Characterizing uncertainty aversion through preference for mixtures

Uncertainty aversion is often modelled as (strict) quasi-concavity of preferences over uncertain acts. A theory of uncertainty aversion may be characterized by the pairs of acts for which strict preference for a mixture between them is permitted. This paper provides such a characterization for two leading representations of uncertainty averse preferences; those of Schmeidler [24] (Choquet expected utility or CEU) and of Gilboa and Schmeidler [16] (maxmin expected utility with a non-unique prior or MMEU). This characterization clarifies the relation between the two theories. Received: 20 February 1998/Accepted: 25 March 1999     

AVERAGE PREDICTIVE COMPARISONS FOR MODELS WITH NONLINEARITY, INTERACTIONS, AND VARIANCE COMPONENTS

In a predictive model, what is the expected difference in the outcome associated with a unit difference in one of the inputs? In a linear regression model without interactions, this average predictive comparison is simply a regression coefficient (with associated uncertainty). In a model with nonlinearity or interactions, however, the average predictive comparison in general depends on the values of the predictors. We consider various definitions based on averages over a population distribution of the predictors, and we compute standard errors based on uncertainty in model parameters. We illustrate with a study of criminal justice data for urban counties in the United States. The outcome of interest measures whether a convicted felon received a prison sentence rather than a jail or non-custodial sentence, with predictors available at both individual and county levels. We fit three models: (1) a hierarchical logistic regression with varying coefficients for the within-county intercepts as well as for each individual predictor; (2) a hierarchical model with varying intercepts only; and (3) a nonhierarchical model that ignores the multilevel nature of the data. The regression coefficients have different interpretations for the different models; in contrast, the models can be compared directly using predictive comparisons. Furthermore, predictive comparisons clarify the interplay between the individual and county predictors for the hierarchical models and also illustrate the relative size of varying county effects.     

Perceptions of child sexual abuse:victim and perpetrator characteristics, treatment efficacy, and lay vs. legal opinions of abuse

Two studies examined interactions between victim age and victim response, and victim relation to perpetrator and victim response influencing perceptions of child sexual abuse (CSA). Undergraduates read one of several vignettes describing a sexual encounter between a man and a girl. In Experiment 1, age of the girl was varied; victim age interacted with victim response to increase ratings of abuse and expected trauma for the girl. In Experiment 2, age was held constant while victim relation to perpetrator was varied; men gave higher ratings of abuse than did women for scenarios involving a step father rather than a neighbor, regardless of victim response. In both studies, psychotherapy was expected to help the victim more than the perpetrator and the law was judged to be less stringent than it is regarding CSA. Results suggest that perceptions of CSA are influenced by several factors and that laws regarding CSA may not be well understood.     

STOCHASTIC INPUT DELIVERIES

The subject of this paper is the theory of the firm confronted with uncertain deliveries of its inputs. Examples of this form of uncertainty may be found in interruptible natural gas or electricity supply contracts, labor absenteeism and allocations of gasoline. Analyses of the firm's order quantity expansion path and order intensities are conducted. Comparisons are made between the optimal values of inputs selected under certainty and uncertainty, as well as comparisons between expected out-put and certainty output.     

Stock investors’ preference for short-term vs. long-term bonuses

Bonuses in the finance sector may be based on too short time intervals for environmental and social factors to be taken into account in investment decisions. We report two experiments to investigate whether investors prefer short-term to long-term bonuses. In Experiment 1 employing 27 undergraduates, preferences were measured for four short-term certain bonuses, evenly distributed across a time interval, and one certain long-term bonus at the end of the time interval. A majority chose the short-term bonuses, and in order for the long-term bonus to be equally preferred it had to be about 40% higher than the four added short-term bonuses. Experiment 2 employing another 36 undergraduates introduced outcome uncertainty that more accurately reflects the choices stock investors face. The participants again choose between a long-term bonus and four distributed short-term bonuses. It was shown that uncertainty made more participants prefer the long-term bonus to the added short-term bonuses than when the outcome was certain. A smaller increase of the long-term bonus of about 20% was now required to make it equally attractive as the four added short-term bonuses.     

