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on Utility Models and Prospect Theory |
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Issue of 2020‒12‒21
25 papers chosen by |
| By: | Oliver, Adam; Sunstein, Cass |
| Abstract: | The common consequence effect and preference reversals are two of the foundational violations of the standard model of rational choice (i.e. von Neumann – Morgenstern expected utility theory) and, as such, played an important role in the development of empirical behavioural economics. One can hypothesise, however, that due to varying degrees of risk aversion when faced with outcomes of different magnitude, the rate of both of these violations may vary with outcome size. Using various types of outcome, this article reports tests of these violations using different outcome magnitudes in within-respondent designs. The results observed are broadly consistent across outcome type: the common consequence effect, while rarely being substantially observed in any of the tests undertaken, was often found to be somewhat susceptible to outcome size while preference reversals, which were everywhere substantially observed, were not. In and of itself, the observation of systematic preference reversals implies that preferences are often constructed according to the way in which questions are asked, and is sufficient to question the usefulness of stated preference techniques for informing public policy. |
| Keywords: | Allais paradox; common consequence effect; expected utility theory; outcome size; preference elicitation; preference reversals; rational choice |
| JEL: | J1 |
| Date: | 2019–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:91130&r=all |
| By: | Goncalo dos Reis; Vadim Platonov |
| Abstract: | We study a portfolio management problem featuring many-player and mean-field competition, investment and consumption, and relative performance concerns under the forward performance processes (FPP) framework. We focus on agents using power (CRRA) type FPPs for their investment-consumption optimization problem an under common noise Merton market model and we solve both the many-player and mean-field game providing closed-form expressions for the solutions where the limit of the former yields the latter. In our case, the FPP framework yields a continuum of solutions for the consumption component as indexed to a market parameter we coin "market consumption intensity". The parameter permits the agent to set a preference for their consumption going forward in time that, in the competition case, reflects a common market behaviour. We show the FPP framework, under both competition and no-competition, allows the agent to disentangle his risk-tolerance and elasticity of intertemporal substitution (EIS) just like Epstein-Zin preferences under recursive utility framework and unlike the classical utility theory one. This, in turn, allows a finer analysis on the agent's consumption "income" and "substitution" regimes, and, of independent interest, motivates a new strand of economics research on EIS under the FPP framework. We find that competition rescales the agent's perception of consumption in a non-trivial manner in addition to a time-dependent "elasticity of conformity" of the agent to the market's consumption intensity. |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2012.01235&r=all |
| By: | H. Fink; S. Geissel; J. Herbinger; F. T. Seifried |
| Abstract: | The purpose of this article is to evaluate optimal expected utility risk measures (OEU) in a risk-constrained portfolio optimization context where the expected portfolio return is maximized. Wecompare the portfolio optimization with OEU constraint to a portfolio selection model using valueat risk as constraint. The former is a coherent risk measure for utility functions with constantrelative risk aversion and allows individual specifications to the investor’s risk attitude and timepreference. In a case study with three indices we investigate how these theoretical differences in-fluence the performance of the portfolio selection strategies. A copula approach with univariateARMA-GARCH models is used in a rolling forecast to simulate monthly future returns and cal-culate the derived measures for the optimization. The results of this study illustrate that bothoptimization strategies perform considerably better than an equally weighted portfolio and a buyand hold portfolio. Moreover, our results illustrate that portfolio optimization with OEU con-straint experiences individualized effects, e.g. less risk averse investors lose more portfolio value inthe financial crises but outperform their more risk averse counterparts in bull markets. |
| Keywords: | optimal expected utility, portfolio optimization, risk measures, value at risk |
| JEL: | G11 D81 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:trr:qfrawp:201907&r=all |
| By: | Hanming Fang; Zenan Wu |
