Preferences for information on probabilities versus prizes: The role of risk-taking attitudes

Many real-world decisions entail choices between information on either probabilities or payoffs (i.e., prizes). Simplified versions of such decisions are examined to gain insight into preferences for different types of information as a function of risk-attitudes. General and simple decision rules are derived for cases where the utility function is concave (or convex) over the relevant payoff interval.The article further describes several experiments to test business students' intuitions concerning these optimal decision rules. In general, risk-taking attitudes did not correlate significantly with subjects' preferences for information, in violation of theorems regarding mean-preserving spreads of risk. Other tests, e.g., narrowing certain probability ranges, also resulted in preferences contrary to expected utility (EU) theory.     

Factors Affecting Choice and Satisfaction: Social Work in Turkey

ABSTRACT

The study examines the relationship between professional choices and employment expectations of social worker trainees in the country of Turkey. Professional choices are examined according to gender and the relationship between employment expectations and satisfaction. This study examined responses with a comparative relational scanning model with a sample of 692 social service (social worker) trainees studying at four different universities in Turkey. Students were surveyed and answered 25 open- and closed-ended questions identifying aspects related to their career choice. Study findings reveal that gender, university entrance scores, and employability were high among the career selection factors. Additional factors identified included family-related factors, personality traits, and compatibility. Examination of the findings is discussed, and recommendations for further research are made.     

The Value of a Statistical Life and the Coefficient of Relative Risk Aversion

Individuals’ risk preferences are estimated and employed in a variety of settings, notably including choices in financial, labor, and product markets. Recent work, especially in financial economics, provides estimates of individuals’ coefficients of relative risk aversion (R’s) in excess of one, and often significantly higher. However, it can be shown that high R’s imply equally high values for the income elasticity of the value of a statistical life. Yet estimates of this elasticity, derived from labor and product markets, are in the range of 0.5 to 0.6. Furthermore, it turns out that even an R below one is difficult to reconcile with these elasticity estimates. Thus, there appears to be an important (additional) anomaly involving individuals’ risk-taking behavior in different market settings.JEL Classification: D80, G11, G12, I10, J17     

Savage vs. Anscombe-Aumann: an experimental investigation of ambiguity frameworks

The Savage and the Anscombe–Aumann frameworks are the two most popular approaches used when modeling ambiguity. The former is more flexible, but the latter is often preferred for its simplicity. We conduct an experiment where subjects place bets on the joint outcome of an ambiguous urn and a fair coin. We document that more than a third of our subjects make choices that are incompatible with Anscombe–Aumann for any preferences, while the Savage framework is flexible enough to account for subjects’ behaviors.

     

Dopamine receptor genes predict risk preferences,time preferences,and related economic choices

Outside of economics, researchers have recently identified genetic predictors of “sensation-seeking” that have been linked to risky and impulsive behaviors. We examine the implications of these genetic polymorphisms for economic behavior. Our analysis indicates that the 7-repeat allele of the DRD4 gene that regulates dopamine uptake in the brain predicts risk-taking and time preferences in economic experiments that allow for ambiguity, losses and discounting. These genetic polymorphisms can also be used to directly predict financial choice patterns that are consistent with previous findings in the behavioral genetics literature.     

Determinants of risk-taking: Behavioral and economic views

The concept of risk-taking is examined from various perspectives: economic, decision theoretic, and psychological. Multiple factors are discussed as complicating the extraction of any presumed risk-taking propensity from a person's real-world behavior.Problem structuring, beliefs, andvalues (defined here as riskless as opposed to risky utility) may of course underlie differences in risk behavior. In addition,context andprocess factors can induce variance in risk-bearing. Also,portfolio effects (including cross-sectional, multiattribute, and longitudinal) may greatly complicate the measurement of risk-taking propensity. Lastly, the presence of incompletemarkets (via which risks can be partially diversified and traded) may further mask the link between intrinsic and observed risk-taking. This article examines each of these measurement obstacles and sources of variance.     

