... 1 Giacomo Bonanno Department of Economics University of California Davis, CA 95616-8578, USA ... more ... 1 Giacomo Bonanno Department of Economics University of California Davis, CA 95616-8578, USA 1. Risk and uncertainty ... An example of this is the uncertainty whether a second-hand car we are considering buying was involved in a serious accident in the past. ...
This paper experimentally studies the extraction decisions of a sole-owner in a fishery, the popu... more This paper experimentally studies the extraction decisions of a sole-owner in a fishery, the population dynamics of which behave according to the standard deterministic logistic growth model. Four treatments were implemented which differed in the level of information supplied to the experimental subjects. The theoretical solution was used to evaluate the behaviour of experimental subjects. The data reveal high efficiency losses due to the lack of information on population dynamics and stock size. Efficiency varied between treatments according to the information conditions.
There is a large theoretical literature in both economics and psychology on decision making under... more There is a large theoretical literature in both economics and psychology on decision making under ambiguity (as distinct from risk) and many preference functionals proposed in this literature for describing behaviour in such contexts. However, the empirical literature is scarce and largely confined to testing between various proposed functionals. Using a new design, in which we create genuine ambiguity in the laboratory and can control the amount of ambiguity, we generate data which enables us to estimate several of the proposed preference functionals. In particular, we fit Subjective Expected Utility, Prospect Theory, Choquet Expected Utility, Maximin, Maximax, and Minimum Regret preference functionals, and examine how the fit changes when we vary the ambiguity. We find that the Choquet formulation performs best overall, though it is clear that different decision makers have different functionals. We also identify new decision rules which are not explicitly modelled in the literatu...
When people take decisions under risk, it is not only the expected utility that is important, but... more When people take decisions under risk, it is not only the expected utility that is important, but also the shape of the distribution of utility: clearly the dispersion is important, but also the skewness. For given mean and dispersion, decision-makers treat positively and negatively skewed prospects differently. This paper presents a new behaviourally-inspired model for decision making under risk, incorporating both dispersion and skewness. We run a horse-race of this new model against six other models of decision-making under risk and show that it outperforms many in terms of goodness of fit and shows a reasonable performance in predictive ability. It can incorporate the prominent anomalies of standard theory such as the Allais paradox, the valuation gap, and preference reversals, and also the behavioural patterns observed in experiments that cannot be explained by Rank Dependent Utility Theory. JEL classification: D81.
Eliciting the level of risk aversion of experimental subjects is of crucial concern to experiment... more Eliciting the level of risk aversion of experimental subjects is of crucial concern to experimenters. In the literature there are a variety of methods used for such elicitation; the concern of the experiment reported in this paper is to compare them. The methods we investigate are the following: Holt–Laury price lists; pairwise choices, the Becker–DeGroot–Marschak method; allocation questions. Clearly their relative efficiency in measuring risk aversion depends upon the numbers of questions asked; but the method itself may well influence the estimated risk-aversion. While it is impossible to determine a ‘best’ method (as the truth is unknown) we can look at the differences between the different methods. We carried out an experiment in four parts, corresponding to the four different methods, with 96 subjects. In analysing the data our methodology involves fitting preference functionals; we use four, Expected Utility and Rank-Dependent Expected Utility, each combined with either a CRR...
This paper presents a new theory, called Preference Cloud Theory, of decision-making under uncert... more This paper presents a new theory, called Preference Cloud Theory, of decision-making under uncertainty. This new theory provides an explanation for empirically-observed Preference reversals. Central to the theory is the incorporation of preference imprecision which arises because of individuals' vague understanding of numerical probabilities. We combine this concept with the use of the Alpha model (which builds on Hurwicz's criterion) and construct a simple model which helps us to understand various anomalies discovered in the experimental economics literature that standard models cannot explain.
