetical bias in some applications, though empirical results are ambiguous. We discuss reasons why Cheap Talk may fail to effectively remove hypothetical bias, especially in Choice Experiments. In this light, we suggest augmenting Cheap Talk in Choice Experiments with a so-called Opt-Out Reminder. Prior to each single choice set, the Opt-Out Reminder explicitly instructs respondents to choose the opt-out alternative if they find the experimentally designed alternatives too expensive. In an empirical Choice Experiment survey we find the Opt-Out Reminder to significantly reduce total WTP and to some extent also marginal WTP beyond the capability of the Cheap Talk applied without the Opt-Out Reminder. This suggests that rather than merely adopting the Cheap Talk practice directly from Contingent Valuation, it should be adapted to fit the potentially different decision processes and repeated choices structure of the Choice Experiment format. Our results further suggest that augmenting Cheap Talk with a dynamic Opt-Out Reminder can be an effective and promising improvement in the ongoing effort to remedy the particular types of hypothetical bias that potentially continue to invalidate Choice Experiment surveys. |
| Keywords: | Cheap talk, Opt-Out Reminder, Choice Experiments, hypothetical bias, stream re-establishment, opt-out effect |
| JEL: | C42 C93 Q24 Q26 Q51 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:foi:wpaper:2010_09&r=upt |
| By: | Vreeland, James; Spada, Paolo |
| Abstract: | Many believe that deliberative democracy, where individuals discuss alternatives before voting on them, should result in collectively superior outcomes because voters become better informed and decisions are justified using reason. These deliberations typically involve a moderator, however, whose role has been under-examined. We conduct a field experiment to test the effects moderators may have. Participants in a class of 107 students voted on options over their writing and exam requirements. Before voting, they participated in group discussions of about five people each with one moderator. Some (randomly assigned) moderators remained neutral throughout, while others made limited interventions, supporting a specific option. We find a substantial moderator effect. Our experiment is structured like deliberations used world-wide to make community decisions and thus should have some external validity. The results indicate that if organized interest groups had influence over moderators, they might be able to hijack a deliberative decision-making process. |
| Keywords: | deliberative democracy; participatory decision making; interest group; manipulation; moderators; facilitators |
| JEL: | D70 C93 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24048&r=upt |
| By: | Stéphane Loisel (SAF - Laboratoire de Sciences Actuarielle et Financière - Université Claude Bernard - Lyon I : EA2429); Xavier Milhaud (SAF - Laboratoire de Sciences Actuarielle et Financière - Université Claude Bernard - Lyon I : EA2429, Axa Global Life - AXA) |
| Abstract: | In this paper we raise the matter of considering a stochastic modeling of the surrender rate instead of the classical S-shaped deterministic curve (in function of the spread), still used in almost all insurance companies. A stochastic model in which surrenders are conditionally independent with respect to a S-curve disturbance would be tempting in some extreme scenarii, especially to address the question of the lack of data. However, we explain why this conditional independence between policyholders, which has the advantage to be the simplest assumption, looks particularly maladaptive when the spread increases. Indeed the correlation between policyholders' decisions is most likely to increase in this situation. We suggest and develop a simple model which integrates those phenomena. With stochastic orders it is possible to compare it to the conditional independence approach qualitatively. In an partially internal Solvency II model, we quantify the impact of the correlation phenomenon on a real life portfolio for a global risk management strategy. |
| Date: | 2010–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00502847_v1&r=upt |