| Abstract: | A wealth of evidence shows that individuals are biased and firms can often exploit consumers' behavioral biases in their contract designs. In this paper, we study how vulnerable biased individuals are to their own behavioral biases in market equilibrium, and focus on the role of risk aversion and intertemporal elasticity of substitution (IES). We measure consumer vulnerability by the percentage loss in a consumer's equilibrium certainty equivalent from a market with non-biased consumers to that with biased ones. We examine several important behavioral biases that have been extensively studied in the literature, including the impact of biased beliefs (either over- or under-confidence) in an insurance market, the impact of present bias and naïveté about present bias in a dynamic model of credit contract design, the impact of projection bias about habit formation, and the impact of expectation-based loss aversion on an investor's portfolio choice. We show that consumer vulnerability to all four commonly studied behavioral biases has a non-monotonic relationship with risk aversion or IES. This is in striking contrast to the deviations in the equilibrium allocations from the rational benchmark, which are often monotonic to the risk aversion or IES. We also consider a setting of biased agents with Epstein-Zin preferences to isolate the effect of risk aversion from that of IES. |
| JEL: | D60 D81 D86 D91 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28121&r=all |
| By: | Yiding Feng; Jason Hartline; Yingkai Li |
| Abstract: | We consider agents with non-linear preferences given by private values and private budgets. We quantify the extent to which posted pricing approximately optimizes welfare and revenue for a single agent. We give a reduction framework that extends the approximation of multi-agent pricing-based mechanisms from linear utility to nonlinear utility. This reduction framework is broadly applicable as Alaei et al. (2012) have shown that mechanisms for linear agents can generally be interpreted as pricing-based mechanisms. We give example applications of the framework to oblivious posted pricing (e.g., Chawla et al., 2010), sequential posted pricing (e.g., Yan, 2011), and virtual surplus maximization (Myerson, 1981). |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2003.00545&r=all |
| By: | Robert A. Becker (Indiana University); Juan Pablo Rincon-Zapatero (Universidad Carlos III de Madrid) |
| Abstract: | The existence of a unique optimum, a unique optimal stationary program, and a turnpike theorem are demonstrated for a neoclassical one sector optimal growth model. The plannerís allocation problem is formulated as a discrete time deterministic, infinite horizon programming model. The production sector is subject to diminishing marginal returns to capital. The plannerís objective function is derived from a Generalized Marinacci and Montrucchio (GMM) Thompson aggregator preference. A given Thompson aggregator may be associated with many intertemporal utility functions (which may not be ordinally equivalent). The choice of one of these representations over another is shown to be a matter of mathematical tractability. There is an observational equivalence between those alternative objective functions: the qualitative features of the optimal solution do not depend on the particular utility function representation of the underlying Thompson aggregator preference structure. |
| Keywords: | Recursive Utility, Thompson Aggregators, Generalized Marinacci Montrucchio Aggregators, Koopmans Equation, Extremal Fixed Points, Turnpike Theorem, Discounted Golden-Rule, Observational Equivalence Theorem |
| JEL: | D15 D50 E10 E13 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2020001&r=all |
| By: | Franz Dietrich (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, CNRS - Centre National de la Recherche Scientifique); Antonios Staras (Cardiff University); Robert Sugden (UEA - University of East Anglia [Norwich]) |
| Abstract: | Leonard Savage famously contravened his own theory when first confronting the Allais Paradox, but then convinced himself that the had made an error. We examine the formal structure of Savage's ‘error-correcting' reasoning in the light of (i) behavioural economists' claims to identify the latent preferences of individuals who violate conventional rationality requirements and (ii) John Broome's critique of arguments which presuppose that rationality requirements can be achieved through reasoning. We argue that Savage's reasoning is not vulnerable to Broome's critique, but does not provide support for the view that behavioural scientists can identify and counteract errors in people's choices. |
| Keywords: | behavioural economics,reasoning,rationality,Broome,Allais Paradox,Savage |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseptp:halshs-02905466&r=all |
| By: | Géraldine Bocqueho (BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Julien Jacob (BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Marielle Brunette (BETA - Bureau d'Économie Théorique et Appliquée - UL - Université de Lorraine - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Keywords: | Reflected behaviour,Loss aversion,Probability weighting,Tanaka-Camerer-Nguyenmethod,Risk preferences |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02987294&r=all |
