Regret theory and risk attitudes

We examine risk attitudes under regret theory and derive analytical expressions for two components—the resolution and regret premiums—of the risk premium under regret theory. We posit that regret-averse decision makers are risk seeking (resp., risk averse) for low (resp., high) probabilities of gains and that feedback concerning the foregone option reinforces risk attitudes. We test these hypotheses experimentally and estimate empirically both the resolution premium and the regret premium. Our results confirm the predominance of regret aversion but not the risk attitudes predicted by regret theory; they also clarify how feedback affects attitudes toward both risk and regret.     

A note on “Re-examining the law of iterated expectations for Choquet decision makers”

This note completes the main result of Zimper (Theory and decision, doi:10.1007/s11238-010-9221-8, 2010), by showing that additional conditions are needed in order the law of iterated expectations to hold true for Choquet decision makers. Due to the comonotonic additivity of Choquet expectations, the equation E[f, ν(dω)] = E[E[f(ω _{i, j} ), ν(A _{i, j} |A _i )], ν(A _i )], is valid only when the act f is comonotonic with its dynamic form, that we name “conditional certainty equivalent act”.     

Helping patients and physicians reach individualized medical decisions: theory and application to prenatal diagnostic testing

This paper presents a procedure designed to aid physicians and patients in the process of making medical decisions, and illustrates its implementation to aid pregnant women, who decided to undergo prenatal diagnostic test choose a physician to administer it. The procedure is based on a medical decision-making model of Karni (J Risk Uncertain 39: 1–16, 2009). This model accommodates the possibility that the decision maker’s risk attitudes may vary with her state of health and incorporates other costs, such as pain and inconvenience, associated with alternative treatments. The medical decision problem was chosen for its relative simplicity and the transparency it affords.     

Model for the distribution process of attitudes in a two-party-system

This article considers a social system where a political decision is to be made. Only two alternatives are permitted: YES or NO. Within the total population A there are two groups, one (X) campaigns for a YES decision, the other one (Y) argues for a NO decision. It is assumed that every individual within the total population has the same opportunities in the field of communications. The question to be answered is as follows: How are the opinions within the total population A distributed after a certain length of time. In our model we use a quantitative concept: The ‘Influence of Opinion in a Two-Party-System’. It is assumed that the relative influence of a group of people having a certain opinion is the stronger, the faster they are able to publicize their decision within the total population A. This and other assumptions (axioms) are formulated more precisely in the following discussion.     

Normalized measures of concavity and Ross’s strongly more risk averse order

The Arrow-Pratt (A-P) definitions of absolute and relative risk aversion dominate the discussion of risk aversion and defining “more risk averse”. Ross (Econometrica 49:621–663, 1981) notes, however, that being A-P more risk averse is not sufficient for addressing many important comparative static questions. Consequently he introduces “a new and stronger measure for comparing two agents’ attitudes towards risk…”. Ross does not provide a corresponding measure of risk aversion. This paper uses a normalized measure of concavity to characterize the Ross definition of strongly more risk averse on bounded intervals. Other properties and uses of these normalized measures of concavity are also presented.     

Harsanyi’s critical rule utilitarianism

In his recent book,Rational Behaviour and Bargaining Equilibrium In Games and Social Situations, John C. Harsanyi devotes a chapter to his new theory of morality, which he calls ‘Critical Rule Utilitarianism’, and which contains his solution to the problem of the interpersonal comparison of utility. After a detailed exposition of his theory, arguments will be presented to show that:

1. there are certain formal difficulties in the solution that he offers which leads to a rejection of the axiom that there is to be agreement between an individualj’s personal preferences and individuali’s (i ≠j) extended utility function out of which the social welfare function is to be constructed; and
2. Harsanyi’s theory of critical rule utilitarianism cannot be accepted as a theory of morality because it presupposes a more fundamental theory in its actual construction.

     

The conflict between naive and sophisticated choice as a form of the ‘liberal paradox’

Pareto-inefficient perfect equilibria can be represented by the liberal paradox approach of Sen, appropriately reconfigured to model intertemporal decision-making by an individual. We show that the preference profile used by Grout (1982) to construct a case in which naive choice Pareto-dominates sophisticated choice can be so represented, if tastes change and if the individual can make decisions at time t, which restrict or determine opportunities available in period t + 1 and beyond. This ability to make a decision that binds oneself in the future is a form of rights assignment. We also show how two resolutions of the liberal paradox work out in the individual decision framework.     

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.     

The effect of the background risk in a simple chance improving decision model

We experimentally investigate the effect of an independent and exogenous background risk to initial wealth on subjects’ risk attitudes and explore an appropriate incentive mechanism when identical or similar tasks are repeated in an experiment. Taking a simple chance improving decision model under risk where the winning probabilities are negatively related to the potential gain, we find that such a background risk tends to make risk-averse subjects behave more risk aversely. Furthermore, we find that risk-averse subjects tend to show decreasing absolute risk aversion (DARA), and that a random round payoff mechanism (RRPM) would control the possible wealth effect. This suggests that RRPM would be a better incentive mechanism for an experiment where repetition of a task is used.

