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Behavioral Economics Commons

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2012

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Articles 1 - 30 of 89

Full-Text Articles in Behavioral Economics

The Smallest Upper Bound For The Pth Absolute Central Moment Of A Class Of Random Variables, Martin Egozcue, Luis Fuentes García, Wing Keung Wong, Ricardas Zitikis Dec 2012

The Smallest Upper Bound For The Pth Absolute Central Moment Of A Class Of Random Variables, Martin Egozcue, Luis Fuentes García, Wing Keung Wong, Ricardas Zitikis

Martin Egozcue

We establish the smallest upper bound for the p absolute central moment over the class of all random variables with values in a compact interval. Numerical values of the bound are calculated for the first ten integer values of p, and its asymptotic behaviour derived when p tends to infinity. In addition, we establish an analogous bound in the case of all symmetric random variables with values in a compact interval. Such results play a role in a number of areas including actuarial science, economics, finance, operations research, and reliability.


An Optimal Strategy For Maximizing The Expected Real- Estate Selling Price: Accept Or Reject An Offer?, Martin Egozcue, Luis Fuentes García, Ricardas Zitikis Dec 2012

An Optimal Strategy For Maximizing The Expected Real- Estate Selling Price: Accept Or Reject An Offer?, Martin Egozcue, Luis Fuentes García, Ricardas Zitikis

Martin Egozcue

Motivated by a real-life situation, we put forward a model and then derive an optimal strategy that maximizes the expected real-estate selling price when one of the only two remaining buyers has already made an offer but the other one is yet to make. Since the seller is not sure whether the other buyer would make a lower or higher offer, and given no recall, the seller needs a strategy to decide whether to accept or reject the first-come offer. The herein derived optimal seller's strategy, which maximizes the expected selling price, is illustrated under several scenarios, such as ...


Enfoques Teóricos De Las Reglas Por Defecto En El Derecho De Contratos: Complementariedades, Coincidencias Y Contradicciones, Daniel Monroy Dec 2012

Enfoques Teóricos De Las Reglas Por Defecto En El Derecho De Contratos: Complementariedades, Coincidencias Y Contradicciones, Daniel Monroy

Daniel A Monroy C

El artículo muestra una lectura crítica en lo que respecta a la noción, las funciones y el diseño de las reglas por defecto en el derecho de contratos a partir de tres enfoques teóricos a saber: la perspectiva jurídica tradicional; la visión del Análisis Económico del Derecho (AED) en su versión clásica y; el enfoque del denominado behavioral law and economics (BL&E). El documento destaca con particular atención que en lo correspondiente a la noción y las funciones de las reglas por defecto en el derecho de contratos, existe un alto nivel de coherencia entre la perspectiva jurídica tradicional por un lado y, la visión del AED por el otro; pero, la diferencia de estos dos enfoques esta dada en lo que corresponde al diseño de la regla por defecto, cuestión que si bien pareciera ser irrelevante desde aquella perspectiva, ocupa un rol protagónico en el contexto de ...


Does Green Consumerism Increase The Acceptance Of Wind Power?, Caroline L. Noblet, John Thøgersen Dec 2012

Does Green Consumerism Increase The Acceptance Of Wind Power?, Caroline L. Noblet, John Thøgersen

Publications

In this paper, we discuss what might be termed an action-based learning approach to promoting important pro-environmental actions, such as support for or acceptance of environmental policy. Such an approach involves promoting simple and easy behaviours as entry points for more radical steps towards sustainability, referred to as “catalytic” or “wedge” behaviours. Despite the obvious need for innovative approaches to promote important pro-environmental behaviour, and sound theoretical backing for such concepts, there is a lack of research testing the key propositions of this approach. In a survey study based on a random sample of residents of the state of Maine ...


Traditional And Market-Based Financial Intermediaries: Three Essays Examining Their Risk Behavior, Delisting Behavior, And Reactions To Economic Policy Uncertainty, Marc S. Schaffer Dec 2012

Traditional And Market-Based Financial Intermediaries: Three Essays Examining Their Risk Behavior, Delisting Behavior, And Reactions To Economic Policy Uncertainty, Marc S. Schaffer

Dissertations

In the wake of our country’s greatest financial crisis since the Great Depression, the need to better understand the risks and behaviors associated with financial intermediaries has become apparent. In particular, the literature distinguishes between traditional or depository-based financial intermediaries and their market-based or non-depository counterparts. This dissertation focuses on understanding the behavioral differences across these two groups by examining their equity-based risk differences, their stock market delisting differences, and lastly how these firms react to economic policy uncertainty.

