The consistency of fairness rules: An experimental study

This paper studies individual consistency in the use of fairness rules, together with the role of self-serving bias in decision-making. We likewise attempt to characterize the different decision-making processes associated with the two types of self-interested behavior (pure selfish and self-serving). We use a within-subject design, which allows us to compare individual behavior when the context changes. In line with the literature, we find a multiplicity of fairness rules. However, the set of fairness rules is considerably smaller when we control for consistency. Only selfishness and strict egalitarianism seem to survive the stricter consistency requirements. We observe that this result is mainly explained by a self-serving bias. Additionally, we observe that faster decisions are self-interested and decisions dealing with moral trade-off are slower.     

Psychometric Testing of the FACES III with Rural Adolescents

This study tests the validity and reliability of the Family Adaptability and Cohesion Scale III (FACES III) in two samples of rural adolescents. The underlying theory is the linear 3-D circumplex model. The FACES III was administered to 1,632 adolescents in Grades 7 through 12 in two counties in a rural western state. The FACES III Scale and the Cohesion Scale demonstrated high internal consistency, although the Cohesion Scale was more consistently predictive of self-esteem and higher in internal consistency than was the Adaptability Scale. Findings confirmed previous methodological critiques regarding linearity, the correlation of factors, and internal consistency. The presence of two orthogonal factors was consistent with the original 3-D circumplex model, but items from the Adaptability Scale relating to changing of rules for children's roles and egalitarianism tended to be problematic.     

Illusion of control and gambling in children

This paper outlines a cognitive theory to explain persistent gambling behavior. The major thesis is that people who persist in gambling in the face of significant losses do so, in part, because they misattribute the locus of control of the outcome of gambles to themselves rather than a random environmental event. Stated differently, this implies that people who are involved in gambling situations and win, find ways to take responsibility for winning, and that people will seek to exert control and direction over future gambles as well. This explanation is not intended to totally supplant existing theoretical analyses of persistent gambling such as models of addictive processes, or psychodynamic motivations, but rather to add a cognitive process dimension. Indeed, the different models are not mutually exclusive. In all probability, parts of each are useful in explaining pathological gambling. This study suggests that more importance and more research is need in the cognitive area to fully understand pathological gambling.     

Misestimating Betting Behavior: The Role of Negative Asymmetries in Emotional Self Prediction

This paper addresses the role of negative asymmetries in emotional self-prediction by looking at the extent to which individuals misestimate their own betting behavior in sequential gambles. In a series of three experimental studies, we demonstrate that losses lead to higher than planned bets whereas bets are on average carried over after gains. Such asymmetric deviations from the plan emerge (1) when monetary and non-monetary incentives are used, and (2) when participants face fair and unfair gambles. The asymmetry is based on people’s inability to predict how much the negative emotions generated by a bad experience (e.g. the loss) will influence them to put more effort (e.g. bet more) than planned in an attempt to re-establish a homeostatic state in the prospect of a good experience (e.g. winning).     

How information frame influences risky decisions: Between-subjects and within-subject comparisons

Previous studies have demonstrated that subjects who receive positively framed information evaluate decision options more favorably than do other subjects who receive the same information framed negatively. This study examines whether the initial frame continues to influence responses of a given subject even after the frame is changed. In separate sequentially administered booklets, subjects were presented a series of gambles expressed in terms of probability of winning (positive condition), probability of losing (negative condition), or both (mixed condition). Subjects indicated whether they would take each ganble and rated their confidence in each decision Between-subjects analyses based on only the first condition received by each subject revealed a significant framing effect. Evaluations were most favorable in the positive condition and least favorable in the negative condition. Within-subject analyses based on all three conditions received by each subject revealed no significant framing effect. The effect of the initial frame apparently perseveres despite subsequent changes in the frame.     

Something for nothing: A model of gambling behavior

Gambling is an ancient economic activity, but despite its universality and importance, no single explanation for the demand for gambles has gained ascendance among economists. This paper suggests that the demand for gambles is based on the ability to obtain “something for nothing.” That is, the gain from gambling is not merely additional income, but additional income for which the gambler does not need to work. Thus, to fully understand gambling behavior, it must be placed in a labor supply context. The theory is tested empirically using the Survey of Gambling in the U.S. Support for the theory is found.     

Time-based versus money-based decision making under risk: An experimental investigation

This paper investigates whether individuals make similar decisions under risk when the outcomes are expressed in time versus monetary units. We address this issue in two studies measuring individual risk preferences and prospect theory parameters (i.e., utility curvature, probability weighting, and loss aversion) for both time and money. In the first (resp., second) study we consider relatively small (resp., large) time and monetary outcomes. We find that individuals hold similar risk preferences for time and money; we also find evidence that “time is money” with regard to the utility curvature for gains, loss aversion, and decision weighting. However, individuals have different valuations of losing time and money. The utility function for small losses of money is more concave and variable than the utility function for small losses of time (Study 1), but the utility function for large losses of time is more concave and variable than that for large losses of money (Study 2). We argue that these results reflect a difference in the perceived slack of the respective resource.     