Changing preferences towards redistribution: How deliberation shapes welfare attitudes

The article departs from the argument that research on welfare attitudes is, so far, dominated by large‐scale survey‐studies, which allow for generalizable insights into citizens' preferences and evaluations, but are necessarily limited in their ability to capture the dynamic and contextual aspects of attitude formation. In order to broaden the horizon of welfare attitudes' research, this article introduces a new qualitative method, namely deliberative forums. In these large group discussions—originally developed for participatory decision‐making—attitudes, opinions, and preferences are core aspects of the deliberation process, and the article argues that by observing deliberation, we can observe attitude construction “in vivo ”. The evidence from a two‐day German deliberation event illustrates in an exploratory manner how information, reasoning, and group processes can influence people's evaluations and expressed policy preferences with regard to redistribution. By linking participants' answers from a survey before and after the event to their statements during the discussions, the article not only shows that the preferences for redistribution people expressed in the survey answers are often higher after the deliberative event, but also seeks to make sense of attitudinal dynamics on the basis of the qualitative material by pointing towards the role of information, reasoning, and group processes.     

Estimating subjective probabilities

Subjective probabilities play a central role in many economic decisions and act as an immediate confound of inferences about behavior, unless controlled for. Several procedures to recover subjective probabilities have been proposed, but in order to recover the correct latent probability one must either construct elicitation mechanisms that control for risk aversion, or construct elicitation mechanisms which undertake “calibrating adjustments” to elicited reports. We illustrate how the joint estimation of risk attitudes and subjective probabilities can provide the calibration adjustments that theory calls for. We illustrate this approach using data from a controlled experiment with real monetary consequences to the subjects. This allows the observer to make inferences about the latent subjective probability, under virtually any well-specified model of choice under subjective risk, while still employing relatively simple elicitation mechanisms.     

Relationships between attitudes toward women's roles in society,and work and life values

This exploratory study examined the relationships between attitudes toward women's roles in society, as measured by the six sub-scales on ward Women Scale (AWS: Spence, J. T., & Helmreich, R. L. (1972). The Attitudes Towards Women Scale: An objective instrument to measure attitudes towards the rights and roles of women in contemporary society. JSAS Catalog of Selected Documents in Psychology, 2(66)) and 20 work and life values, as measured by the Life Roles Inventory-Values Scale (LRI-VS: Macnab, D., Fitzsimmons, G., & Casserly, C. (1985). Administrator's manual for the Life Roles Inventory Values and Salience. Edmonton, AB: PsiCan Consulting). It was hypothesized that more liberal attitudes toward women's roles in society would be associated with higher scores on the social, personal and individual values. Results from a sample of 89 management and health sciences undergraduates generally supported the hypothesis.     

Judging parental competence: A cross‐country analysis of judicial decision makers' written assessment of mothers' parenting capacities in newborn removal cases

This paper examines the discretionary reasoning of the judiciary in three jurisdictions, England, Germany and Norway, in cases deciding whether a newborn child is safe with her parents or intervention is necessary. Our analysis focuses on one specific dimension of decision makers' exercise of discretion, namely, if and how the strengths and weaknesses of the mother are considered. The data material consists of all decisions concerning care orders of newborns from one large city in Germany from 2015 to 2017 (n = 27) and 2016 in Norway (n = 76) and all publicly available newborn removal decisions in England for 2015–2017 (n = 14). The findings reveal a high number of risk factors in the cases and less focus on risk‐reducing factors. The situation of the newborn is considered to be harmful, as most cases result in a care order. Judicial discretion differs by how much information, and what types of factors, are included in the justification for the decision. A learning point for decision makers and policymakers would be to actively undertake a balancing act between risk‐increasing and risk‐reducing factors.     

Implementing affirmative action in higher education: University responses to Gratz and Grutter

In 2003, the Supreme Court handed down two landmark decisions regarding the use of affirmative action in higher education. In one case, Grutter v. Bollinger, the Court said it was constitutional to consider race in admissions decisions in order to achieve the educational benefits of a diverse student body. In stark contrast, the Court struck down in Gratz v. Bollinger the University of Michigan's undergraduate admissions policy on the grounds that too much of the decision was based on race. In this research note, we surveyed midwestern and southern institutions of higher education to see how college and university presidents in the Fifth and Sixth federal circuits have sought to implement Gratz and Grutter. We find schools in the Fifth Circuit (southern) do not consider race in admissions decisions and those in the Sixth Circuit (midwestern) utilize race to assemble a student body. We suggest that lower federal court precedent may explain why the midwestern schools consider race but the southern schools do not.     

