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Author: Harry Rolls
Publisher:
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Languages : en
Pages : 0
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Author: Harry Rolls
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Languages : en
Pages : 0
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Author: Yudistira Permana
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Languages : en
Pages :
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Author: Kinga Posadzy
Publisher: Linköping University Electronic Press
ISBN: 9176854213
Category :
Languages : en
Pages : 16
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The objective of this thesis is to improve the understanding of human behavior that goes beyond monetary rewards. In particular, it investigates social influences in individual’s decision making in situations that involve coordination, competition, and deciding for others. Further, it compares how monetary and social outcomes are perceived. The common theme of all studies is uncertainty. The first four essays study individual decisions that have uncertain consequences, be it due to the actions of others or chance. The last essay, in turn, uses the advances in research on decision making under uncertainty to predict behavior in riskless choices. The first essay, Fairness Versus Efficiency: How Procedural Fairness Concerns Affect Coordination, investigates whether preferences for fair rules undermine the efficiency of coordination mechanisms that put some individuals at a disadvantage. The results from a laboratory experiment show that the existence of coordination mechanisms, such as action recommendations, increases efficiency, even if one party is strongly disadvantaged by the mechanism. Further, it is demonstrated that while individuals’ behavior does not depend on the fairness of the coordination mechanism, their beliefs about people’s behavior do. The second essay, Dishonesty and Competition. Evidence from a stiff competition environment, explores whether and how the possibility to behave dishonestly affects the willingness to compete and who the winner is in a competition between similarly skilled individuals. We do not find differences in competition entry between competitions in which dishonesty is possible and in which it is not. However, we find that due to the heterogeneity in propensity to behave dishonestly, around 20% of winners are not the best-performing individuals. This implies that the efficient allocation of resources cannot be ensured in a stiff competition in which behavior is unmonitored. The third essay, Tracing Risky Decision Making for Oneself and Others: The Role of Intuition and Deliberation, explores how individuals make choices under risk for themselves and on behalf of other people. The findings demonstrate that while there are no differences in preferences for taking risks when deciding for oneself and for others, individuals have greater decision error when choosing for other individuals. The differences in the decision error can be partly attributed to the differences in information processing; individuals employ more deliberative cognitive processing when deciding for themselves than when deciding for others. Conducting more information processing when deciding for others is related to the reduction in decision error. The fourth essay, The Effect of Decision Fatigue on Surgeons’ Clinical Decision Making, investigates how mental depletion, caused by a long session of decision making, affects surgeon’s decision to operate. Exploiting a natural experiment, we find that surgeons are less likely to schedule an operation for patients who have appointment late during the work shift than for patients who have appointment at the beginning of the work shift. Understanding how the quality of medical decisions depends on when the patient is seen is important for achieving both efficiency and fairness in health care, where long shifts are popular. The fifth essay, Preferences for Outcome Editing in Monetary and Social Contexts, compares whether individuals use the same rules for mental representation of monetary outcomes (e.g., purchases, expenses) as for social outcomes (e.g., having nice time with friends). Outcome editing is an operation in mental accounting that determines whether individuals prefer to first combine multiple outcomes before their evaluation (integration) or evaluate each outcome separately (segregation). I find that the majority of individuals express different preferences for outcome editing in the monetary context than in the social context. Further, while the results on the editing of monetary outcomes are consistent with theoretical predictions, no existing model can explain the editing of social outcomes.
Author: Santiago Ignacio Sautua
Publisher:
ISBN:
Category :
Languages : en
Pages : 234
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This dissertation consists of three chapters about decision making under uncertainty. Chapter 1: "Testing between Models of Smoking Risk Perceptions" Research in social and health psychology reports that smokers systematically underestimate the personal smoking risk. I build a model that captures potential determinants of smoking risk perceptions to investigate how smoking may cause an underestimation of the risk. The model is based on the premise that smokers have an incentive to be optimistic: because quitting may be hard, they find it reassuring to think that smoking is not so risky. Drawing upon the theoretical framework, I suggest two empirical tests of the model--one using survey data and another based on a laboratory experiment. Chapter 2: "Does Uncertainty Cause Inertia in Decision Making? An Experimental Study of the Role of Regret Aversion and Indecisiveness" Previous research has shown that in many situations there is clear inertia in individual decision making--that is, a tendency for decision makers to choose a status quo option. The status quo option may be the result of a previous choice, or may simply be the option designated as the "default." While inertia may simply reflect the fact that individuals view the status quo option as optimal, there are other factors that may explain this observed behavior. I conduct a laboratory experiment to thoroughly investigate two potential determinants of inertia in uncertain environments: (i) regret aversion and (ii) indecisiveness. A decision maker may experience regret when the outcome of a choice compares unfavorably to the outcome that would have occurred had she made a different choice. Alternatively, a decision maker may be indecisive among the options if she does not know the probability distributions over the relevant outcomes. I use a between-subjects design, with varying conditions, to identify the effects of regret aversion and indecisiveness on choice behavior. In each condition, participants choose between two simple real gambles, one of which is assigned to be the status quo. I find that inertia is quite large and that both mechanisms are equally important. Chapter 3: "Risk, Ambiguity, and Diversification" Attitudes toward risk influence the decision to diversify among uncertain options. Yet, because in most situations the probability distributions over outcomes are unknown, attitudes toward ambiguity may also play an important role. In a simple laboratory experiment, I investigate the effect of ambiguity on the decision to diversify. Participants have the opportunity to diversify between gambles; in one condition, all gambles are risky, whereas in the other all gambles are ambiguous. I find that diversification is more prevalent and more persistent under ambiguity than under risk. Moreover, excess diversification under ambiguity is driven by participants who stick with a status quo gamble when diversification is not feasible. This behavioral pattern cannot be accommodated by major theories of choice under ambiguity.