Inspired by Clower's conjecture that the necessity of trading through money in monetised economie... more Inspired by Clower's conjecture that the necessity of trading through money in monetised economies might hinder convergence to competitive equilibrium, and hence, for example, cause unemployment, we experimentally investigate behaviour in markets where trading has to be done through money. In order to evaluate the properties of these markets, we compare their behaviour to behaviour in markets without money, where money cannot intervene. As the trading mechanism might be a compounding factor, we investigate two kinds of market mechanism: the double auction, where bids, asks and trades take place in continuous time throughout a trading period; and the clearing house, where bids and asks are placed once in a trading period, and which are then cleared by an aggregating device. We thus have four treatments, the pairwise combinations of nonmonetised/monetised trading with double auction/clearing house. We find that: convergence is faster under non-monetised trading, implying that the necessity of using money to facilitate trade hinders convergence; that monetised trading is noisier than non-monetised trading; and that the volume of trade and realised surpluses are higher with the double auction than the clearing house. As far as efficiency is concerned, monetised trading lowers both informational and allocational efficiency, and while the double auction outperforms the clearing house in terms of allocational efficiency, the clearing house is marginally better than the double auction in terms of informational efficiency when trade is through money. Crucially we confirm the conjecture that inspired these experiments: that the necessity to use money in trading hinders convergence to competitive equilibrium, lowers realised trades and surpluses, and hence may cause unemployment.
When and How to Satisfice An Experimental Investigation This paper is about satisficing behaviour... more When and How to Satisfice An Experimental Investigation This paper is about satisficing behaviour. Rather tautologically, this is when decision-makers are satisfied with achieving some objective, rather than in obtaining the best outcome. The term was coined by Herbert Simon in 1955, and has stimulated many discussions and theories. Prominent amongst these theories are models of incomplete preferences, models of behaviour under ambiguity, theories of rational inattention, and search theories. Most of these, however, seem to lack an answer to at least one of two key questions: when should the decision-maker (DM) satisfice; and how should the DM satisfice. In a sense, search models answer the latter question (in that the theory tells the DM when to stop searching), but not the former; moreover, usually the question as to whether any search at all is justified is left to a footnote. A recent paper by Manski (2017) fills the gaps in the literature and answers the questions: when and how to satisfice? He achieves this by setting the decision problem in an ambiguous situation (so that probabilities do not exist, and many preference functionals can therefore not be applied) and by using the Minimax Regret criterion as the preference functional. The results are simple and intuitive. This paper reports on an experimental test of his theory. The results show that some of his propositions (those less so.
Inspired by the conjecture that the necessity of trading through money in monetarised economies m... more Inspired by the conjecture that the necessity of trading through money in monetarised economies might hinder convergence to competitive equilibrium, and hence, for example, cause unemployment, we experimentally investigate behaviour in sequential markets. In order to evaluate the properties of these markets, we compare their behaviour to behaviour in simultaneous markets, where money does not intervene. As the trading mechanism might be a compounding factor, we investigate two kinds of mechanism: the double auction, where bids, asks and trades take place in continuous time throughout a trading period; and the clearing house, where bids and asks are placed once in a trading period, and which are then cleared by an aggregating device. We thus have four treatments, the pairwise combinations of simultaneous/sequential with double auction/clearing house. We find that: convergence is faster under simultaneous trading, implying that the necessity of using money to facilitate trade hinders ...
The Random Utility Model (RUM) and the Random Preference Model (RPM) are important tools in the e... more The Random Utility Model (RUM) and the Random Preference Model (RPM) are important tools in the economist’s toolbox when estimating preference functionals from experimental data. In an important recent paper in this journal, Apesteguia and Ballester (2018) cautioned decision theorists against using the RUM, suggesting that the RPM may be preferable. This short note comments on this paper, and concludes that RUM does not suffer from the drawbacks suggested in their paper.