Male involvement in the abortion decision and college students’ attitudes on the subject

College students’ attitudes concerning male involvement in the abortion decision-making process were investigated with the aid of 94 participants. A t test supported the first hypothesis that no significant difference exists between males and females regarding levels of male involvement. A t test also supported the second hypothesis that pro-life participants will endorse higher levels of male involvement. A Pearson correlation revealing no significant relationship between level of male involvement and number of religious worship services attended during the last month did not support the third hypothesis that more religious participants would endorse higher levels of male involvement. A multiple linear regression was used to investigate the research question, “Do gender, race, and religiosity significantly predict levels of male involvement in abortion decisions?” Regression results indicate that the linear combination of these variables significantly predicted level of male involvement.     

Does anti-Semitism among African Americans simply reflect anti-White sentiment?

In his classic essay (1967) titled “Negroes Are Anti-Semitic Because They’re Anti-White,” writer James Baldwin argues that African American resentment of Jews reflects generalized anti-White sentiment. The current study examines levels of anti-Semitic attitudes in the United States among African Americans and other racial/ethnic groups. Using General Social Survey (2000) data for a nationally representative sample of adults (n = 1,118), this research investigates whether variation in anti-White attitudes explains variation in anti-Semitic attitudes. Multiple indicators are used to operationalize anti-Semitic and anti-White attitudes. One such indicator is the degree to which one opposed living in a Jewish (or White) neighborhood. Control variables include measures of perception of wealth for Jews and Whites. A series of logistic regression analyses offers mixed results. One analysis indicates that while some anti-Semitic attitudes are strongly associated with anti-White attitudes, African Americans are still significantly more likely than White, Latino, and Asian groups to express anti-Semitic views when the level of anti-White sentiment is held constant (p < .05). In a second analysis the respondent's race is not a significant effect on expressed anti-Semitism when controlling for anti-White attitudes.     

Defining the boundaries: social worker assessment of sexual abuse in a cultural context – multivariate analysis of personal and professional factors influencing social workers' labelling of intimacy behaviour

To explore personal and professional factors influencing social worker assessment of family intimacy behaviour in diverse cultural groups, a 27‐item questionnaire was mailed to a random, stratified sample of MSW‐level social workers. The instrument measured rank‐order responses to 10 questions about attitudes towards public exposure to sexual stimuli and rank‐order responses to questions about three vignettes depicting culturally informed family intimacy behaviour. The instrument also measured sample characteristics such as area of social work practice and per cent of caseload involving sexually abused as well as diverse clients. Completed questionnaires (n = 387) were analysed for association between respondents' definition of intimacy behaviour (dependent variable), attitude towards sexual stimuli, and intervening variables thought to explain variance in the dependent measure. Labelling theory provided a basis for hypotheses testing. When mean attitude scores were correlated with mean definition scores, Pearson's r returned a significant low, positive association between conservative attitudes towards exposure to sexual stimuli and definitions of cross‐cultural scenarios as sexual abuse. Holding attitude scores constant, regression modelling of the sample's definition of scenarios indicated that practice area, minority status, and per cent of caseload with sexual abuse clients were significant predictors of R² change in the dependent variable. Further analysis of data through regression tree modelling showed that a small group of conservative practitioners with ethnically diverse caseloads were more likely to label culturally influenced behaviours as deviant. Among conservative practitioners with less diverse caseloads, number of hours in sexuality training had a moderating influence on deviancy labelling. Tree modelling of the data also indicated that an ethnic minority subgroup within the sample accounted for the lowest ranking of scenarios as sexual abuse. Results support earlier work on social worker assessment of child maltreatment as a function of agency setting. Another implication for social work is the need for practitioners to understand their attitudes towards human sexuality in relation to assessment of diverse patterns of childhood sexual socialization.     

Is imprecise knowledge better than conflicting expertise? Evidence from insurers’ decisions in the United States

This paper reports the results of the first experiment in the United States designed to distinguish between two sources of ambiguity: imprecise ambiguity (expert groups agree on a range of probability, but not on any point estimate) versus conflict ambiguity (each expert group provides a precise probability estimate which differs from one group to another). The specific context is whether risk professionals (here, insurers) behave differently under risk (when probability is well-specified) and different types of ambiguity in pricing catastrophic risks (floods and hurricanes) and non-catastrophic risks (house fires). The data show that insurers charge higher premiums when faced with ambiguity than when the probability of a loss is well specified (risk). Furthermore, they tend to charge more for conflict ambiguity than imprecise ambiguity for flood and hurricane hazards, but less in the case of fire. The source of ambiguity also impacts causal inferences insurers make to reduce their uncertainty.     

Decision analysis using lottery-dependent utility

In this article we show how the lottery-dependent expected utility (LDEU) model can be used in decision analysis. The LDEU model is an extension of the classical expected utility (EU) model and yet permits preference patterns that are infeasible in the EU model. We propose a framework for constructing decision trees in a particular way that permits us to use the principle of optimality and thus the divide and conquer strategy for analyzing complex problems using the LDEU model. Our approach may be applicable to some other nonlinear utility models as well. The result is that, if desired, decision analysis can be conducted without assuming the restrictive substitution principle/independence axiom.