Gender Differences in Perceived Business Success and Profit Growth Among Family Business Managers

Using data from the 1997–2000 National Family Business Surveys (NFBS), this study investigated the effect of gender on business success and profit growth among family businesses. The Ordinary Least Squares (OLS) results indicate that all else being equal, female managers perceived their businesses as more successful than male managers, and they reported more profit growth between 1996 and 1999 than male managers. The results of the dummy variable interaction approach also show that a differential response existed in profit growth over time between female and male managers in relation to health status, business liabilities, business size, and whether the business was home-based. This study concludes that there are many distinct differences between male and female managers in business performance.     

Increased Public Financing and Health Care Outcomes in Russia

The paper proposes to estimate effectiveness in the rise of public health care expenditure within the 2006 Russian health care project by using the following indicators: mortality of working age population (from all causes except for external), life expectancy at birth, number of illness days for working population, and infant mortality under 1. Regional time-trend eliminated panel data regression analysis demonstrates significance of the dummy for the year 2006 in explaining the first three of the above health outcomes. Price-level adjusted medical staff salary turns out to be a significant predictor, too. Yet, since increased financing was almost unrelated to efficiency issues, it may be seen only as a first step in perfecting the post-Soviet Russian health system.     

OPTION VALUE: A GENERAL APPROACH

This article examines a potential bias if expected consumer surplus is used to measure the benefits of a price change under uncertainty. This bias, which is called option value, may be positive or negative. A general framework is developed for analyzing the determinants of the sign of option value, and this framework is applied to three types of uncertainty: income uncertainty, quality uncertainty, and uncertainty over consumer tastes. In the first two cases, option value has a determinate sign; however, in the last case, option value may be positive, negative, or zero in an unpredictable fashion.     

Reflections on Accuracy

The difference between test accuracy and predictive accuracy is presented and defined. The failure to distinguish between these two types of measures is shown to have led to a misguided debate over the interpretation of prevalence estimates. The distinction between test accuracy defined as sensitivity and specificity, and predictive accuracy defined as positive and negative predictive value is shown to reflect the choice of the denominator used to calculate true positive, false positive, false negative, and true negative rates. It is further shown that any instrument will tend to overestimate prevalence in low base rate populations and underestimate it in those populations where prevalence is high. The implications of these observations are then discussed in terms of the need to define diagnostic thresholds that have clinical and policy relevance.     

How organizational characteristics affect the adaptive tactics used by human service nonprofit managers confronting financial uncertainty

The way that nonprofits respond to funding uncertainty is crucial to their ability to meet goals and position themselves for future success. This article investigates how structural, managerial, and financial characteristics affect the adaptive tactics used by human service nonprofits during times of financial stress. These tactics include adding new programs, reducing programs or staff, expanding or starting joint programs, pursuing earned income, and expanding advocacy involvement. Using longitudinal data on human service nonprofits collected on either side of the 2002–2003 economic downtown, we find that larger size provides organizations with a unique ability to choose among different adaptive tactics, as larger size was significantly predictive of adding new programs, reducing programs, expanding advocacy, and pursuing earned income. Strategic planning was positively associated with innovative tactics such as starting joint programs or pursuing earned income. Financial stress or declines in an organization's major funding source led to cutbacks, as expected, but managers who foresaw these challenges were able to respond proactively by adding programs or starting joint programs. However, managers with more training did not respond much differently than did other managers, and organizational age and use of performance management tools had no effect in guiding organizational responses to financial uncertainty.     