Potentially dynamically-inconsistent individuals create particular problems for economics, as the... more Potentially dynamically-inconsistent individuals create particular problems for economics, as their behaviour depends upon whether and how they attempt to resolve their potential inconsistency. This paper reports on the results of a new experiment designed to help us distinguish between the different types that may exist. We classify people into four types: myopic, naive, resolute and sophisticated. We implement a new and simple experimental design in which subjects are asked to take two sequential decisions (interspersed by a random move by Nature) concerning the allocation of a given sum of money. The resulting data enables us to classify the subjects. We find that the majority are resolute, a significant minority are sophisticated and rather few are naive or myopic.
The disinvestment decision is of importance in many contexts: if funds are tied up for too long i... more The disinvestment decision is of importance in many contexts: if funds are tied up for too long in a poorly-performing project, then opportunities for re-investment may be missed. Optimal disinvestment theory is a component of real options theory, but is relatively ignored by experimentalists. Two recent papers conclude that decision-makers stay in projects longer than that prescribed by the optimal behaviour of a risk-neutral agent. This departure is explained through riskaversion, but without a formal hypothesis under test. We report here on an experiment which explains the behaviour of the subjects through an estimationof risk-aversion. We also explore an alternative hypothesis – that subjects are myopic. Our results show that few subjects appear to be risk-neutral, many seem to be risk-averse but few are myopic.
The Lucas (1978) asset pricing model lies at the heart of modern macro-finance. At its core, it p... more The Lucas (1978) asset pricing model lies at the heart of modern macro-finance. At its core, it provides an analysis of the equilibrium price of a long-lived financial asset in an economy where consumption is the objective, and the sole purpose of the asset is to smooth consumption through time. Experimental tests of the model are mainly confined to Crockett et al (forthcoming 2019) and Asparouhova et al (2016), both of them using a particular instantiation of the Lucas Model. Here we adopt a different instantiation, extending their analyses from a two-period oscillating world to a three-period cyclical world. We also go one step further, and compare this asset market solution (to a consumption-smoothing problem) with the perhaps intuitively more reasonable solution provided by a credit market, in which agents can directly trade consumption between periods. We find that the latter is more efficient in smoothing consumption, and that prices in the credit market are closer to their eq...
This paper represents an intersection between two lines of research. The first is portfolio choic... more This paper represents an intersection between two lines of research. The first is portfolio choice theory, which underlies much of finance; the second is the elicitation of preferences under uncertainty. The theory of the behaviour of financial markets builds heavily on portfolio choice theory; until recently this has assumed that preferences are of a particularly simple kind. In contrast research on preferences has revealed that people have more sophisticated preferences. This paper tries to bring the two fields together by investigating, in a portfolio choice context, the preferences that are revealed by decisions. In the second of these two fields, researchers are increasingly using allocation problems to elicit the preferences of subjects, believing that such problems are more informative, and perhaps more natural, than other elicitation methods. At the same time portfolio choice theory is itself concerned with an allocation problem. Usually in experimental finance the allocatio...
This paper represents an intersection between two lines of research. The first is portfolio choic... more This paper represents an intersection between two lines of research. The first is portfolio choice theory, which underlies much of finance; the second is the elicitation of preferences under uncertainty. The theory of the behaviour of financial markets builds heavily on portfolio choice theory; until recently this has assumed that preferences are of a particularly simple kind. In contrast research on preferences has revealed that people have more sophisticated preferences. This paper tries to bring the two fields together by investigating, in a portfolio choice context, the preferences that are revealed by decisions. In the second of these two fields, researchers are increasingly using allocation problems to elicit the preferences of subjects, believing that such problems are more informative, and perhaps more natural, than other elicitation methods. At the same time portfolio choice theory is itself concerned with an allocation problem. Usually in experimental finance the allocatio...
Search and switching costs are two market frictions that are well known in the literature for pre... more Search and switching costs are two market frictions that are well known in the literature for preventing people from switching to a new and cheaper provider. Previous experimental literature has studied these two frictions in isolation. However, field evidence shows that these two frictions frequently occur together. Recently, a theoretical framework has been developed (Wilson in Eur Econ Rev 56(6):1070–1086) which studies the interplay between these two costs. We report on an experiment testing this theory to see if individual behaviour with search and switching costs is in line with the theoretical predictions derived from the optimal choice rule of Wilson. The results show the crucial role of the search strategy: not only, according to Wilson model, the search cost has a greater deterrent impact on search than the switching costs, but also the sub-optimality of the search strategy is the major source of sub-optimality in the switching behaviour.
