Does time inconsistency differ between gain and loss? An intra-personal comparison using a non-parametric elicitation method

Several studies on time preference have found time inconsistency in both gain and loss preferences. However, the relationship between the two within the same person remains unclear; that is, does an individual who demonstrates time inconsistency for gain outcomes do so for losses as well? This paper reports on individuals’ time inconsistency for gains and losses in a laboratory setting. To obtain a precise comparison of individuals’ time inconsistency for gains and losses, we used Rohde’s “DI (decreasing impatience)-index” (Manag Sci 65(4):1700–1716, 2018) and measured the level of time inconsistency, rather than merely identifying whether TI was present. This index represents how strongly a person exhibits present bias, and easily extends to the comparison between gain and loss preferences within the same person. Further, it allows the experiment to test for so-called future bias, which has been a focus area in recent time inconsistency literature. It is elicited through a non-parametric method, which avoids any specification errors in the analysis. Our findings are as follows: first, we found future bias in preferences for not only gains but also losses, and we confirmed that this tendency is consistent with previous findings on preferences for gains. Second, a positive correlation between time inconsistency for gains and losses was found at the individual level. Indeed, we could not find a significant difference between the two in most cases.

     

Status quo bias in decision making

Most real decisions, unlike those of economics texts, have a status quo alternative—that is, doing nothing or maintaining one's current or previous decision. A series of decision-making experiments shows that individuals disproportionately stick with the status quo. Data on the selections of health plans and retirement programs by faculty members reveal that the status quo bias is substantial in important real decisions. Economics, psychology, and decision theory provide possible explanations for this bias. Applications are discussed ranging from marketing techniques, to industrial organization, to the advance of science.     

Positive confirmation bias in the acquisition of information

An experiment is reported which tests for positive confirmation bias in a setting in which individuals choose what information to buy, prior to making a decision. The design – an adaptation of Wason's selection task – reveals the use that subjects make of information after buying it. Strong evidence of positive confirmation bias, in both information acquisition and information use, is found; and this bias is found to be robust to experience. It is suggested that the bias results from a pattern of reasoning which, although producing sub-optimal decisions, is internally coherent and which is self-reinforcing.     

Measuring risk aversion with lists: a new bias

Various experimental procedures aimed at measuring individual risk aversion involve a list of pairs of alternative prospects. We first study the widely used method by Holt and Laury (Am Econ Rev 92(5):1644–1655, 2002), for which we find that the removal of some items from the lists yields a systematic decrease in risk aversion and scrambles the ranking of individuals by risk aversion. This bias, that we call embedding bias, is quite distinct from other confounds that have been previously observed in the use of the HL method. It may be related to empirical phenomena and theoretical developments where better prospects increase risk aversion. Nevertheless, we also find that the more recent elicitation method due to Abdellaoui et al. (Theory Decis 71:63–80, 2011), also based on lists but using only one and the same probability in the list, does not display any statistically significant bias when the corresponding items of the list are removed. Our results suggest that methods other than the popular HL one may be preferable for the measurement of risk aversion.     

Decomposing Hindsight Bias

Traditional accounts of hindsight bias inadequately distinguish primary hindsight bias from both secondary and tertiary hindsight bias. A subject exhibits primary bias when she assigns a higher ex ante probability estimate to actual outcomes, secondary bias when she believes that she herself would have made the same estimate of the prior probability of an event before receiving outcome information as she made after receiving it, and tertiary bias when she believes that third parties lacking outcome information were unreasonable if they did not make the same prior probability judgments that subjects now possessing such information make.In our experiments, we find that when people can readily calculate the actual ex ante probability of an outcome, they don't reassess that probability when told what outcomes actually occurred. They reassess only in situations in which they are unable to assess prior probabilities or when given information that the outcome was not simply a result of sampling or chance but the result of an imperceptible feature of the initial situation. Observed primary bias may therefore often be rational.     

Gender Identity and Social Services: Barriers to Care

ABSTRACT

Transgender people seek social services for a variety of reasons. This literature review highlights needs assessments and social science research articles (N = 30) from the last 16 years that demonstrate the many ways in which social services are further revictimizing transgender people. Studies indicate that transgender people often encounter ignorance, hostility, and transphobic environments while attempting to access social services, and these environments can dissuade transgender people from gaining needed care. Suggestions are made to address these inequalities and include simple measures that social service agencies can begin with to make their services more transinclusive. Future research should address the bias in social services more directly and also develop a clear plan of action and best practices to help agencies remove discrimination from social service settings.     