| By: | Olkhov, Victor |
| Abstract: | We suggest use continuous numerical risk grades [0,1] of R for a single risk or the unit cube in Rn for n risks as the economic domain. We consider risk ratings of economic agents as their coordinates in the economic domain. Economic activity of agents, economic or other factors change agents risk ratings and that cause motion of agents in the economic domain. Aggregations of variables and transactions of individual agents in small volume of economic domain establish the continuous economic media approximation that describes collective variables, transactions and their flows in the economic domain as functions of risk coordinates. Any economic variable A(t,x) defines mean risk XA(t) as risk weighted by economic variable A(t,x). Collective flows of economic variables in bounded economic domain fluctuate from secure to risky area and back. These fluctuations of flows cause time oscillations of macroeconomic variables A(t) and their mean risks XA(t) in economic domain and are the origin of any business and credit cycles. We derive equations that describe evolution of collective variables, transactions and their flows in the economic domain. As illustration we present simple self-consistent equations of supply-demand cycles that describe fluctuations of supply, demand and their mean risks. |
| Keywords: | business cycle; risk ratings; collective variables; economic flows; economic domain |
| JEL: | C53 E32 E37 F44 |
| Date: | 2020–12–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104598&r=all |
| By: | Loic BERGER (CNRS, IESEG School of Management, University of Lille, UMR 9221 -LEM, 59000 Lille, France; RFF-CMCC European Institute on Economics and the Environment (EIEE), Centro Euro-Mediterraneo sui Cambiamenti Climatici, 20123 Milan, Italy); Nicolas BERGER (Faculty of Public Health and Policy, London School of Hygiene & Tropical Medicine, WC1H 9SH, London, UK; Sciensano (Belgian Scientific Institute of Public Health), 1050 Brussels, Belgium); Valentina BOSETTI (RFF-CMCC European Institute on Economics and the Environment (EIEE), Centro Euro-Mediterraneo sui Cambiamenti Climatici, 20123 Milan, Italy; Department of Economics and IGIER, Bocconi University, 20136 Milan, Italy); Itzhak GILBOA (HEC, Paris-Saclay, 78350 Jouy-en-Josas, France; Eitan Berglas School of Economics, Tel Aviv University, Tel Aviv 69978, Israel); Lars Peter HANSEN (Department of Economics, University of Chicago, Chicago, IL 60637; Department of Statistics, University of Chicago, Chicago, IL 60637; Booth School of Business, University of Chicago, Chicago, IL 60637); Christopher JARVIS (Department of Infectious Disease Epidemiology, London School of Hygiene & Tropical Medicine, WC1E 7HT, London, UK); Massimo MARINACCI (Department of Decision Sciences and IGIER, Universita Bocconi, 20136 Milan, Italy); Richard D. Smith (Faculty of Public Health and Policy, London School of Hygiene & Tropical Medicine, WC1H 9SH, London, UK; College of Medicine and Health, University of Exeter, Exeter, EX1 2LU, UK) |
| Abstract: | Policymaking during a pandemic can be extremely challenging. As COVID-19 is a new disease and its global impacts are unprecedented, decisions are taken in a highly uncertain, complex, and rapidly changing environment. In such a context, in which human lives and the economy are at stake, we argue that using ideas and constructs from modern decision theory, even informally, will make policymaking a more responsible and transparent process. |
| Keywords: | model uncertainty, ambiguity, robustness, decision rules |
| JEL: | D81 I18 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ies:wpaper:e202008&r=all |
| By: | Wolfgang Breuer; Ji Cao; Marc Oliver Rieger; K. Can Soypak |
| Abstract: | Previous studies suggest that equity is sold at a premium in capitalmarkets and behavioral economists attribute this equity premium puz-zle to investors’ loss aversion. The market timing literature argues thatmarket evaluation of equity affects capital structure decisions of firms.Combining the two strands, we theoretically and empirically show thatinvestors’ loss aversion positively affects the leverage of firms. The ef-fect is robust to alternative regression approaches, definitions of lever-age, subperiods, and subsamples. The positive relation between lossaversion and leverage vanishes for firms with high bankruptcy risks,with high foreign holdings, or with high institutional holdings. Con-trolling for additional preferences and cultural variables does not sub-due the effect. Thus, unlike previous studies, we not only discusswhether mispricing of external financing instruments affects capitalstructure, but we elaborate on the reasons that generate mispricing inthe first place. |
| Keywords: | Capital Structure, Loss Aversion, Equity Premium, Lever-age, Bankruptcy Risk |