Author: Di Wang
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Donald J. Brown
Publisher: Springer Nature
ISBN: 3030595129
Category : Business & Economics
Languages : en
Pages : 88
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This book is an exploration of the ubiquity of ambiguity in decision-making under uncertainty. It presents various essays on behavioral economics and behavioral finance that draw on the theory of Black Swans (Taleb 2010), which argues for a distinction between unprecedented events in our past and unpredictable events in our future. The defining property of Black Swan random events is that they are unpredictable, i.e., highly unlikely random events. In this text, Mandelbrot’s (1972) operational definition of risky random unpredictable events is extended to Black Swan assets – assets for which the cumulative probability distribution or conditional probability distribution of random future asset returns is a power distribution. Ambiguous assets are assets for which the uncertainties of future returns are not risks. Consequently, there are two disjoint classes of Black Swan assets: Risky Black Swan assets and Ambiguous Black Swan assets, a new class of ambiguous assets with unpredictable random future outcomes. The text is divided into two parts, the first of which focuses on affective moods, introduces affective utility functions and discusses the ambiguity of Black Swans. The second part, which shifts the spotlight to affective equilibrium in asset markets, features chapters on affective portfolio analysis and Walrasian and Gorman Polar Form Equilibrium Inequalities. In order to gain the most from the book, readers should have completed the standard introductory graduate courses on microeconomics, behavioral finance, and convex optimization. The book is intended for advanced undergraduates, graduate students and post docs specializing in economic theory, experimental economics, finance, mathematics, computer science or data analysis.
Author: Jacques Drèze
Publisher: CUP Archive
ISBN: 9780521386975
Category : Business & Economics
Languages : en
Pages : 460
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Professor Dreze is a highly respected mathematical economist and econometrician. This book brings together some of his major contributions to the economic theory of decision making under uncertainty, and also several essays. These include an important essay on 'Decision theory under moral hazard and state dependent preferences' that significantly extends modern theory, and which provides rigorous foundations for subsequent chapters. Topics covered within the theory include decision theory, market allocation and prices, consumer decisions, theory of the firm, labour contracts, and public decisions.
Author: Marcela Tarazona-Gomez
Publisher:
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Category :
Languages : en
Pages :
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Using laboratory experiments as a tool, this dissertation contributes to the debate of decision making under risk three domains : The first essay presents the results of an experiment that elicits prudence and risk aversion. We find that the majority of subjects are prudent and that a big proportion is simultaneously prudent and risk averse, even if we find no correlation between prudence and risk aversion. The second essay investigates the effect of uncertainty on the decision to finance a public good. Our theoretical prediction is that risk adverse individuals will reduce their contributions to the production of a public good when facing more uncertainty. Results reveal that this prediction is confirmed but only for economists, and that non economists rather increase their contributions. In the last essay we elicit individual preferences over social risk. We analyze if these preferences are correlated with individual preferences over individual risk and over the well-being of others. We find that social risk attitudes closely approximate individual risk attitudes.
Author: Erick Davidson
Publisher:
ISBN:
Category : Dynamic programming
Languages : en
Pages : 107
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Abstract: This dissertation explores decision making under risk and uncertainty by professionals and markets composed of professionals. Both essays use empirical data from some of the most competitive economic environments imaginable. The first essay looks at market prices resulting from the sum of both professional and lay choices while the second analyzes the individual choices of professional gamblers. Both essays propose a theoretical framework to not just positively identify what professionals do, but also prescribe normatively what they should do. In both cases, the two are found to be different. The first essay, Market Response to Risk and Uncertainty, 2004 Hurricane Forecasts, develops a simple function to explain insurance losses from hurricanes as a function of short-term forecasts. After demonstrating the accuracy of the function in explaining 2004 insurance claims, the remainder of the essay looks at the stock market's use of these forecasts in pricing insurer and US economy risk. Despite causing billions in damages, both hurricanes and hurricane forecasts are found to have only marginal impacts on financial markets. Surprisingly, markets fail to make efficient use of hurricane forecasts in pricing both insurer and general market exposure to hurricane risk. A potential explanation for market inefficiency around hurricane information is that, like researchers, financial actors may be confounding uncertainty for unpredictability. The second essay, Know When to Hold'em, examines a specific decision within a highly popular, high-stakes version of poker. Like financial markets analyzed in the first essay, professional gamblers must make risky decisions with uncertain probabilities of success. Gamblers are found to be both overly conservative in their choices and overly confident in their abilities to predict uncertain outcomes. A simple statistical model that generalizes across situations to form a naïve probability of having the best cards, is found to be as effective in decision making as players' true expectations of winning. Additionally, a dynamic theoretical model is presented in order to show professional divergence from risk-neutral expected profit maximization in the credit constrained world of tournament poker. Interestingly the value function, derived from this model, is equivalent to an optimal stock price of a poker player.
Author: Michael Balch
Publisher: North-Holland
ISBN:
Category : Business & Economics
Languages : en
Pages : 464
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