INCREASING INCREMENT GENERALIZATIONS OF RANK-DEPENDENT THEORIES

Empirical evidence from both utility and psychophysical experiments suggests that people respond quite differently—perhaps discontinuously—to stimulus pairs when one consequence or signal is set to `zero.' Such stimuli are called unitary. The author's earlier theories assumed otherwise. In particular, the key property of segregation relating gambles and joint receipts (or presentations) involves unitary stimuli. Also, the representation of unitary stimuli was assumed to be separable (i.e., multiplicative). The theories developed here do not invoke separability. Four general cases based on two distinctions are explored. The first distinction is between commutative joint receipts, which are relevant to utility, and the non-commutative ones, which are relevant to psychophysics. The second distinction concerns how stimuli of the form (x, C; y) and the operation of joint receipt are linked: by segregation, which mixes stimuli and unitary ones, and by distributivity, which does not involve any unitary stimuli. A class of representations more general than rank-dependent utility (RDU) is found in which monotonic functions of increments U(x)-U(y), where U is an order preseving representation of gambles, and joint receipt play a role. This form and its natural generalization to gambles with n > 2 consequences, which is also axiomatized, appear to encompass models of configural weights and decision affect. When joint receipts are not commutative, somewhat similar representations of stimuli arise, and joint receipts are shown to have a conjoint additive representation and in some cases a constant bias independent of signal intensity is predicted.     

A Simple Risk-Sharing Experiment

This paper reports on an experiment designed to test whether pairs of individuals are able to exploit ex ante efficiency gains in the sharing of a risky financial prospect. Observations from a previous experiment had suggested a general rejection of efficiency in favour of ex post equality. The present experiment explores some possible explanations for this. The results indicate that fairness is not a significant consideration, but rather that having to choose between prospects diverts partners from allocating the chosen prospect efficiently.     

Attitudes Toward Gays and Lesbians: A Latent Class Analysis of University Students

ABSTRACT

The profession of social work advocates for civil rights for gay men, lesbians, and bisexual persons. However, a number of social work students and practitioners harbor antigay bias that in prior variable-centered research has been determined to be related to race, relationship status, and age. The purpose of this research was to use latent class analysis (LCA), a person-centered statistical technique, to cluster 394 university student survey responses to the Attitudes Toward Lesbian and Gays short-form instrument. The analyses indicated three groups that can be profiled as unbiased, moderately biased, and highly biased. Analysis of variance and multinomial regression verified LCA findings that are consistent with prior research. The importance of selecting appropriate educational approaches to address antigay bias among social work students and practicing social workers is discussed, and recommendations for continued research, including a national random survey of social work students and licensed social workers, are made.     

Product evaluation bias under minimal group situations

The present study was designed to identify the source of product evaluation bias. Three experiments were conducted to see if the evaluation bias occur in the minimal group situation defined by [Tajifel, H., Billig, M., Bundy, R., & Flament, C. (1971). Social categorization and intergroup behavior. European Journal of Social Psychology, 1, 149–178], and to determine the factors responsible for making evaluation bias. Relative measure of product evaluation played a major role in producing an evaluation bias in minimal group situation. Similarly, relative measure of distribution was a critical factor affecting distribution bias. The possible boundary condition of [Tajifel, H., Billig, M., Bundy, R., & Flament, C. (1971). Social categorization and intergroup behavior. European Journal of Social Psychology, 1, 149–178] minimal group situation in evaluation bias were also discussed.     