The first essay uses an equity-based approach to quantify the average firm-level risk that is associated with these intermediary groups ...


Grandparents As Guards: A Game Theoretic Analysis Of Inheritance And Post Marital Residence In A World Of Uncertain Paternity, Brishti Guha Dec 2012

Grandparents As Guards: A Game Theoretic Analysis Of Inheritance And Post Marital Residence In A World Of Uncertain Paternity, Brishti Guha

Research Collection School Of Economics

I unify the following (1) men face paternal uncertainty while women do not face maternal uncertainty, (2) putative fathers and paternal kin care about true paternity, (3) paternity confidence is systematically lower in matrilocal cultures than in patrilocal ones, (4) inheritance tends to be patrilineal in high paternity confidence cultures and matrilineal in low confidence ones, and (5) most societies with patrilineal inheritance were patrilocal while most societies with matrilineal inheritance were matrilocal. I model the co-evolution of inheritance patterns and post-marital residence patterns - and their relationship with paternity uncertainty. Using a game theoretic model, I examine how a "high ...


Convex Combinations Of Quadrant Dependent Copulas, Martin Egozcue, Luis Fuentes García, Wing Wong, Ricardas Zitikis Nov 2012

Convex Combinations Of Quadrant Dependent Copulas, Martin Egozcue, Luis Fuentes García, Wing Wong, Ricardas Zitikis

Martin Egozcue

It is well known that quadrant dependent (QD) random variables are also quadrant dependent in expectation (QDE). Recent literature has offered examples rigorously establishing the fact that there are QDE random variables which are not QD. The examples are based on convex combinations of specially chosen QD copulas: one negatively QD and another positively QD. In this paper we establish general results that determine when convex combinations of arbitrary QD copulas give rise to negatively or positively QD/QDE copulas. In addition to being an interesting mathematical exercise, the established results are helpful when modeling insurance and financial portfolios.


The Nature Of Risk Preferences: Evidence From Insurance Choices, Levon Barseghyan, Francesca Molinari, Joshua C. Teitelbaum, Ted O'Donoghue Nov 2012

The Nature Of Risk Preferences: Evidence From Insurance Choices, Levon Barseghyan, Francesca Molinari, Joshua C. Teitelbaum, Ted O'Donoghue

Georgetown Law Faculty Publications and Other Works

The authors use data on insurance deductible choices to estimate a structural model of risky choice that incorporates "standard" risk aversion (diminishing marginal utility for wealth) and probability distortions. They find that probability distortions--characterized by substantial overweighting of small probabilities and only mild insensitivity to probability changes--play an important role in explaining the aversion to risk manifested in deductible choices. This finding is robust to allowing for observed and unobserved heterogeneity in preferences. They demonstrate that neither Kőszegi-Rabin loss aversion alone nor Gul disappointment aversion alone can explain our estimated probability distortions, signifying a key role for probability weighting.


Schooling, Political Participation, And The Economy, Filipe R. Campante, Davin Chor Nov 2012

Schooling, Political Participation, And The Economy, Filipe R. Campante, Davin Chor

Research Collection School Of Economics

We investigate how the link between individual schooling and political participation is a ected by country characteristics. Using individual survey data, we nd that political participation is more responsive to schooling in land-abundant countries, and less responsive in human capital-abundant countries, even while controlling for country political institutions and cultural attitudes. We propose an explanation that centers on how individuals allocate the use of their human capital. A relative abundance of land (used primarily in the least skill-intensive sector) or a scarcity of aggregate hu- man capital increases both the level of political participation and its responsiveness to schooling, by ...


Mindscapes And Landscapes: Hayek And Simon On Cognitive Extension, Leslie Marsh Oct 2012

Mindscapes And Landscapes: Hayek And Simon On Cognitive Extension, Leslie Marsh

Leslie Marsh

Hayek’s and Simon’s social externalism runs on a shared presupposition: mind is constrained in its computational capacity to detect, harvest, and assimilate “data” generated by the infinitely fine-grained and perpetually dynamic characteristic of experience in complex social environments. For Hayek, mind and sociality are co-evolved spontaneous orders, allowing little or no prospect of comprehensive explanation, trapped in a hermeneutically sealed, i.e. inescapably context bound, eco-system. For Simon, it is the simplicity of mind that is the bottleneck, overwhelmed by the ambient complexity of the environmental. Since on Simon’s account complexity is unidirectional, Simon is far more ...


