Behavioral Economics Commons^™

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.

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, …

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 independent …

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 …

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. While …

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 …

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

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

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

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 ebullient about the prospects …

Estimating The Economic Impact Of Garvan Woodland Gardens, Katherin A. Deck, Viktoria Riiman

Publications and Presentations

The study is organized as follows. First, the facilities and programs at Garvan Woodland Gardens are described in detail. Next, information on visitor and member counts, employment and volunteers, and financial information from the Gardens are provided. Finally, the results of the economic impact analysis from the IMPLAN input‐output model are presented for employment, value‐added, and output impacts on the Hot Springs area and the state of Arkansas. The detailed employment and output impacts by industry are available in the Appendix. Estimated employment impacts are compared to the county and state employment data from the Bureau of Labor Statistics to …

University Of Arkansas Athletics Economic Impact, Katherine A. Deck, Mervin Jebaraj

Publications and Presentations

The Center for Business and Economic Research in the Sam M. Walton College of Business at the University of Arkansas was approached by the Athletic Department to conduct an economic impact study of its operations and the visitor impacts associated with the athletic events held on the University of Arkansas campus. This study examines the economic impact of the athletic department from three broad categories of activities that produce economic impacts. The first category presented in this study is the direct economic impacts of the operations of the University of Arkansas Athletic Department, using annual expenditures of the department and …

Understanding Child Work And Child Labor In The 21st Century: A Focus On Malawi And Tanzania, Courage Chikomborero Mudzongo

Faculty Publications - Doctor of Psychology (PsyD) Program

Child labor is on the increase and this is exacerbating an already desperate situation in Africa. Past research has focused on which levels of determinants are most effective in influencing the decision on children’s activities. Using the Malawi Integrated Household Survey and the Tanzania National Panel Survey, this research seeks to unearth the factors that influence the number of hours that child workers and laborers work. I can conclude that the greatest degrees of change are at the individual level as child’s enrollment status is significant for child workers from Malawi and Tanzania and laborers from Tanzania. At the community …

An Evolutionary Analysis Of Turnout With Conformist Citizens, Massimiliano Landi, Mauro Sodini

Research Collection School Of Economics

We propose an evolutionary analysis of a voting game where citizens have a preference for conformism that adds to the instrumental preference for the electoral outcome. Multiple equilibria arise, and some generate high turnout. Simulations of best response dynamics show that high turnout is asymptotically stable if conformism matters but its likelihood depends on the reference group for conformism: high turnout is more likely when voters care about their own group's choice, as this better overrides the free rider problem of voting games. Comparative statics on the voting cost distribution, the population's size or the groups' composition are also done.

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

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 ‘products’. Our …

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

All Faculty Scholarship

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 settlement outcomes. …

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 in the …

Central Place Theory And City Size Distribution, Wen-Tai Hsu

Research Collection School Of Economics

This paper proposes a theory of city size distribution via a hierarchy approach rather than the popular random growth process. It does so by formalizing central place theory using an equilibrium entry model and specifying the conditions under which city size distribution follows a power law. Central place theory describes the way in which a hierarchical city system with different layers of cities serving differently sized market areas is formed from a uniformly populated space. The force driving the city size differences in this model is the heterogeneity in economies of scale across goods. The city size distribution under a …

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 be present …

Gains From Diversification: A Regret Theory Approach, Martin Egozcue

Martin Egozcue

No abstract provided.

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 response …

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, greater …

The Role Of Macroeconomic And Group Threat In Prejudice, Aaron Hass

Morehead State Theses and Dissertations

A thesis presented to the faculty of the College of Science and Technology at Morehead State University in partial fulfillment of the requirements for the Degree of Master of Science by Aaron Haas on June 11, 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

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.

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

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 …

Revisiting The Economic Impact Of The Natural Gas Activity In The Fayetteville Shale: 2008-2012, Katherine A. Deck, Viktoria Riiman

Publications and Presentations

In 2008, the Center for Business and Economic Research released a study that estimated the economic impact of projected Fayetteville Shale activities from 2008 to 2012. This updated report revisits the assumptions of the initial study, reviews the impact of actual activities in the Fayetteville Shale from 2008 to 2011, and delivers some insights into projected impacts for 2012.

Exploration and production of natural gas in the Fayetteville Shale area generates direct effects from drilling wells and causes the need for supporting activities such as construction, transportation, storage, and distribution. Moreover, investments made by oil and gas companies produce indirect …

Palliative Commitments, Leo Buser

Mahurin 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.