| JEL: | C61 G32 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:trr:qfrawp:201904&r=all |
| By: | Jose Apesteguia; Miguel Ángel Ballester |
| Abstract: | We propose a novel measure of goodness of fit for stochastic choice models: that is, the maximal fraction of data that can be reconciled with the model. The procedure is to separate the data into two parts: one generated by the best specification of the model and another representing residual behavior. We claim that the three elements involved in a separation are instrumental to understanding the data. We show how to apply our approach to any stochastic choice model and then study the case of four well-known models, each capturing a different notion of randomness. We illustrate our results with an experimental dataset. |
| Keywords: | Goodness of fit; Stochastic Choice; Residual Behavior |
| JEL: | C91 D81 G12 G20 G41 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1757&r=all |
| By: | Marc Oliver Rieger; Mei Wang; Daniel Hausmann |
| Abstract: | It is a common phenomenon that people tend to acquire more information in a decision task than a rational benchmark would predict. What is the reason behind this? To answer this question we conducted an information acquisition experiment that has been carefully designed to disentangle several plausible reasons for information overpurchasing before decision-making. A within-subject experiment with a simple basic information acquisition task on an investment project, equivalent formulated lotteries, estimations of probability, and an additional option to satisfy one’s curiosity was used to test five different potential reasons. The results show that overpurchasing of information can be explained nearly entirely by systematic information-processing errors (misestimationor incorrect Bayesean updating). Other factors, such as overoptimism on the validity of new information, risk aversion, ambiguity aversion, and curiosity for (irrelevant) information, play at most a minor role. Our results imply that overinvestment in information acquisition can be mostly avoided if more detailed informationis given to decision makers on how much (or little) further information can improve the decision quality. |
| Keywords: | sequential information acquisition, ambiguity, Bayesian updating, financial decision-making |
| JEL: | G11 G12 G1 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:trr:qfrawp:202002&r=all |
| By: | Eric Budish |
| Abstract: | This paper presents a simple price-theory approach to Covid-19 lockdown and reopening policy. The key idea is to conceptualize R ≤ 1 as a constraint, allowing traditional economic and societal goals to be the policy objective, all within a simple static optimization framework. This approach yields two main insights. First, the R ≤ 1 constraint imposes a disease-transmission budget on society. Society should optimally spend this budget on the activities with the highest ratio of utility to disease-transmission risk, dropping activities with too low a ratio of utility to risk. Second, masks, tests, and other simple interventions increase activities' utility-to-risk ratios, and hence expand how much activity society can engage in and utility society can achieve while staying within the R ≤ 1 budget. A simple numerical example, based on estimates from the medical literature for R0 and the efficacy of facemasks and complementary measures, suggests the potential gains are enormous. Overall, the formulation provides economics language for a policy middle ground between society-wide lockdown and ignore-the-virus, and a new infectious threat response paradigm alongside “eradicate” and “minimize”. |
| JEL: | C61 D47 D6 D7 E6 H12 I1 I18 L51 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28093&r=all |
| By: | Ilke AYDOGAN (IESEG School of Managemen,t, UMR 9221 - LEM, F-59000 Lille, France; and Department of Economics, Bocconi University, Italy); Loic BERGER (CNRS, IESEG School of Management, Univ. Lille, UMR 9221 -LEM, F-59000 Lille, France; RFF-CMCC European Institute of Economics and the Environment (EIEE), and Centro Euro-Mediterraneo sui Cambiamenti Climatici, Italy); Valentina BOSETTI (Department of Economics and IGIER, Bocconi University, and RFF-CMCC European Institute on Economics and the Environment (EIEE), Centro Euro-Mediterraneo sui Cambiamenti Climatici, Italy); Ning LIU (Schoof of Economics and Management, Beihang University, China) |
| Abstract: | We explore decision-making under uncertainty using a framework that decom-poses uncertainty into three distinct layers: (1)risk, which entails inherent ran-domness within a given probability model; (2)model uncertainty, which entailssubjective uncertainty about the probability model to be used; and (3)model mis-specification, which entails uncertainty about the presence of the correct probabilitymodel among the set of models considered. Using a new experimental design, wemeasure individual attitudes towards these different layers of uncertainty and ex-amine the role of each of them in characterizing attitudes towards ambiguity. Inaddition to providing new insights into the underlying processes behind ambigu-ity aversion, our study provides the first empirical evidence of the role of modelmisspecification in decision-making under uncertainty. |