Poisoning The Well, Or How Economic Theory Damages, Julie A. Nelson Sep 2012

Poisoning The Well, Or How Economic Theory Damages, Julie A. Nelson

Julie A. Nelson

Contemporary mainstream economics has widely “poisoned the well” from which people get their ideas about the relationship between economics and ethics. The image of economic life as inherently characterized by self-interest, utility- and profitmaximization, and mechanical controllability has caused many businesspeople, judges, sociologists, philosophers, policymakers, critics of economics, and the public at large to come to tolerate greed and opportunism, or even to expect or encourage them. This essay raises and discusses a number of counterarguments that might be made to the charge that current dominant professional practice is having negative ethical effects, as well as discussing some examples of ...


Integration–Segregation Decisions Under General Value Functions: ‘Create Your Own Bundle—Choose 1, 2 Or All 3!’, Martin Egozcue, Sebastien Massoni, Wing Wong, Ricardas Zitkiks Sep 2012

Integration–Segregation Decisions Under General Value Functions: ‘Create Your Own Bundle—Choose 1, 2 Or All 3!’, Martin Egozcue, Sebastien Massoni, Wing Wong, Ricardas Zitkiks

Martin Egozcue

Whether to keep products segregated (e.g., unbundled) or integrate some or all of them (e.g., bundle) has been a problem of profound interest in areas such as portfolio theory in finance, risk capital allocations in insurance and marketing of consumer products. Such decisions are inherently complex and depend on factors such as the underlying product values and consumer preferences, the latter being frequently described using value functions, also known as utility functions in economics. In this paper, we develop decision rules for multiple products, which we generally call ‘exposure units’ to naturally cover manifold scenarios spanning well beyond ...


Predicting Securities Fraud Settlements And Amounts: A Hierarchical Bayesian Model Of Federal Securities Class Action Lawsuits, Blakeley B. Mcshane, Oliver P. Watson, Tom Baker, Sean J. Griffith Sep 2012

Predicting Securities Fraud Settlements And Amounts: A Hierarchical Bayesian Model Of Federal Securities Class Action Lawsuits, Blakeley B. Mcshane, Oliver P. Watson, Tom Baker, Sean J. Griffith

Faculty Scholarship at Penn Law

This paper develops models that predict the incidence and amount of settlements for federal class action securities fraud litigation in the post-PLSRA period. We build hierarchical Bayesian models using data which comes principally from Risk metrics and identify several important predictors of settlement incidence (e.g., the number of different types of securities associated with a case, the company return during the class period) and settlement amount (e.g., market capitalization, measures of newsworthiness). Our models allow us to estimate how the circuit court a case is filed in as well as the industry of the plaintiff firm associate with ...


Gambling On Genes: Ambiguity Aversion Explains Investment In Sisters' Children, Brishti Guha Sep 2012

Gambling On Genes: Ambiguity Aversion Explains Investment In Sisters' Children, Brishti Guha

Research Collection School Of Economics

Many men invest in their sisters’ children instead of their wives’. Existing theories addressing such behavior depend on the level of paternity probability in such men’s societies being implausibly low. I link this anthropologically observed investment behavior with the experimentally observed phenomenon that some individuals are ambiguity averse. Arguing that men’s decisions are made under ambiguity, I show that an increase in ambiguity aversion results in investment in sisters’, rather than wives’, children. I show that this can happen even under risk neutrality. I also consider the special cases of a SEU maximizer and of extreme ambiguity aversion ...


Valuing Improvements To Coastal Waters Using Choice Experiments: An Application To Revisions Of The Eu Bathing Waters Directive, Stephen Hynes, Dugald Tinch, Nick Hanley Aug 2012

Valuing Improvements To Coastal Waters Using Choice Experiments: An Application To Revisions Of The Eu Bathing Waters Directive, Stephen Hynes, Dugald Tinch, Nick Hanley

Working Papers

Planned changes to the European Union’s Bathing Waters Directive (2006/7 EC) will force member states to produce improvements in a number of parameters of coastal water quality. This study uses the choice experiment method to estimate the economic benefits attached to such improvements, based on a sample of recreationalists on beaches in Ireland. The analysis indicates that improvements in all of the bathing water related attributes studied result in positive willingness to pay, and also show evidence of scope effects. Using random parameters and latent class modelling techniques, potential heterogeneity in preferences is then investigated and shown to ...


Gains From Diversification: A Regret Theory Approach, Martin Egozcue Aug 2012

Gains From Diversification: A Regret Theory Approach, Martin Egozcue

Martin Egozcue

No abstract provided.


