|
on Utility Models and Prospect Theory |
|
Issue of 2021‒11‒08
nine papers chosen by |
| By: | Shimokawa, Satoru; Kudo, Haruyo; Kito, Yayoi; Yamaguchi, Michitoshi; Niiyama, Yoko |
| Keywords: | Food Consumption/Nutrition/Food Safety |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae21:315249&r= |
| By: | Barigozzi, Francesca; Cremer, Helmuth |
| Abstract: | We study how workers’ concern for coworkers’ ability (CfCA) affects competition in the labor market. We consider two firms offering nonlinear contracts to a unit mass of prospective workers. Firms may differ in their marginal productivity, while workers are heterogeneous in their ability (high or low), and in their taste for being employed by any of the two firms. Workers receive a utility premium when employed by the firm hiring the workforce with larger average ability and they suffer a utility loss in the opposite case. These premiums/losses are endogenously determined. When workers’ ability is observable and the difference in firms’ marginal productivities is strictly positive, we show that CfCA increases surplus but it also increases firms’ competition for high-ability workers. As a result, CfCA benefits high-ability workers but is detrimental to firms. In addition, CfCA exacerbates the existing distortion in sorting of high-ability workers to firms: too many workers are hired by the least efficient firm. When ability is not observable, the additional surplus appropriated by high-ability workers is eroded by overincentivization (countervailing incentives) and the more so when CfCA is high. Conversely, high-types’sorting improves when CfCA is low and remains the same when it is high. |
| Keywords: | Concern for Coworkers' Quality; Competition; Screening; Sorting |
| Date: | 2021–11–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126143&r= |
| By: | Philippe Jehiel (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Matthew Leduc (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Successive governments must decide whether to implement an affirmative action policy aimed at improving the performance distribution of the next generation of a targeted group. Workers receive wages corresponding to their expected performance, suffer a feeling of injustice when getting less than their performance, and employers do not (perfectly) observe whether workers benefited from affirmative action. We find that welfare-maximizing governments choose to implement affirmative action perpetually, despite the resulting feeling of injustice that eventually dominates the purported beneficial effect on the performance of the targeted group. This is in contrast with the first-best that requires affirmative action to be temporary. |
| Keywords: | Affirmative Action,General Equilibrium,Loss Aversion,Prospect Theory,Moral Hazard,Game Theory |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03359602&r= |
| By: | Stéphane Gauthier (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, Institute for Fiscal Studies); Guy Laroque (Institut d'Études Politiques [IEP] - Paris, UCL - University College of London [London], Institute for Fiscal Studies) |
| Abstract: | This paper assesses the usefulness of stochastic contracts in the presence of informational asymmetries. It identifies circumstances where a stochastic redistribution policy is socially dominated by the deterministic policy where after-tax income lotteries are replaced with their certainty equivalent. It also provides a parametric example where every stochastic menu which has the optimal deterministic menu as certainty equivalent is dominated by the deterministic menu, while there exist feasible and incentive compatible lotteries improving locally upon the deterministic menu. |
| Keywords: | Asymmetric information,Random contracts,Certainty equivalent |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03359574&r= |
| By: | Carlo Zappia (Università degli Studi di Siena) |
| Abstract: | On the occasion of the assessment of the enduring influence of Keynes's Treatise on Probability at 100 years, this paper focuses on its relevance for decision theory. The paper places emphasis on Keynes's introduction of the epistemic notion of probabilities that often are non-numerical, as a theoretical object intended to replace frequency probabilities. The paper argues that, as non-numerical probabilities make it possible to deal with uncertainty as if individuals were endowed with interval-valued probabilities, Keynes's 1921 critique of contemporary frequency probability theory turns out to be relevant also with regard to the yet to be established subjective probability theory. Although non-numerical probabilities were used by Keynes to criticize the contemporary application of probability to conduct, it must be acknowledged that, still today, they may constitute an appropriate tool for decision-making when confronting uncertainty, as he hinted at in his late 1930s correspondence with Hugh Townshend. |
| Keywords: | probability, uncertainty, decision-making |
| JEL: | B21 B31 D81 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2021-36&r= |
| By: | Roman Frydman (New York University); Joshua Stillwagon (Babson College) |
| Abstract: | We develop a novel characterization of participants` forecasts with a mixture of normal variables arising from a Markov component. Using this characterization, we formulate five behavioral specifications, including four implied by the diagnostic expectations approach, as well as three implied by REH, and derive several new predictions for Coibion and Gorodnichenko`s regression of forecast errors on forecast revisions. Predictions of all eight specifications are inconsistent with the observed instability of individual CG regressions` coefficients, based on inflation forecasts from 24 professionals. Our findings suggest how to build on key insights of the REH and behavioral approaches in specifying individuals` forecasts. |
| Keywords: | Diagnostic Expectations, Rational Expectations, Model Selection, Structural Change, Inflation Forecasts` Survey |
| JEL: | C52 D80 D83 D91 E31 E71 |
| Date: | 2021–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:inetwp163&r= |
| By: | Fels, Markus |
| JEL: | D01 D81 G22 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242418&r= |
| By: | Yuta Yasui (School of Economics and Management, Kochi University of Technology) |
| Abstract: | Assumptions of competitive structure are often crucial for marginal cost estimation and counterfactual predictions. This paper introduces tests for price competition among multi-product rms. The tests are based on the firm's revealed preference (revealed pro t function). In contrast to other approaches based on estimated demand functions such as conduct parameter estimation, the proposed tests do not require any instrumental variables, even though the models can accommodate structural error terms. In this paper, I employ a demand structure introduced by Nocke and Schutz (2018), the discrete/continuous choice model, which nests the multinomial logit demand and CES demand functions. Any price and quantity data can be rationalized by price competition under a discrete/continuous choice model and increasing marginal costs. Adding more assumptions to the demand function, such as logit, CES, or the co-evolving and log-concave property produces some falsifiable restrictions. |
| Keywords: | revealed preference, multi-product, conduct, discrete/continuous |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:kch:wpaper:sdes-2021-14&r= |
| By: | Leonardo Becchetti (Dipartimento di Economia e Finanza, Università di Roma Tor Vergata); Sara Mancini (Dipartimento di Economia e Finanza, Università di Roma Tor Vergata); Nazaria Solferino (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria) |
| Abstract: | Based on results of the different fields of the game theoretic literature on strategic interactions and social dilemmas, gift exchange and procedural utility, we argue that corporate social responsibility and relational skills i) with other firms; ii) between employers and workers iii) among workers and iv) with stakeholders are associated to positive effects on productivity. We test our research hypothesis on a large representative sample of Italian firms including the universe of medium and large companies and accounting for 91.3 percent of domestic employees. We find that companies with higher relational skills report significantly higher value added per worker after controlling for relevant concurring factors. More specifically, the identified significant skill related components are: i) corporate policies considering strategic workers’ wellbeing; ii) team working attitudes considered as priority soft skills when hiring workers; iii) initiatives in favour of the productive network operating in the same local area and iv) involvement of stakeholders in CSR projects. |
| Keywords: | relational skills, corporate productivity, gift exchange, team working |
| JEL: | L22 L25 L14 J53 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:clb:wpaper:202106&r= |