Prospects for Mathematical Psychological Economics
Psychological Economics, 1988
Economists and psychologists share an ultimate aim: to predict human behavior. Being economists a... more Economists and psychologists share an ultimate aim: to predict human behavior. Being economists and psychologists — rather than mathematicians, chartists, computer scientists, or whatever — they also share a penultimate aim: to explain human behavior. Both aims imply a belief that there is something systematic about human behavior. This, in turn, implies that there must be some role for mathematics in modeling that behavior. The only question that remains, therefore, is what role?
Transactions of the Royal Society of South Africa, 1989
SUMMARY In this article, written to commemorate the centenary of Schrodinger's birth, the lif... more SUMMARY In this article, written to commemorate the centenary of Schrodinger's birth, the life and major areas of intellectual activity of one of the giants of twentieth-century physics are reviewed under the following headings: early years, Louis de Broglie, wave mechanics, quantum mechanics, the Nobel Prize, paradoxes, relativity and field theory, contributions to biology, science in relation to ancient thought and philosophy, and the final years.
This paper reports on an experimental test of the acceptability of the Principle of Accountabilit... more This paper reports on an experimental test of the acceptability of the Principle of Accountability. This is a principle of social justice, and states, “individuals should be rewarded for factors under their control […], but not for factors outside their control” (Cappelen and Tungodden (2009)). We specifically ask for acceptability of the principle underlying it, rather than for particular rewards in particular instances. We carry out the test with both an Internal and an External Dictator, conducting a laboratory experiment with a total of 240 subjects. We find that there is broad, but not overwhelming support for the Principle. When the Principle is internally inconsistent no clear preference emerges, which is not surprising.
... 1 Giacomo Bonanno Department of Economics University of California Davis, CA 95616-8578, USA ... more ... 1 Giacomo Bonanno Department of Economics University of California Davis, CA 95616-8578, USA 1. Risk and uncertainty ... An example of this is the uncertainty whether a second-hand car we are considering buying was involved in a serious accident in the past. ...
This paper experimentally studies the extraction decisions of a sole-owner in a fishery, the popu... more This paper experimentally studies the extraction decisions of a sole-owner in a fishery, the population dynamics of which behave according to the standard deterministic logistic growth model. Four treatments were implemented which differed in the level of information supplied to the experimental subjects. The theoretical solution was used to evaluate the behaviour of experimental subjects. The data reveal high efficiency losses due to the lack of information on population dynamics and stock size. Efficiency varied between treatments according to the information conditions.
There is a large theoretical literature in both economics and psychology on decision making under... more There is a large theoretical literature in both economics and psychology on decision making under ambiguity (as distinct from risk) and many preference functionals proposed in this literature for describing behaviour in such contexts. However, the empirical literature is scarce and largely confined to testing between various proposed functionals. Using a new design, in which we create genuine ambiguity in the laboratory and can control the amount of ambiguity, we generate data which enables us to estimate several of the proposed preference functionals. In particular, we fit Subjective Expected Utility, Prospect Theory, Choquet Expected Utility, Maximin, Maximax, and Minimum Regret preference functionals, and examine how the fit changes when we vary the ambiguity. We find that the Choquet formulation performs best overall, though it is clear that different decision makers have different functionals. We also identify new decision rules which are not explicitly modelled in the literatu...