A necessary and sufficient condition for stable matching rules to be strategy-proof

We study one-to-one matching problems and analyze conditions on preference domains that admit the existence of stable and strategy-proof rules. In this context, when a preference domain is unrestricted, it is known that no stable rule is strategy-proof. We introduce the notion of the no-detour condition, and show that under this condition, there is a stable and group strategy-proof rule. In addition, we show that when the men’s preference domain is unrestricted, the no-detour condition is also a necessary condition for the existence of stable and strategy-proof rules. As a result, under the assumption that the men’s preference domain is unrestricted, the following three statements are equivalent: (i) a preference domain satisfies the no-detour condition, (ii) there is a stable and group strategy-proof rule, (iii) there is a stable and strategy-proof rule.     

Contraction consistent stochastic choice correspondence

We model a general choice environment via probabilistic choice correspondences, with (possibly) incomplete domain and infinite universal set of alternatives. We offer a consistency restriction regarding choice when the feasible set contracts. This condition, ‘contraction consistency’, subsumes earlier notions such as Chernoff’s Condition, Sen’s α and β, and regularity. We identify a restriction on the domain of the stochastic choice correspondence (SCC), under which contraction consistency is equivalent to the weak axiom of revealed preference in its most general form. When the universal set of alternatives is finite, this restriction is also necessary for such equivalence. Analogous domain restrictions are also identified for the special case where choice is deterministic but possibly multi-valued. Results due to Sen (Rev Econ Stud 38:307–317, 1971) and Dasgupta and Pattanaik (Econ Theory 31:35–50, 2007) fall out as corollaries. Thus, conditions are established, under which our notion of consistency, articulated only in reference to contractions of the feasible set, suffices as the axiomatic foundation for a general revealed preference theory of choice behaviour.     

Parental and peer characteristics as modifiers of the bond-behavior relationship: an elaboration of control theory.

Three bonds are at the core of Hirschi's control theory: attachment to parents, commitment to conventional activities, and belief in the conventional rules of society. Control theory does not include parental and peer attitudes and behaviors, variables that frequently are implicated in adolescent behavior. This study examines whether parental and peer behaviors and attitudes modify bond/behavior relationships. Adolescent cigarette smoking is the behavior of interest. Panel data from a probability sample of 685 adolescents shows that the relationship between attachment and adolescent smoking is modified by parental smoking; the relationship between commitment to conventional activities and adolescent smoking is modified by father's smoking; but the relationship between belief in conventional rules and adolescent smoking is not modified by parental or peer variables. We conclude that control theory needs to encompass parental behavior when considering adolescent smoking behavior.     

Lottery Gambling: A Review

This paper presents an exhaustive review of the literature on lottery gambling involving numbers games, lotto, and scratch cards. Results provide tentative answers to the question why people buy lotteries, and support the theory of judgment under uncertainty, cognitive theory of gambling, and theory of demand for gambles. Results also indicate some potential addictiveness of this form of gambling. Youths buy different forms of lotteries and the best predictor of their lottery purchases is their parents’ lottery participation. Contrary to the myth that a big lottery win will ruin the winners’ lives, lottery winners tend to be well-adjusted and their life quality seems to improve. Suggestions for future research are discussed.     

Maximal domain for strategy-proof probabilistic rules in economies with one public good

We consider the problem of choosing a level of a public good on an interval of the real line among a group of agents. A probabilistic rule chooses a probability distribution over the interval for each preference profile. We investigate strategy-proof probabilistic rules in the case where distributions are compared based on stochastic dominance relations. First, on a “minimally rich domain”, we characterize the so-called probabilistic generalized median rules (Ehlers et al., J Econ Theory 105:408–434, 2002) by means of stochastic-dominance (sd) strategy-proofness and ontoness. Next, we study how much we can enlarge a domain to allow for the existence of sd-strategy-proof probabilistic rules that satisfy ontoness and the no-vetoer condition. We establish that the domain of “convex” preferences is the unique maximal domain including a minimally rich domain for these properties.     