The Role of Self-Conscious Emotions in the Sexual Health of Gay and Bisexual Men: Psychometric Properties and Theoretical Validation of the Sexual Shame and Pride Scale

Researchers have theorized about the role of sexual shame as a mechanism through which sexual minority stress manifests into mental health difficulties, such as sexual compulsivity for gay and bisexual men (GBM), and about the resilience-promoting effects of sexual pride. However, no validated measures to date have directly tapped into these constructs rather than using proxies for them, such as internalized homonegativity. We developed the Sexual Shame and Pride Scale (SSPS) and conducted a psychometric evaluation of it using a sample of 260 highly sexually active GBM. The scale had the expected structure in factor analysis and showed evidence of internal consistency and test–retest reliability. Correlational analyses demonstrated the convergent validity of sexual shame and sexual pride with relevant constructs. Regression analyses demonstrated the predictive validity of sexual shame in relation to sexual compulsivity, accounting for unique variability even after adjusting for previously demonstrated etiological factors, and the predictive validity of both shame and pride, which interacted to consistently predict four sexual behavior outcomes. Findings suggest the SSPS is a psychometrically valid and reliable measure that may be useful in future empirical work and highlight preliminary evidence for the role of these constructs in the sexual health of GBM.     

Picking the Winners: Politician vs. Voter Predictions of Two Controversial Ballot Measures

Abstract Both politicians and voters were asked to predict outcomesof two Oregon ballot measures in 1982. As expected, politicians'predictions always were closer to the mark than voters' were.Further, voters showed stronger signs of wishful thinking (the"Looking-Glass effect") in their predictions than did politicians.Using published preelection polls apparently improved politicians'accuracy in 1982, as well as voters' accuracy in a separate1984 survey. No other sources of data improved predictive accuracy.Findings have implications for theories of representative governmentand are consistent with a new theory of public opinion.     

Risk information processing and rational ignoring in the health context

Findings about the desire for health-risk information are heterogeneous and sometimes contradictory. In particular, they seem to be at variance with established psychological theories of information-seeking behavior.The present paper posits the decision about treating illness with medicine as the causal determinant for the expected net value of information, and attempts to explain idiosyncrasies in information-seeking behavior by using the notion of decision sensitivity to incoming information.Furthermore, active information avoidance is explained by modeling the expected emotional distress potentially brought about by “bad news” as a disutility factor in pay-off maximization.In this context two notions of uncertainty are distinguished: an epistemic uncertainty related to the prognostic probability assigned to the risk, and an emotional uncertainty related to the expected damage. Health-risk information can both reduce epistemic and increase emotional uncertainty, giving rise to idiosyncratic processing strategies.     

Prediction and Decision Making in Child Welfare

Use of computer-based statistical models to support decision making may reduce the subjectivity and uncertainty in this process of more acceptable levels. Multivariate procedures capture the collective experience of many workers by integrating information from a large number of variables and cases. Once a predictive model has been developed and validated, the profile of new cases can be compared to cases already on the data base. The probability of critical case events such as admission tocare, occurence of abuse, and placement breakdown can be identified. Such capabilities could also be incorporated into the development of computerized information systems. This would faciliate case planning and a more equitable and effective match between client needs and resource utilization.     

Forms of uncertainty reduction: decision,valuation, and contest

Uncertainty is an intriguing aspect of social life. Uncertainty is epistemic, future-oriented, and implies that we can neither predict nor foresee what will happen when acting. In cases in which no institutionalized certainty about future states exists, or can be generated, judgment is needed. This article presents the forms by which uncertainty is reduced as a result of judgments made about different alternatives in a process involving several actors. This type of uncertainty may exist, for example, about which artist is the best, which offer in the market is more valuable, which football team is better than all the rest, or which research proposal will get a grant. The result of different forms of uncertainty reduction is increased certainty concerning alternatives in relation to one another, such as good and bad, rank lists, scores, quality assessment, and “winner and losers.” Based on the result, uncertainty is reduced and action is facilitated. The forms are structural and comprise roles; may be legitimate in a smaller or larger domain; and may exist in all spheres of life, as exemplified in sports competitions, in labor markets, and in the ranking of universities. Three forms of uncertainty reduction based on judgment are identified in this article: (1) decision, made by an authority; (2) valuation, by means of which order arises as a result of actors ascribing values; and (3) contest, by which an order is the result of direct struggle.     