When people take decisions under risk, it is not only the expected utility that is important, but... more When people take decisions under risk, it is not only the expected utility that is important, but also the shape of the distribution of utility: clearly the dispersion is important, but also the skewness. For given mean and dispersion, decision-makers treat positively and negatively skewed prospects differently. This paper presents a new behaviourally-inspired model for decision making under risk, incorporating both dispersion and skewness. We run a horse-race of this new model against six other models of decision-making under risk and show that it outperforms many in terms of goodness of fit and shows a reasonable performance in predictive ability. It can incorporate the prominent anomalies of standard theory such as the Allais paradox, the valuation gap, and preference reversals, and also the behavioural patterns observed in experiments that cannot be explained by Rank Dependent Utility Theory. JEL classification: D81.
Eliciting the level of risk aversion of experimental subjects is of crucial concern to experiment... more Eliciting the level of risk aversion of experimental subjects is of crucial concern to experimenters. In the literature there are a variety of methods used for such elicitation; the concern of the experiment reported in this paper is to compare them. The methods we investigate are the following: Holt–Laury price lists; pairwise choices, the Becker–DeGroot–Marschak method; allocation questions. Clearly their relative efficiency in measuring risk aversion depends upon the numbers of questions asked; but the method itself may well influence the estimated risk-aversion. While it is impossible to determine a ‘best’ method (as the truth is unknown) we can look at the differences between the different methods. We carried out an experiment in four parts, corresponding to the four different methods, with 96 subjects. In analysing the data our methodology involves fitting preference functionals; we use four, Expected Utility and Rank-Dependent Expected Utility, each combined with either a CRR...
This paper presents a new theory, called Preference Cloud Theory, of decision-making under uncert... more This paper presents a new theory, called Preference Cloud Theory, of decision-making under uncertainty. This new theory provides an explanation for empirically-observed Preference reversals. Central to the theory is the incorporation of preference imprecision which arises because of individuals' vague understanding of numerical probabilities. We combine this concept with the use of the Alpha model (which builds on Hurwicz's criterion) and construct a simple model which helps us to understand various anomalies discovered in the experimental economics literature that standard models cannot explain.
Inspired by Clower's conjecture that the necessity of trading through money in monetised economie... more Inspired by Clower's conjecture that the necessity of trading through money in monetised economies might hinder convergence to competitive equilibrium, and hence, for example, cause unemployment, we experimentally investigate behaviour in markets where trading has to be done through money. In order to evaluate the properties of these markets, we compare their behaviour to behaviour in markets without money, where money cannot intervene. As the trading mechanism might be a compounding factor, we investigate two kinds of market mechanism: the double auction, where bids, asks and trades take place in continuous time throughout a trading period; and the clearing house, where bids and asks are placed once in a trading period, and which are then cleared by an aggregating device. We thus have four treatments, the pairwise combinations of nonmonetised/monetised trading with double auction/clearing house. We find that: convergence is faster under non-monetised trading, implying that the necessity of using money to facilitate trade hinders convergence; that monetised trading is noisier than non-monetised trading; and that the volume of trade and realised surpluses are higher with the double auction than the clearing house. As far as efficiency is concerned, monetised trading lowers both informational and allocational efficiency, and while the double auction outperforms the clearing house in terms of allocational efficiency, the clearing house is marginally better than the double auction in terms of informational efficiency when trade is through money. Crucially we confirm the conjecture that inspired these experiments: that the necessity to use money in trading hinders convergence to competitive equilibrium, lowers realised trades and surpluses, and hence may cause unemployment.
When and How to Satisfice An Experimental Investigation This paper is about satisficing behaviour... more When and How to Satisfice An Experimental Investigation This paper is about satisficing behaviour. Rather tautologically, this is when decision-makers are satisfied with achieving some objective, rather than in obtaining the best outcome. The term was coined by Herbert Simon in 1955, and has stimulated many discussions and theories. Prominent amongst these theories are models of incomplete preferences, models of behaviour under ambiguity, theories of rational inattention, and search theories. Most of these, however, seem to lack an answer to at least one of two key questions: when should the decision-maker (DM) satisfice; and how should the DM satisfice. In a sense, search models answer the latter question (in that the theory tells the DM when to stop searching), but not the former; moreover, usually the question as to whether any search at all is justified is left to a footnote. A recent paper by Manski (2017) fills the gaps in the literature and answers the questions: when and how to satisfice? He achieves this by setting the decision problem in an ambiguous situation (so that probabilities do not exist, and many preference functionals can therefore not be applied) and by using the Minimax Regret criterion as the preference functional. The results are simple and intuitive. This paper reports on an experimental test of his theory. The results show that some of his propositions (those less so.