Empirical testing of the expected utility model

Suppose an individual is faced with a set of alternatives with uncertain money outcomes, then according to the expected utilily moded the alternative with the highest cxpected utility will be chosen. In the present paper this model is tested against the more general model given by Kahneman and Iversky (1979) and others. As contrasted with usual practice, the test is based on an exogenously measured utility function. The result of the test is that the expected utility model has to be rejected, both for a concavee and for an S-shaped specification of the utility function. The subjective evaluation of an objectve probability of 0.5 is in this study estimated at a value of 0.45 or 0.47. depending on the functional specification used.Our main conclusion is that although the hypotlicsis of expected utility has to be rejected, for practical purposes the difference between 0.5 and 0.45 (0.47) is so slight, that the hypothesis is a good working approximation. We do not know whether this remains true for valus of the objective probability considerably different from 0.5.     

Collective choice rules and collective rationality: a unified method of characterizations

The purpose of this paper is to investigate the relationship between collective rationality and permissible collective choice rules using a unified approach inspired by Bossert and Suzumura (J Econ Theory 138:311–320, 2008). We consider collective choice rules satisfying four axioms: unrestricted domain, strong Pareto, anonymity, and neutrality. A number of new classes of collective choice rules as well as the Pareto and Pareto extension rules are characterized under various concepts of collective rationality: acyclicity, transitivity, quasi-transitivity, semi-transitivity, and the interval order property. Further, new concepts of collective rationality, K-term acyclicity and K-term consistency, are proposed and the corresponding characterizations are provided.     

Movement without mobility: Adolescent status hierarchies and the contextual limits of cumulative advantage

This paper develops a theory of interpersonal status hierarchies that builds on and challenges traditional models of cumulative advantage. Cumulative advantage models predict stability in interpersonal status hierarchies, where status is defined by asymmetries in social relationships. According to strict cumulative advantage, initial status differences are exaggerated over time, making upward or downward mobility unlikely. We argue that interpersonal status hierarchies are instead quite fluid, with individuals regularly moving up or down the hierarchy. Individual status gains do not, however, disrupt the status order as the upwardly mobile are often pulled back to their original positions. This drag of the past generates the same long run status outcomes as cumulative advantage models, but through very different means: sustained upward mobility is rare because the upwardly mobile fail to maintain their status gains, and not because initial gains are impossible. More generally, the effect of the past limits sustained mobility in most, but not all, status hierarchies, and we expect sustained mobility where ties are stable and the expectations for reciprocity are low. We test our model using longitudinal data on adolescents, finding strong support for the theory. We end the paper with a reflexive discussion about measurement error, hypothesis testing, and “messy” longitudinal network data.     

Characterization of self-selective social choice functions on the tops-only domain

Self-selectivity is a new kind of consistency pertaining to social choice rules. It deals with the problem of whether a social choice rule selects itself from among other rival such rules when a society is also to choose the choice rule that it will employ in making its choice from a given set of alternatives. Koray [3] shows that a neutral and unanimous social choice function is universally self-selective if and only if it is dictatorial. In this paper, we confine the available social choice functions to the tops-only domain and examine whether such restriction allow us to escape the dictatoriality result. A neutral, unanimous, and tops-only social choice function, however, turns out to be self-selective relative to the tops-only domain if and only if it is top-monotonic, and thus again dictatorial. Received: 8 October 2001/Accepted: 4 June 2002     

Self-employment and attitudes towards risk: Timing and unobserved heterogeneity

We explore the relationship between self-employment and attitudes towards financial risk using individual level data drawn from the US Panel Study of Income Dynamics (PSID), which includes measures of individuals’ attitudes towards hypothetical gambles allowing us to explore the implications of interpersonal differences in risk attitudes for the probability of self-employment. Our empirical findings suggest that willingness to take financial risk is positively associated with self-employment. By exploiting the panel aspect of the PSID, we find evidence, whilst controlling for unobserved individual heterogeneity, consistent with a causal relationship between attitudes towards risk and self-employment with attitudes towards risk measured prior to becoming self-employed having a statistically significant positive influence on the probability of future self-employment.     

Tired Winners: The Effects of Cognitive Resources and Prior Winning on Risky Decision Making

Previous research has shown mixed results regarding the effects of cognitively draining tasks, sometimes reporting that the depletion of cognitive resources increases risk taking and other times reporting that depletion leads to increases in risk aversion. Additionally, evidence has been provided demonstrating that both winning and losing can increase future risk-taking. This experiment was designed to assess the interaction between cognitive resource depletion and outcomes in blackjack on risky decision making. A 2 × 2 between subjects design was employed in which 81 university undergraduates were randomized to either a cognitive resource depletion condition or control condition and then a winning condition or losing condition. Participants completed a self-report measure of decision making and then a completed a task in which they could make actual wagers to win a lottery. Evidence is provided for the conclusion that people become risk averse to lottery style gambles after cognitive depletion and losing. Research and clinical implications are discussed.