Stochastic Choice and Consistency in Decision Making Under Risk: An Experimental Study

This paper reports the results of an experiment designed to uncover the stochastic structure of individual preferences over lotteries. Unlike previous experiments, which have presented subjects with pair-wise choices between lotteries, our design allowed subjects to choose between two lotteries or (virtually) any convex combination of the two lotteries. We interpret the mixtures of lotteries chosen by subjects as a measure of the stochastic structure of choice. We test between two alternative interpretations of stochastic choice: the random utility interpretation and the deterministic preferences interpretation. The main findings of the experiment are that the typical subject prefers mixtures of lotteries rather than the extremes of a linear lottery choice set. The distribution of choices does not change between a first and second asking of the same question. We argue that this provides support for the deterministic preferences interpretation over the random utility interpretation of stochastic choice. As a subsidiary result, we find a small proportion of subjects make choices that violate transitivity, but the level of intransitive choice falls significantly over time.     

Dopamine and risk choices in different domains: Findings among serious tournament bridge players

We explore how risk-taking in the card game contract bridge, and in a financial gamble, correlate with variation in the dopamine receptor D4 gene (DRD4) among serious tournament bridge players. In bridge risk-taking, we find significant interactions between genetic predisposition and skill. Among men with the 7-repeat allele of DRD4, namely 7R + men, those with more bridge skill take more good risks and fewer bad risks, while the opposite is found for less-expert 7R + men. Conversely, skill does not predict risk-taking among men without the 7R + allele. Consistent with some prior studies, we also find that 7R + men take more risk in the financial gamble. We find no relationship between 7R + and either risk measure among our female subjects. Our results suggest that the dopamine system plays an important role in individual differences in risk-taking among men, and is the first to distinguish between advantageous and disadvantageous risk-taking.     

Some implications of common consequences in lotteries

This work studies the implications of some aspects of preferences toward risk in the choice between two binary lotteries exhibiting a common consequence. The results obtained are then applied to two different problems: the choice between two risky challenges characterized by different rewards in the case of success and different probabilities of success and the choice between self-protection and self-insurance in the presence of the risk of incurring financial loss.

     

Gender,risk and stereotypes

This paper reports results from an economic experiment where respondents are asked to make choices between risky outcomes for themselves and others. We investigate whether subjects’ own risk preferences and gender stereotypes are reflected in the predictions they make for the risk preferences of others and the way this occurs. When predicting other people’s risk preferences, the respondents tend to use a combination of their own risk preferences and stereotypes. Moreover, when making risky choices for others, the respondents generally use a combination of their own risk preferences and their average predicted risk preference of the targeted group.

Justice in an uncertain world: Evidence on donations to cancer research

The paper uses information on actual and hypothetical charitable contributions to cancer research in the United Kingdom to elicit information on justice principles endorsed by donors. They face a choice between fund-raising contributions for several hereditary and lifestyle-related cancers. Donors’ choices of how much to donate to different cancers reveal how they view luck vis-a-vis risky individual choices. The estimation results reveal that donations are smaller for cancers with higher prevention rates, which is the probability that the potential cancer victim can avoid the cancer in question by some choice. We also find that provision of information on lifestyle-related causes of cancer adversely affects contributions. In contrast, information on hereditary causes has a positive effect on donations. Furthermore, a large share of donors indicated in their feedback that they chose donations to a hereditary over a lifestyle-related cancer to “punish” poor individual choices. These findings suggest that many donors lean toward choice egalitarianism, which conditions donations on the potential beneficiaries’ choices.

     

Managing the Family: Productivity, Scheduling and the Male Veto

This paper argues that research, analysis and policy innovations focused on how households combine paid work with care responsibilities are driven to too great a degree by preconceptions of “the problem” that do not take sufficient account of how families themselves understand their work and care roles and the choices they are making. The evidence of 246 SOCCARE interviews across five European countries (Finland, France, Italy, Portugal and the UK) is that the variables that are conventionally accepted as having fundamental significance (family‐friendly policies and generous care services, flexible working hours, women's work–life preferences, family type, national labour markets, cultural differences) are less important than is often suggested. More important are time pressures and the idiosyncratic factors that constrain the work and care timetables that families are able to construct. We characterize these as “scheduling problems”. They occupied a large part of the accounts of their lives provided by our respondents and are a primary dimension within which their combinations of paid work and care responsibilities need to be understood. The difficulties our respondents faced in coordinating the work and care activities of their families bear a striking similarity to the problems described in the operations research literature on small businesses. Within the context of these scheduling problems a second important factor emerged: the preferences and behaviour of men who played a critical, though often passive, part in the construction of work and care timetables of the families. We characterize this effect as the “the male veto”.     