Inspired by the conjecture that the necessity of trading through money in monetarised economies m... more Inspired by the conjecture that the necessity of trading through money in monetarised economies might hinder convergence to competitive equilibrium, and hence, for example, cause unemployment, we experimentally investigate behaviour in sequential markets. In order to evaluate the properties of these markets, we compare their behaviour to behaviour in simultaneous markets, where money does not intervene. As the trading mechanism might be a compounding factor, we investigate two kinds of mechanism: the double auction, where bids, asks and trades take place in continuous time throughout a trading period; and the clearing house, where bids and asks are placed once in a trading period, and which are then cleared by an aggregating device. We thus have four treatments, the pairwise combinations of simultaneous/sequential with double auction/clearing house. We find that: convergence is faster under simultaneous trading, implying that the necessity of using money to facilitate trade hinders ...
The Random Utility Model (RUM) and the Random Preference Model (RPM) are important tools in the e... more The Random Utility Model (RUM) and the Random Preference Model (RPM) are important tools in the economist’s toolbox when estimating preference functionals from experimental data. In an important recent paper in this journal, Apesteguia and Ballester (2018) cautioned decision theorists against using the RUM, suggesting that the RPM may be preferable. This short note comments on this paper, and concludes that RUM does not suffer from the drawbacks suggested in their paper.
Potentially dynamically-inconsistent individuals create particular problems for economics, as the... more Potentially dynamically-inconsistent individuals create particular problems for economics, as their behaviour depends upon whether and how they attempt to resolve their potential inconsistency. This paper reports on the results of a new experiment designed to help us distinguish between the different types that may exist. We classify people into four types: myopic, naive, resolute and sophisticated. We implement a new and simple experimental design in which subjects are asked to take two sequential decisions (interspersed by a random move by Nature) concerning the allocation of a given sum of money. The resulting data enables us to classify the subjects. We find that the majority are resolute, a significant minority are sophisticated and rather few are naive or myopic.
The disinvestment decision is of importance in many contexts: if funds are tied up for too long i... more The disinvestment decision is of importance in many contexts: if funds are tied up for too long in a poorly-performing project, then opportunities for re-investment may be missed. Optimal disinvestment theory is a component of real options theory, but is relatively ignored by experimentalists. Two recent papers conclude that decision-makers stay in projects longer than that prescribed by the optimal behaviour of a risk-neutral agent. This departure is explained through riskaversion, but without a formal hypothesis under test. We report here on an experiment which explains the behaviour of the subjects through an estimationof risk-aversion. We also explore an alternative hypothesis – that subjects are myopic. Our results show that few subjects appear to be risk-neutral, many seem to be risk-averse but few are myopic.
The Lucas (1978) asset pricing model lies at the heart of modern macro-finance. At its core, it p... more The Lucas (1978) asset pricing model lies at the heart of modern macro-finance. At its core, it provides an analysis of the equilibrium price of a long-lived financial asset in an economy where consumption is the objective, and the sole purpose of the asset is to smooth consumption through time. Experimental tests of the model are mainly confined to Crockett et al (forthcoming 2019) and Asparouhova et al (2016), both of them using a particular instantiation of the Lucas Model. Here we adopt a different instantiation, extending their analyses from a two-period oscillating world to a three-period cyclical world. We also go one step further, and compare this asset market solution (to a consumption-smoothing problem) with the perhaps intuitively more reasonable solution provided by a credit market, in which agents can directly trade consumption between periods. We find that the latter is more efficient in smoothing consumption, and that prices in the credit market are closer to their eq...