What Do You Think Would Make You Happier? What Do You Think You Would Choose?, Daniel J. Benjamin, Ori Heffetz, Miles S. Kimball, Alex Rees-Jones Aug 2012

What Do You Think Would Make You Happier? What Do You Think You Would Choose?, Daniel J. Benjamin, Ori Heffetz, Miles S. Kimball, Alex Rees-Jones

Finance Papers

Would people choose what they think would maximize their subjective well-being (SWB)? We present survey respondents with hypothetical scenarios and elicit both choice and predicted SWB rankings of two alternatives. While choice and predicted SWB rankings usually coincide in our data, we find systematic reversals. We identify factors—such as predicted sense of purpose, control over one's life, family happiness, and social status—that help explain hypothetical choice controlling for predicted SWB. We explore how our findings vary by SWB measure and by scenario. Our results have implications regarding the use of SWB survey questions as a proxy for ...


Social Structure, Non-Market Valuation, And Bargaining, Bruno Moreira Wichmann Aug 2012

Social Structure, Non-Market Valuation, And Bargaining, Bruno Moreira Wichmann

Doctoral Dissertations

This dissertation consists of three chapters that explore the effects of social utility on non-market values and bargaining.

Chapter 1 considers the role of social networks in the valuation of public goods. In the model individuals derive utility from both their own direct enjoyment of the public good as well as from the enjoyment of those in their social network. We find that the network increases an individual's valuation for the public good when members of her network have a higher weighted average valuation than she does. The network increases aggregate valuation when it assigns higher importance, that is ...


Essays On Individual Choice And Behavior, Caleb A. Siladke Aug 2012

Essays On Individual Choice And Behavior, Caleb A. Siladke

Doctoral Dissertations

This dissertation consists of three chapters that explore individual choice and behavior. Chapter 1 investigates the incentive properties of advisory referenda using a particular form of NEU theory which replaces the independence axiom assumed in EU theory with two less-restrictive assumptions: betweenness and fanning-out. Betweenness replaces the independence axiom and allows for context dependent risk attitudes. The fanning-out hypothesis then governs the precise way in which risk preferences change given the unique circumstances in which values are elicited. When the assumption of independence is relaxed, an individual's response to an advisory referendum depends on how consequential she believes her ...


Forced Displacement In Colombia, Fernando Estrada Jul 2012

Forced Displacement In Colombia, Fernando Estrada

Fernando Estrada

No abstract provided.


Crime And Moral Hazard: Does More Policing Necessarily Induce Private Negligence?, Brishti Guha, Ashok S. Guha Jun 2012

Crime And Moral Hazard: Does More Policing Necessarily Induce Private Negligence?, Brishti Guha, Ashok S. Guha

Research Collection School Of Economics

Even risk-neutral individuals can insure themselves against crimes by combining direct expenditure on security with costly diversification. In such cases — and even when one of these options is infeasible — greater policing often actually encourages private precautions.


Human Capital Formation And Economic Development In Pakistan: An Empirical Analysis, Muhammad Irfan Chani, Mahboob Ul Hassan, Muhammad Shahid May 2012

Human Capital Formation And Economic Development In Pakistan: An Empirical Analysis, Muhammad Irfan Chani, Mahboob Ul Hassan, Muhammad Shahid

Muhammad Irfan Chani

This study investigates the casual relationship between economic development and formation of human capital in Pakistan. Based on endogenous growth theory, this study empirically tests the standard growth model consisting of gross domestic product (GDP) per capita as a dependent variable and human capital formation, investment in physical capital and labor force as independent variables. Autoregressive distributive lag (ARDL) bound testing approach to cointegration is used to check the long-run equilibrium relationship between the variables included in the model. For checking the causal relationship between economic development and human capital formation, pair-wise Granger causality test is used for time series ...


Market Design In The Presence Of Repugnancy: A Market For Children, Shane Olaleye May 2012

Market Design In The Presence Of Repugnancy: A Market For Children, Shane Olaleye

Honors Theses (PPE)

A market-like mechanism for the allocation of children in both the primary market (market for babies) and the secondary market (adoption market) will result in greater social welfare, hence be more efficient, than the current allocation methods used in practice, even in the face of repugnancy. Since a market for children falls under the realm of repugnant transactions, it is necessary to design a market with enough safeguards to bypass the repugnancy while avoiding the excessive regulations that unnecessarily distort the supply and demand pressures of a competitive market. The goal of designing a market for children herein is two-fold ...


The Evolution Of The “Southwest Effect”, Daniel Webb May 2012

The Evolution Of The “Southwest Effect”, Daniel Webb

Honors Projects in Finance

The “Southwest effect” - a large decrease in fares paired with an increase in traffic - has been discussed around the airline industry since the term was first coined in a government study in the early 1990s. But the airline industry has drastically changed since then - Southwest has become the largest domestic airline, and many of its competitors have had the chance to restructure through bankruptcy.

