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on Utility Models and Prospect Theory |
| By: | Wang, Qian (KTH); Sundberg, Marcus (KTH); Karlström , Anders (KTH) |
| Abstract: | Rank dependent utility maximization is applied in maximizing a linear and a quadratic scheduling model considering a subjective weighting over uncertain outcomes. The optimal departure time and maximal utility are different from that under expect utility maximization in the transformed travel time density function. Probability weighting is found when estimating the linear model and the estimated weighting function suggests optimism behaviour of respondents. The results also reveal the evidence of heterogeneity in scheduling preferences. Moreover, evidence for the variable of excessive travel time beyond the traditional scheduling model specification is found even with controlling for probability weighting. Our results also show no empirical equivalence between the scheduling model and its derived forms. |
| Keywords: | Scheduling models; Rank dependent utility; Risk attitudes; Heterogeneity |
| JEL: | R40 |
| Date: | 2013–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ctswps:2013_016&r=upt |
| By: | Andersson, Ola (Research Institute of Industrial Economics (IFN)); Holm, Håkan J. (Lund University); Tyran, Jean-Robert (University of Vienna); Wengström, Erik (Lund University) |
| Abstract: | We study risk taking on behalf of others, both with and without potential losses. A large-scale incentivized experiment is conducted with subjects randomly drawn from the Danish population. On average, decision makers take the same risks for other people as for themselves when losses are excluded. In contrast, when losses are possible, decisions on behalf of others are more risky. Using structural estimation, we show that this increase in risk stems from a decrease in loss aversion when others are affected by their choices. |
| Keywords: | Risk taking; Loss aversion; Experiment |
| JEL: | C91 D03 D81 G02 |
| Date: | 2013–09–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0976&r=upt |
| By: | Aurélien Baillon; Han Bleichrodt; Alessandra Cillo |
| Abstract: | We performed a new test of transitivity based on individual measurements of the main intransitive choice models in decision under uncertainty. Our test is tailor-made and, therefore, more likely to detect violations of transitivity than previous tests. In spite of this, we observed only few intransitivities and we could not reject the hypothesis that these were due to random error. A possible explanation for the poor predictive performance of the intransitive choice models is that they only allow for interactions between acts, but exclude within-act interactions by retaining the assumption that preferences are separable overstates of nature. Prospect theory, which relaxes separability but retains transitivity, predicted choices significantly better than the nontransitive choice models. We conclude that descriptively realistic models need to allow for within-act interactions, but may retain transitivity. Subject classifications: Utility/preference: Estimation. Decision analysis: Risk. Area of review: Decision Analysis. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:496&r=upt |
| By: | Francesca Beccacece; Emanuele Borgonovo; Greg Buzzard; Alessandra Cillo; Stanley Zionts |
| Abstract: | This work addresses the early phases of the elicitation of multiattribute value functions proposing a practical method for assessing interactions and monotonicity. We exploit the link between multiattribute value functions and the theory of high dimensional model representations. The resulting elicitation method does not state any a-priori assumption on an individual’s preference structure. We test the approach via an experiment in a riskless context in which subjects are asked to evaluate mobile phone packages that differ on three attributes. Keywords: Multiattribute Utility Theory; High Dimensional Model Representations; Value Function Elicitation; Sparse Grid Interpolation. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:495&r=upt |
| By: | Matsuki, Jun; Tadenuma, Koichi |
| Abstract: | In this paper, we consider a natural procedure of decision-making, called a “Grouping Choice Method”, which leads to a kind of bounded rational choices. In this procedure a decision-maker (DM) first divides the set of available alternatives into some groups and in each group she chooses the best element (winner) for her preference relation. Then, among the winners in the first round, she selects the best one as her final choice. We characterize Grouping Choice Methods in three different ways. First, we show that a choice function is a Grouping Choice Method if and only if it is a Rational Shortlist Method (Manzini and Mariotti, 2007) in which the first rationale is transitive. Second, Grouping Choice Methods are axiomatically characterized by means of a new axiom called Elimination, in addition to two well-known axioms, Expansion and Weak WARP (Manzini and Mariotti, 2007). Third, Grouping Choice Methods are also characterized by a weak version of Path Independence. |
| Keywords: | grouping of alternatives, preference, bounded rationality |
| JEL: | D01 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:hit:econdp:2013-08&r=upt |
| By: | Wang , Qian (KTH); Sundberg, Marcus (KTH); Karlström , Anders (KTH) |
| Abstract: | In this paper, we introduce a discrete penalty for excessive travel times into scheduling models whose maximal expected utilities have attractive theoretical features of linearity in standard deviation or variance. The extended models maintain the properties of linearity, and its maximal expected utility depends on the shape of the travel time distribution. The value of travel time and its variability could be measured indirectly by the scheduling preferences. The results from empirical data reveal that the extended models, with such a discrete penalty, provide a highly significant better goodness of fit to the data. Furthermore, introducing the penalty for excessive travel time has a strong effect on the estimates of the other scheduling parameters, thus affecting the valuations of travel time. Our findings indicate that, apart from the mean and standard deviation (or variance), individuals value other characteristics of travel time distribution, in particular the probability of excessive travel time. |
| Keywords: | Scheduling preferences; Travel time variability; Asymmetric travel time distribution; Excessive travel time |
| JEL: | R40 |
| Date: | 2013–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ctswps:2013_015&r=upt |
| By: | Marek Hudík |
| Abstract: | The fact that any two choices are necessarily asynchronous raises the question of whether some alternative x at moment t remains the same alternative x at moment t + 1. It is argued that this question cannot be answered without taking into account the decision-maker’s perception of the choice problem. Consequently, an objective description of a choice problem is impossible for each description involves an interpretation. A definition of sameness is provided and an extension of the standard choice model is suggested. The problem of the possibility of different perceptions of the decision-maker and the observer is emphasized |
| Keywords: | sameness, categorization, internal consistency, choice theory, indifference, framing, subjectivism |
| JEL: | B40 D01 D03 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:icr:wpicer:02-2013&r=upt |
| By: | Susilo, Yusak O. (KTH); Lyons, Glenn (University of the West of England); Jain, Juliet (University of the West of England); Atkins, Steve (University of the West of England) |
| Abstract: | Using data from Great Britain’s National Passenger Survey 2010 this paper examines the travel time use of rail passengers and their indicative assessment of its utility. The paper explores the impacts of individuals’ socio demographic characteristics, types of activity undertaken and the perceived difficulties that may be faced by the travellers on their assessment of travel time use utility. The study shows that only 13% of travellers considered their travel time as wasted. However, this varies by journey purpose, travelling class (first/standard class), gender and journey length. The study shows that the positive or negative appreciation by passengers of their journey time is not only a result of various combinations of on-board activity engagements, but also the smoothness of overall journey experience. Being able to work/study on the train most significantly increases individual appreciation of time use. However, a delay on an individual’s train journey also has a major influence in reducing his/her perceived value of travel time spent. ICT devices that enable travellers to watch film/video or play games or check emails are more appreciated than those providing access to music/podcast or access to social networking sites. The paper joins others in questioning assumptions made in economic appraisal that travel time is unproductive. It concludes with a call for more substantive and targeted data collection efforts within travel behaviour research devoted to further unravelling the phenomenon of the positive utility of travel. |
| Keywords: | Travel time use; Rail passenger; Journey satisfaction; Great Britain |
| JEL: | R40 R42 |
| Date: | 2013–09–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ctswps:2013_018&r=upt |