This paper represents an intersection between two lines of research. The first is portfolio choic... more This paper represents an intersection between two lines of research. The first is portfolio choice theory, which underlies much of finance; the second is the elicitation of preferences under uncertainty. The theory of the behaviour of financial markets builds heavily on portfolio choice theory; until recently this has assumed that preferences are of a particularly simple kind. In contrast research on preferences has revealed that people have more sophisticated preferences. This paper tries to bring the two fields together by investigating, in a portfolio choice context, the preferences that are revealed by decisions. In the second of these two fields, researchers are increasingly using allocation problems to elicit the preferences of subjects, believing that such problems are more informative, and perhaps more natural, than other elicitation methods. At the same time portfolio choice theory is itself concerned with an allocation problem. Usually in experimental finance the allocatio...
This paper represents an intersection between two lines of research. The first is portfolio choic... more This paper represents an intersection between two lines of research. The first is portfolio choice theory, which underlies much of finance; the second is the elicitation of preferences under uncertainty. The theory of the behaviour of financial markets builds heavily on portfolio choice theory; until recently this has assumed that preferences are of a particularly simple kind. In contrast research on preferences has revealed that people have more sophisticated preferences. This paper tries to bring the two fields together by investigating, in a portfolio choice context, the preferences that are revealed by decisions. In the second of these two fields, researchers are increasingly using allocation problems to elicit the preferences of subjects, believing that such problems are more informative, and perhaps more natural, than other elicitation methods. At the same time portfolio choice theory is itself concerned with an allocation problem. Usually in experimental finance the allocatio...
Search and switching costs are two market frictions that are well known in the literature for pre... more Search and switching costs are two market frictions that are well known in the literature for preventing people from switching to a new and cheaper provider. Previous experimental literature has studied these two frictions in isolation. However, field evidence shows that these two frictions frequently occur together. Recently, a theoretical framework has been developed (Wilson in Eur Econ Rev 56(6):1070–1086) which studies the interplay between these two costs. We report on an experiment testing this theory to see if individual behaviour with search and switching costs is in line with the theoretical predictions derived from the optimal choice rule of Wilson. The results show the crucial role of the search strategy: not only, according to Wilson model, the search cost has a greater deterrent impact on search than the switching costs, but also the sub-optimality of the search strategy is the major source of sub-optimality in the switching behaviour.
Prospects for Mathematical Psychological Economics
Psychological Economics, 1988
Economists and psychologists share an ultimate aim: to predict human behavior. Being economists a... more Economists and psychologists share an ultimate aim: to predict human behavior. Being economists and psychologists — rather than mathematicians, chartists, computer scientists, or whatever — they also share a penultimate aim: to explain human behavior. Both aims imply a belief that there is something systematic about human behavior. This, in turn, implies that there must be some role for mathematics in modeling that behavior. The only question that remains, therefore, is what role?
Transactions of the Royal Society of South Africa, 1989
SUMMARY In this article, written to commemorate the centenary of Schrodinger's birth, the lif... more SUMMARY In this article, written to commemorate the centenary of Schrodinger's birth, the life and major areas of intellectual activity of one of the giants of twentieth-century physics are reviewed under the following headings: early years, Louis de Broglie, wave mechanics, quantum mechanics, the Nobel Prize, paradoxes, relativity and field theory, contributions to biology, science in relation to ancient thought and philosophy, and the final years.
This paper reports on an experimental test of the acceptability of the Principle of Accountabilit... more This paper reports on an experimental test of the acceptability of the Principle of Accountability. This is a principle of social justice, and states, “individuals should be rewarded for factors under their control […], but not for factors outside their control” (Cappelen and Tungodden (2009)). We specifically ask for acceptability of the principle underlying it, rather than for particular rewards in particular instances. We carry out the test with both an Internal and an External Dictator, conducting a laboratory experiment with a total of 240 subjects. We find that there is broad, but not overwhelming support for the Principle. When the Principle is internally inconsistent no clear preference emerges, which is not surprising.
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