Sex and Drugs and Starting School: Differences in Precollege Alcohol-Related Sexual Risk Taking by Gender and Recent Blackout Activity

Research has demonstrated a link between alcohol use and multiple forms of risky sexual behavior, particularly among college-age individuals. Studies have also linked heavy alcohol use to other problems, such as impaired consciousness resulting from an alcohol-induced blackout, which may impact sexual decision making. However, research has rarely examined sexual risk taking (SRT) in relation to blackouts, nor has it examined this construct during the precollege transition (i.e., the interval of time between high school graduation and college matriculation). This study examined the intersection between alcohol-involved SRT, blackouts, and gender in a sample of precollege individuals with prior alcohol use (N = 229; 54% male, 63% White). Results indicated that, despite drinking less per occasion, women reporting recent blackouts were at increased risk for experiencing unwanted, unsafe, and regretted sexual behaviors compared to men with recent blackouts and their peers with no recent blackouts. Women with recent blackouts also reported differences in alcohol expectancies that may increase their risk for experiencing negative consequences while drinking, including higher social expectancies and lower negative expectancies of danger. Future directions for research and implications for precollege interventions are discussed.     

Assessing Bias in the Estimation of Causal Effects: Rosenbaum Bounds on Matching Estimators and Instrumental Variables Estimation with Imperfect Instruments

Propensity score matching provides an estimate of the effect of a "treatment" variable on an outcome variable that is largely free of bias arising from an association between treatment status and observable variables. However, matching methods are not robust against "hidden bias" arising from unobserved variables that simultaneously affect assignment to treatment and the outcome variable. One strategy for addressing this problem is the Rosenbaum bounds approach, which allows the analyst to determine how strongly an unmeasured confounding variable must affect selection into treatment in order to undermine the conclusions about causal effects from a matching analysis. Instrumental variables (IV) estimation provides an alternative strategy for the estimation of causal effects, but the method typically reduces the precision of the estimate and has an additional source of uncertainty that derives from the untestable nature of the assumptions of the IV approach. A method of assessing this additional uncertainty is proposed so that the total uncertainty of the IV approach can be compared with the Rosenbaum bounds approach to uncertainty using matching methods. Because the approaches rely on different information and different assumptions, they provide complementary information about causal relationships. The approach is illustrated via an analysis of the impact of unemployment insurance on the timing of reemployment, the postunemployment wage, and the probability of relocation, using data from several panels of the Survey of Income and Program Participation (SIPP).     

Urban heritage endangerment at the interface of future cities and past heritage: A spatial vulnerability assessment

Uncontrolled urban growth has been an increasing concern in many regions throughout the world. Generated by a natural tendency of population growth in relation to unsustainable land use, city sprawl has led to complex spatial developments that are creating both benefits to, and challenges for decision makers. A major problem inherent in the uncontrolled growth of cities is the threat to the fragile cultural and ecological heritage, which may escalate to permanent and irreversible damage as a result of factors such as environmental depletion and landscape decay. Using modern geosciences and spatial information technologies as predictive tools to analyse and forecast urban growth, a regional spatial decision system may be useful in order to provide seemly and timely information on the risk of overburdening the carrying capacity regarding the historico-cultural heritage at local and regional levels.The present paper develops a predictive toolkit for urban heritage in relation to urban cultural endangerment. This common problem is shared through many regions of the world and is increasingly jeopardizing fragile archaeological landscape due to urban pressure. In this sense, and to forecast an example of this common pressure, the Algarve is exemplified as a laboratory for testing this novel methodology, relying on a combined analysis of urban growth potential and threats to the abundant presence of archaeological heritage in the area. Our appro ach supports the paradigm of city growth in the context of a common agenda emerging from the Valetta Treaty, in which preserving the archaeological heritage is recognized as a key element for sustainable development. The study provides novel empirical results from the above mentioned modelling approach, with important lessons for the developing world. This paper proposes as such, an integrative spatial analysis methodology on the issue of historico-cultural endangerment, which is a new approach to comparative spatial analysis for decision making on urban heritage endangerment at the regional scale. Later, the discussion extends to a more conceptual level of urban planning by considering the questions: Is urban sprawl influencing the way we perceive cities? If so, are there positive advantages in the paradigm of urban growth and urban sprawl which might help us to protect past heritage while ensuring sustainable and modern cities?