| Keywords: | Ambiguity aversion, model uncertainty, model misspecification, non-expectedutility, reduction of compound lotteries |
| JEL: | D81 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ies:wpaper:e202007&r=all |
| By: | James C. Cox; Vjollca Sadiraj; Susan Xu Tang |
| Abstract: | Decades of robust data from public good games with positive and negative externalities challenges internal consistency axioms that comprise rational choice theory. This paper reports an extension of rational choice theory that incorporates observable moral reference points. This morally monotonic choice theory is consistent with data in the literature and has idiosyncratic features that motivate new experimental designs. We report experiments on choices in public good games with positive, negative, and mixed-sign externalities, with and without non-binding quotas on extractions or minimum contributions. Data favors choices predicted by moral monotonicity over choices predicted by: (a) conventional rational choice theory; or (b) conventional reference dependent model of loss aversion. |
| Keywords: | choice theory, public goods, externalities, crowding out, moral reference points, experiment |
| JEL: | C91 D62 H41 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2020-05&r=all |
| By: | C. Bram Cadsby (Department of Economics and Finance, University of Guelph, Guelph ON Canada); Fei Song (Ted Rogers School of Management, Ryerson University, Toronto ON Canada); Nick Zubanov (University of Konstanz, Konstanz, Germany) |
| Abstract: | We examine the response of labor supply to short-run wage changes with and without a reference wage (RW) that we manipulate experimentally. We find that, in the absence of RW, labor supply increases monotonically with wage. In contrast, when RW is present, people work more both when wages rise and fall relative to RW. These findings suggest a kink in the labor-supply curve, consistent with income targeting by loss-averse individuals. However, the effects of income targeting are sensitive to context: in a treatment where wages could either rise or fall relative to RW, the kink in the labor-supply curve disappears. |
| Keywords: | labor supply, short-run wage changes, reference wage, loss-aversion, experimental |
| JEL: | D91 J22 J31 M52 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2020-06&r=all |
| By: | Dennis Umlandt |
| Abstract: | This paper proposes a new parametric approach to estimate linear factor pricing mod-els with time-varying risk premia. In contrast to recent contributions to the literature,the framework presented abstains from introducing instrument variables to describethe time variation of risk prices. Instead, time-varying risk prices and exposures followa recursive updating scheme constructed to reduce the one-step ahead prediction errorfrom a cross-sectional factor model at the current observation. This agnostic approachis particularly useful in situations where instrument variables are unavailable or of poorquality. Estimation and inference are done by likelihood maximization. A Monte Carlostudy compares the ability of the method to predict risk prices and returns to that ofa regression-based method that uses noisy signals from true risk price predictors. Ina realistic setting, the two approaches keep pace when the signal contains 80 percentcorrect information. An application to a macro-finance model of currency carry tradesillustrates the novel approach. |
| Keywords: | Dynamic Asset Pricing, Generalized Autoregressive Score Models, Time-varying Risk Premia, Return Predictability |
| JEL: | G12 G17 C58 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:trr:qfrawp:202006&r=all |
| By: | Balaska, Dimitra; Pollalis, Yannis; Dimogerontas, George; Bitsori, Zoi; Karaferis, Dimitrios; Malisiova, Vasiliki |
| Abstract: | AIM: The purpose of the present study is to evaluate the quality of life (QoL) of patients with spinal problems before and after surgery with the use of the EQ-5D-5L health status questionnaire. MATERIALS - METHODS: The research is based on primary data collection of 314 patients who completed the questionnaires at three different times: a) preoperatively; that is, after completion of conservative treatment which involved medication, physiotherapy, etc., b) ten days postoperatively and c) immediately after the first post-operative month. RESULTS: Out of the 314 patients, aged between 34 and 79 years (mean age 52±15,07) who participated in this study, 172 were males (54,8%) and 142 females (45,2%). 