This study examines some of Southwest's latest city additions, as well as a few of the airline’s intra-California routes where it is now a dominant player. Using publically-available government data, the change in passengers ...


Norms Of Un-Sustainability: Significant, Yet Overlooked, Factors Inhibiting The Adoption Of Environmental Solutions, Douglas J. Miller Jr. May 2012

Norms Of Un-Sustainability: Significant, Yet Overlooked, Factors Inhibiting The Adoption Of Environmental Solutions, Douglas J. Miller Jr.

Honors Theses (PPE)

This study discusses the need for a new approach for addressing environmental issues – because current approaches are either not working or not working at a significant scale – and the role of individuals in both creating and resolving environmental issues. An analysis of the social nature of individual decision-making, with an emphasis on social and descriptive norms, is presented to provide background in the subject that serves as the fundamental topic behind this paper’s main argument. Empirical research then offers an opportunity to demonstrate not only the presence of undesirable (largely descriptive) norms that foster unsustainable individual decision-making and habits ...


What Is The Optimal Subsidy For Exercise? Informing Health Insurance Companies' Fitness Reimbursement Programs, Molly E. Frean May 2012

What Is The Optimal Subsidy For Exercise? Informing Health Insurance Companies' Fitness Reimbursement Programs, Molly E. Frean

Economics Honors Projects

Health care costs account for 17% of US GDP and many programs and policies seek to reduce these costs. This paper focuses on exercise as preventive care due to its immense physiological benefits. I model the profit-maximizing choice of health insurance companies to subsidize exercise and the utility-maximizing choice of individuals to engage in exercise using a traditional principal-agent framework. I then use principles from behavioral economics and psychology to critique these models and provide further insight into understanding our underconsumption of such preventive services. I end with an evaluation of current programs and suggestions for improvement using empirical findings.


Palliative Commitments, Leo Buser May 2012

Palliative Commitments, Leo Buser

Honors College Capstone Experience/Thesis Projects

This project is a speculative fiction novel. The focus of my project is a futuristic palliative care treatment. The intended use if for terminal patients, and it can also be considered an alternative to terminal sedation. The theme of this project mainly came from Biomedical Ethics. This project is also influenced by economics and dreaming supplements. A section explaining the academic influences to the story is provided.


I Would Rather Be Happy Than Right: Consumer Impulsivity, Risky Decision Making, And Accountability, Suzanne Beth Bellman May 2012

I Would Rather Be Happy Than Right: Consumer Impulsivity, Risky Decision Making, And Accountability, Suzanne Beth Bellman

Theses and Dissertations

Consumer impulsivity accounts for a large percentage of purchases yet this aspect of personality is measured with a variety of instruments. Three studies were conducted to examine how measures of consumer impulsiveness relate to each other, other measures of trait level impulsivity, and a variety of decisions and judgments. These studies looked at the relationship between biases resulting from motivated reasoning and the trait of impulsiveness. Motivated reasoning and impulsiveness was considered within the context of consumer and other choice decisions. Consumer impulsivity was found to be related to both general measures of trait level impulsivity as well as containing ...


Is Elitism A Myth? A Study Of Nyc Specialized High Schools, Bonnie Kong May 2012

Is Elitism A Myth? A Study Of Nyc Specialized High Schools, Bonnie Kong

Syracuse University Honors Program Capstone Projects

In New York City, specialized high schools exist in the public school system to educate the city’s most gifted students. These schools are recognized nationally and have a strong focus on math, science, and technology. Benefits of attending these schools include a competitive peer group, challenging courses, and strong alumni networks. Admission to these schools is determined by individuals’ score on the Specialized High School Admissions Test (SHSAT).

This paper measures the impact of attending these specialized high schools on graduation and results on New York State Regents examinations. A regression discontinuity design was used to study seven of ...


The Role Of Family Ties In Mitigating Moral Hazard: Firm-Level Evidence From Tamil Nadu, India, Goldie Chow May 2012

The Role Of Family Ties In Mitigating Moral Hazard: Firm-Level Evidence From Tamil Nadu, India, Goldie Chow

Master's Theses

Drawing on firm-level data from the district of Coimbatore in Tamil Nadu, India, this study explores the role of family ties as a means to counteract potential moral hazard concerns. It is shown that firms will be more likely to employ family relations when faced with a higher hidden context for moral hazard. Specifically, the analysis finds that the presence of family members within the firm is higher when the firm provides general training and that firms that are more likely to do external business with family relations when it is believed that the legal system is not effective. Additionally ...