Models of supranational policymaking and the reform of the EMU

Under what conditions do sovereign governments agree to create a common policy institution? And what model of supranational policymaking may be preferable? To answer these questions, we introduce a policy game of two interdependent countries with reciprocal negative externalities created by shocks to a socially relevant variable. Depending on national preferences over policy options and their outcomes, both countries incur welfare losses if governments pursue non-cooperative policy choices. Then we examine what kind of supranational policy regimes may be endorsed by both governments according to the Pareto criterion. Two regimes are “technocratic” (they do not take national preferences into account), two are “political” (they do). One political regime that we call “union” aggregates the national preferences additively. The thrust of our analysis is that the technocratic regimes are dominated by non-cooperation, so that the single alternative is between the union and non-cooperation. Yet an important point is that the union is the Pareto-dominant regime only within a limited range of asymmetry between countries’ preferences. This result has notable implications for the debate on the reform of the European Economic and Monetary Union (EMU) facing the challenge of further integration of member countries. Application to the EMU case is assisted by numerical simulations based on empirical parameters drawn from qualified external sources, which show that aymmetries in national attitudes towards policies that “Europe wants” may jeopardize the creation of a union in alternative to non-cooperation.     

Psychosocial Environmental Relationships Among MSW Students in Distance Learning and Traditional Classrooms

ABSTRACT

A Midwestern university assessed 108 graduate social work students. Student preferences were examined regarding their perceptions and satisfaction with distance education versus traditional classroom settings. With a standardized measurement scale and 6 qualitative interviews being utilized, results identified several interpersonal and environmental characteristics influencing positive preference. Using an independent sample t-test, significant differences were found between the two types of learning environments. Results showed a preference for the standard, face-to-face format, and the results identified several variables that contribute to significant advantages and disadvantages of using distance education technology. Recommendations are provided for future research and explication of factors contributing to satisfaction with the learning environment.     

Stability of risk preference measures: results from a field experiment on French farmers

We compare two different elicitation methods for measuring risk attitudes on a sample of French farmers. We consider the lottery tasks initially proposed by Holt and Laury (Econ Rev 92:1644?C1655, 2002) and by Eckel and Grossman (Evol Hum Behav 23:281?C295, 2002; J Econ Behav Org 68:1?C7, 2008). The main empirical result from this within-subject study is that risk preference measures are affected by the type of mechanism used. We first show that this risk preference instability can be related to non-expected utility preferences of farmers. Using a risk-taking psychometric questionnaire, we then demonstrate that risk preferences of farmers are context-dependent. This may be another explanation of the observed risk preference instability.     

Sleepiness,choice consistency,and risk preferences

We investigate the consistency and stability of individual risk preferences by manipulating cognitive resources. Participants are randomly assigned to an experiment session at a preferred time of day relative to their diurnal preference (circadian matched) or at a non-preferred time (circadian mismatched) and choose allocations between two risky assets [using the Choi et al. (Am Econ Rev 27(5):1921–1938, 2007), design]. We find that choices of circadian matched and mismatched subject are statistically similar in terms of satisfying basic requirements for preference consistency. However, mismatched subjects tend to choose riskier asset bundles.     

Intentional time inconsistency

We propose a theoretical model to explain the usage of time-inconsistent behavior as a strategy to exploit others when reputation and trust have secondary effects on the economic outcome. We consider two agents with time-consistent preferences exploiting common resources. Supposing that an agent is believed to have time-inconsistent preferences with probability p,  we analyze whether she uses this misinformation when she has the opportunity to use it. Using the model originally provided by Levhari and Mirman (Bell J Econ 11(1):322–334, 1980), we determine the optimal degree of present bias that the agent would like to have while pretending to have time-inconsistent preferences and we provide the range of present-bias parameter under which deceiving is optimal. Moreover, by allowing the constant relative risk aversion class of utility form, we characterize the distinction between pretending to be naive and sophisticated.

     

Measuring Intergenerational Time Preference: Are Future Lives Valued Less?

Prior research has estimated intergenerational time preferences by asking respondents to choose between hypothetical life saving programs. From such choices, researchers have concluded that the public heavily discounts the lives of people in future generations. However, using a multiversion survey involving 401 respondents, I show that imputed intergenerational time preferences can be dramatically affected by the specific question that is asked. Different elicitation procedures can yield widely varying results by evoking or suppressing various relevant considerations (such as uncertainty). Many formats revealed no preference for current generations over future generations.