77,71% of the patients suffered from a herniated intervertebral disc and 22,29% from spondylolisthesis in the lumbar region. Total improvement of the quality of life (QoL) in our study was on average 0,59 QALYs at 10 days and 0,82 QALYs at 30 days. The total average direct cost of these surgical interventions amounted to 9341,86±4042,53 euro while the index of cost-utility for the sample population was estimated to be 15870,16 euro/ QALY at 10 days. This index decreased considerably to 11867,14 euro/ QALY at 30 days after the surgical intervention since the average benefit in QALYs increased and the QoL improved. CONCLUSIONS: The evaluation of the data of this study was highlighted the high degree of effectiveness of each surgery applied to treat the symptomatology of patients . All the statistical tests applied to the sample showed a very significant improvement of all variables used by the questionnaire for all intervals evaluated after surgery. Lastly, there has also been a very large improvement in the overall QoL of patients. |
| Keywords: | Utility, Cost, Quality of Life, Spinal Column |
| JEL: | I15 |
| Date: | 2020–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104308&r=all |
| By: | Andreas Eisl (Centre d'études européennes et de politique comparée) |
| Abstract: | Au cours des dernières années, tous les pays membres de la zone euro ont introduit des règles budgétaires nationales qui fixent des limites à la dette et aux déficits publics. Les règles budgétaires réduisent le pouvoir discrétionnaire des responsables politiques en matière budgétaire et affectent leur capacité à utiliser les budgets publics pour le pilotage macroéconomique et pour la redistribution. Alors que ces contraintes institutionnelles vont à l’encontre des préférences traditionnelles des partis sociaux-démocrates, on peut s’étonner de constater que ces derniers ont soutenu les réformes des règles budgétaires pendant la crise de la dette en Europe. Cette étude défend l’idée selon laquelle les règles sur le déficit structurel, un concept central des initiatives de réforme au sein de la zone euro, ont abouti à un consensus ambigu entre les partis du centre-droit et ceux du centre-gauche. Tandis que les partis conservateurs et libéraux soutiennent généralement les contraintes sur le pouvoir discrétionnaire des institutions, les règles sur le déficit structurel – contrairement aux règles sur le déficit nominal – ont permis aux partis sociaux-démocrates et à d’autres partis de gauche de les relier à leurs préférences pour des politiques keynésiennes contra-cycliques plus larges et au maintien des impôts sur les revenus tout au long du cycle économique, afin d’assurer la capacité redistributive de l’État. Sur la base d’études de cas portant sur trois pays (Allemagne, Autriche et France), cet article montre comment le concept de règles sur le déficit structurel a facilité – du moins au niveau discursif – le soutien des contraintes institutionnelles par les partis sociaux-démocrates et par d’autres partis de gauche. Sur le plan théorique, la présente étude développe la recherche sur le rôle de l’ambiguïté dans la prise de décisions politiques, en (re)conceptualisant trois formes d’ambiguïté sous-jacentes au consensus ambigu : l’ambiguïté textuelle, l’ambiguïté institutionnelle et l’ambiguïté conceptuelle. |
| Keywords: | Ambiguous consensus; Comparative politics; Eurozone governance; Fiscal rules; Ideational ambiguity; Social democratic parties; Ambiguïté conceptuelle; Consensus ambigu; Gouvernance de la zone euro; Partis sociaux-démocrates; Politiques comparées; Règles budgétaires |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/jpcu0knbl80rpibin9slrlrlb&r=all |
| By: | Marc Oliver Rieger; Mei Wang; Thorsten Hens |
| Abstract: | Time preferences are central to human decision making; therefore, a thorough understanding of their international differences is highly relevant. Previous measurements, however, vary widely in their methodology, from questions answered on the Likert scale to lottery-type questions. We show that these different measurements correlate to a large degree and that they have a common factor that can predict a broad spectrum of variables: the countries’ credit ratings, their innova-tion, gas prices (as a proxy for environmental protection), body mass index (as a proxy for health consciousness), and average years of school attendance. The resulting data on this time prefer-ence factor for N=117 countries and regions will be highly useful for further research. Our ag-gregation method is applicable to merge cross-cultural studies that measure the same latent construct with different methodologies. |
| Keywords: | decision making, time preferences |
| JEL: | G11 G12 G14 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:trr:qfrawp:202007&r=all |
| By: | Lee, K.; Linton, O.; Whang, Y-J.; |