Minimizing Social Desirability Bias in Measuring Sensitive Topics: The Use of Forgiving Language in Item Development

Abstract

Social science research has long been concerned with attitudes, beliefs, and behaviors that are potentially objectionable, immoral, or illegal. These types of topics include, for example, racism, ableism, cheating, and stealing, among others. Referred to as “sensitive topics,” their investigation usually involves questions that require respondents to admit to attitudes, beliefs, and behaviors that violate social norms, making their assessment susceptible to error due to social desirability bias. This article describes an empirical investigation of an approach to minimize this bias, the use of “forgiving language” in survey item development and the effect on item variability. Using secondary data initially collected as part of a measurement development study of mental health providers’ stigmatization of service users, 15 pairs of similar, thematically targeted items, varying with respect to wording approach were tested using a purposive sample of mental health providers (N?=?220). Findings indicate that items crafted in a forgiving manner were not significantly influenced by social desirability bias, in contrast to items developed in more traditional language. Additionally, forgiving language-items produced higher levels of agreement, on average, when compared to those written in more traditional language. More research is indicated, including systematic variation of wording approaches, but these results seem promising.     

Rule utilitarianism,rights, obligations and the theory of rational behavior

The paper first summarizes the author's decision-theoretical model of moral behavior, in order to compare the moral implications of the act-utilitarian and of the rule-utilitarian versions of utilitarian theory. This model is then applied to three voting examples. It is argued that the moral behavior of act-utilitarian individuals will have the nature of a noncooperative game, played in the extensive mode, and involving action-by-action maximization of social utility by each player. In contrast, the moral behavior of rule-utilitarian individuals will have the nature of a cooperative game, played in the normal mode, and involving a firm commitment by each player to a specific moral strategy (viz. to the strategy selected by the rule-utilitarian choice criterion) — even if some individual actions prescribed by this strategy, when considered in isolation, should fail to maximize social utility.The most important advantage that rule utilitarianism as an ethical theory has over act utilitarianism lies in its ability to give full recognition to the moral and social importance of individual rights and personal obligations. It is easy to verify that action-by-action maximization of social utility, as required by act utilitarianism, would destroy these rights and obligations. In contrast, rule utilitarianism can fully recognize the moral validity of these rights and obligations precisely because of its commitment to an overall moral strategy, independent of action-by-action social-utility maximization.The paper ends with a discussion of the voter's paradox problem. The conventional theory of rational behavior cannot avoid the paradoxical conclusion that, in any large electorate, voting is always an irrational activity because one's own individual vote is extremely unlikely to make any difference to the outcome of any election. But it can be shown that, by using the principles of rule-utilitarian theory, this paradox can easily be resolved and that, in actual fact, voting, even in large electorates, may be perfectly rational action. More generally, the example of rule utilitarianism shows what an important role the concept of a rational commitment can play in the analysis of rational behavior.     

Unraveling the Source of African American Children's Positively Biased Perceptions of Peer Acceptance

The present study investigated possible ethnic contributions to overly positive self‐perceptions in middle childhood. The goals of this study were threefold. First, the present study sought to replicate the intriguing findings reported by Zakriski and Coie that African American children overestimate their acceptance, and European American children underestimate acceptance by other‐ethnicity peers. Second, this study examined possible explanations for ethnic differences in the pattern of perceptual bias. Finally, this study extended prior research by examining ethnic differences in the accuracy of children's perceived peer acceptance. Archival data consisting of 826 children in third (N = 284), fourth (N = 241), and fifth grades (N = 301) were used in the present investigation; 237 of which were African American children, and 589 were European American children. Results of this study replicated the findings of Zakriski and Coie . Moreover, African Americans' overestimation and European Americans' underestimation of acceptance by other‐ethnicity peers was found to be attributable to more positive views of self and others among African American children relative to European American children. Finally, children were found to be more accurate about judging their acceptance by peers of the same ethnicity than those of a different ethnicity. Possible explanations of what causes African American children to have more positive views of self and others than European American children are discussed.     

What accounts for China''s trade balance dynamics?

This paper proposes a structural VAR model which extends the frameworks of Hoffmaister and Roldós [Hoffmaister, A. W., & Roldós, J. E. (2001). The sources of macroeconomic fluctuations in developing countries: Brazil and Korea. Journal of Macroeconomics, 23, 213–239] and Prasad [Prasad, E. S. (1999). International trade and the business cycle. Economic Journal, 109, 588–606]. The model is then used to analyse the sources of China's trade balance fluctuations in the period of 1985–2000. Efforts are made to distinguish the forces which underlie the long-run trend in trade balance from those with transitory impacts. The effects of four types of shock are examined—the foreign supply shock, the domestic supply shock, the relative demand shock and the nominal shock. Among other findings, two emerge as important. First, the movements in China's trade balance are largely the result of real shocks. Second, the Renminbi is undervalued, yet changes in the exchange rate bear little on the trade balance. Therefore, monetary measures would not suffice to redress China's trade ‘imbalance’.     

Social disorganization in a modernizing Dalit community

India has a traditional community justice forum, known as the panchayat, which settles disputes, keeping them from escalating into serious problems. However, this forum is in decline, with serious consequences for Indian communities. Here we analyze how the demise of the panchayat in the Dalit (untouchable) community of Pudur contributed to serious conflicts and crime. Panchayats have been impacted by India’s democratization, economic development, and urbanization. Dalits, especially, want to be independent, equal, and economically prosperous. In Pudur these needs have disrupted collective sentiment to an extent that fulfillment of them has become difficult. That several non-Dalits live in Pudur has made panchayat success even more unattainable. Socially disorganizing forces—modernization, opposing values of equality and caste hierarchy, intergenerational frictions, and Pudur’s unique history and caste composition—have all contributed to the panchayat’s demise and social ills. Modern societies looking for innovative solutions to crime through community justice can learn from Pudur’s negative experiences.     

Ranked-Weighted Utilities and Qualitative Convolution

For gambles—non-numerical consequences attached to uncertain chance events—analogues are proposed for the sum of independent random variables and their convolution. Joint receipt of gambles is the analogue of the sum of random variables. Because it has no unique expansion as a first-order gamble analogous to convolution, a definition of qualitative convolution is proposed. Assuming ranked, weighted-utility representations (RWU) over gains (and, separately, over losses, but not mixtures of both), conditions are given for the equivalence of joint receipt, qualitative convolution, and a utility expression like expected value. As background, some properties of RWU are developed.     

What children want to know about in‐ and out‐groups,and how knowledge affects their intergroup attitudes

One of the key factors contributing to the development of negative attitudes toward out‐groups is lack of knowledge about them. The present study investigated what type of information 3‐ to 4‐ and 5‐ to 6‐ year‐old Jewish Israeli children (N = 82) are interested in acquiring about unfamiliar in‐ and out‐group individuals, and how providing children with the requested information affects their intergroup attitudes. Children were shown pictures of individuals from three groups—an in‐group (“Jews”), a “conflict” out‐group (“Arabs”), and a “neutral” out‐group (“Scots”)—and were asked what they would like to know about them. The experimenter responded by either answering all of children's questions, half of the questions, or none. Children's attitudes toward the groups were also assessed. It was found that children asked the most questions in regard to conflict out‐group individuals. Moreover, the older age group asked more questions regarding the psychological characteristics, and fewer questions regarding the social identity, of the conflict out‐group than of the other two groups. Finally, full provision of information improved attitudes toward the groups, especially among 3‐ to 4‐year olds, and especially regarding the conflict out‐group. These findings have implications for understanding the sources of intergroup biases, and for developing interventions to reduce them.     

The Favorite-Longshot Bias in Sequential Parimutuel Betting with Non-Expected Utility Players

This paper analyzes a model of sequential parimutuel betting described as a two-horse race with a finite number of noise bettors and a finite number of strategic and symmetrically informed bettors. For generic objective probabilities that the favorite wins the race, a unique subgame perfect equilibrium is characterized. Additionally, two explanations for the favorite–longshot bias—according to which favorites win more often than the market's estimate of their winning chances imply—are offered. It is shown that this robust anomalous empirical regularity might be due to the presence of transaction costs and/or to strategic bettors' subjective attitude to probabilities.     

Towards a more precise decision framework

The terms negative utility of gambling and risk aversion conflate three things:

Probability and juxtaposition effects: An experimental investigation of the common ratio effect

Several theories explain the common ratio effect as a probability effect resulting from properties of individuals' preference orderings over probability distributions of consequences. In contrast, regret theory explains it as the result of changes in the juxtaposition of consequences in the action/state matrix. This article reports an experiment that allowed probability effects and juxtaposition effects to be separately identified for some common ratio problems, some of which involved real gains and others, real losses. The main finding is that changes in the juxtaposition of consequences have systematic effects on choices in the direction predicted by regret theory.University of East Anglia