| Abstract: | We propose nonparametric tests for the null hypothesis of time stochastic dominance. Time stochastic dominance makes a partial order of different prospects over time based on the net present value criteria for general utility and time discount function classes. For example, time stochastic dominance can be used for ranking investment strategies or environmental policies based on the expected net present value of the future benefits. We consider an Lp integrated test statistic and derive its large sample distribution. We suggest a path-wise bootstrap procedures that allows for time dependence in a panel data structure. In addition to the least favorable case based bootstrap method, we describe two approaches, the contact-set approach and the numerical delta method, for the purpose of enhancing a power of the test. We prove the asymptotic validity of our testing procedures. We investigate the finite sample performance of the tests in simulation studies. As an illustration, we apply the proposed tests to evaluate the welfare improvement of the Thailand’s Million Baht Village Fund Program. |
| Keywords: | Bootstrap, Discounting, Stochastic Dominance, Testing |
| JEL: | C10 C12 C14 |
| Date: | 2020–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:20121&r=all |
| By: | Ji Cao; Marc Oliver Rieger |
| Abstract: | We revisit the article by Niu and Zeng (FRL, 2018) on “Corporatefinancing with loss aversion and disagreement”. We find two problem-atic points in the mathematical derivation of their fundamental resultsand suggest ways to remedy these problems. |
| Keywords: | Corporate Finance, Capital Structure, Loss Aversion, ProspectTheory |
| JEL: | C61 G32 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:trr:qfrawp:201903&r=all |
| By: | Vincent Boucher (CRREP - Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques - ULaval - Université Laval [Québec], CREATE, Centre de Recherche en économie de l'Environnement, de l'Agroalimentaire, des Transports et de l'Énergie - ULaval - Université Laval [Québec]); Yann Bramoullé (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université) |
| Abstract: | Heckman and MaCurdy (1985) first showed that binary outcomes are compatible with linear econometric models of interactions. This key insight was unduly discarded by the literature on the econometrics of games. We consider general models of linear interactions in binary outcomes that nest linear models of peer effects in networks and linear models of entry games. We characterize when these models are well defined. Errors must have a specific discrete structure. We then analyze the models' game-theoretic microfoundations. Under complete information and linear utilities, we characterize the preference shocks under which the linear model of interactions forms a Nash equilibrium of the game. Under incomplete information and independence, we show that the linear model of interactions forms a Bayes-Nash equilibrium if and only if preference shocks are iid and uniformly distributed. We also obtain conditions for uniqueness. Finally, we propose two simple consistent estimators. We revisit the empirical analyses of teenage smoking and peer effects of Lee, Li, and Lin (2014) and of entry into airline markets of Ciliberto and Tamer (2009). Our reanalyses showcase the main interests of the linear framework and suggest that the estimations in these two studies suffer from endogeneity problems. |
| Keywords: | Binary Outcomes,Linear Probability Model,Peer Effects,Econometrics of Games |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03031767&r=all |
| By: | Pastore, Chiara (University of York); Schurer, Stefanie (University of Sydney); Tymula, Agnieszka (University of Sydney); Fuller, Nicholas (University of Sydney); Caterson, Ian (University of Sydney) |
| Abstract: | We study economic decision-making of 284 people with obesity and pre-diabetes who participated in a 6-months randomised controlled trial to control weight and prevent diabetes. To elicit preferences, we use incentive-compatible experimental tasks that participants completed during their medical screening examination. We find that, on average, participants are risk averse, show no evidence of present bias, and have impatience levels comparable to healthy samples described in the international literature. Variations in present bias and impatience are not significantly associated with variations in markers of obesity. But we find a significant negative association between risk tolerance and BMI and other markers of obesity for women. A 1 standard deviation increase in risk tolerance is associated with a 0.2 standard deviation drop in BMI and waist circumference. Impatience moderates the link between risk tolerance and obesity. We replicate the key finding of interaction effects between risk and time preferences using survey data from a nationally representative sample of 6,281 Australians with similar characteristics. Deviating markedly from the literature, we conclude that risk tolerance brings benefits for health outcomes if combined with patience in this understudied but highly policy-relevant population. |
| Keywords: | impatience, risk tolerance, obesity, incentive-compatible economic experiment, lab-in-field experiment |
| JEL: | C9 D9 D81 I12 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13915&r=all |