OUTCOME UNCERTAINTY,FAN TRAVEL,AND AGGREGATE ATTENDANCE

The uncertainty of outcome hypothesis (UOH) informs economists' understanding of consumer decisions to attend sporting events and team revenue generation. We develop a model of fan behavior based on standard expected utility methods which incorporates fan heterogeneity in terms of decisions to travel to away games and strong preferences for wins. The model reflects aggregate attendance outcomes across local and visiting fans, generates predictions consistent with the UOH, and gives rise to concave league-wide revenue functions. Empirical analysis of game outcomes and attendance at regular season National Basketball association games from 1979 to 2013 supports key predictions of the model. (JEL L83, D12, Z20)     

PROPERTY RIGHTS AND LOSS AVERSION IN CONTESTS

We analyze the effects of property rights and the resulting loss aversion on contest outcomes. We study three situations: in “gain” two players start with no prize and make sunk bids to win a prize; in “loss” both the players start with prizes and whoever loses the contest loses their prize; and in “mixed” only one player starts with a prize that stays with him if he wins, but is transferred to the rival otherwise. Since the differences among the treatments arise only from framing, the expected utility and the standard loss aversion models predict no difference in bids across treatments. We introduce a loss aversion model in which the property rights are made salient, and as a result the reference point varies across treatments. This model predicts average bids in descending order in the loss, the mixed, and the gain treatment; and higher bids by the player with property rights in the mixed treatment. The results from a laboratory experiment broadly support these predictions. There is no significant difference in bids in the loss (gain) treatment and bids by property rights holder (nonholder) in the mixed treatment. A model incorporating both loss aversion and social preferences explains this result. (JEL C91, C72, D23, D74)     

PERCEIVED GAME UNCERTAINTY,SUSPENSE AND THE DEMAND FOR SPORT

This study tries bridging between different behavioral economic explanations for the lack of support of the uncertainty of outcome hypothesis in spectator sports. We test a measure of perceived game uncertainty that is comparable to objective measures frequently tested in the literature. Econometric results suggest that fans do not perceive closeness of a game differently than how economists have tended to measure it. However, fans' perceptions of suspensefulness are distinct from their perceptions of game uncertainty. Moreover, the finding that fans' preferences for game uncertainty are dominated by loss aversion also emerges—independently of fanship status—in our stated‐preference setting. (JEL L83, D12, Z2)     

WHAT MOTIVATES POLITICAL PREFERENCES? SELF‐INTEREST,IDEOLOGY, AND FAIRNESS IN A LABORATORY DEMOCRACY

Substantial prior literature has established that subjects in laboratory experiments are typically willing to sacrifice their own well being to make financial allocations more equal among participants. We test the applicability of this result in an environment that contains some of the key contextual issues that are usually excluded from more abstract games, but which might be important in situations involving income redistribution. Our general finding is that votes for a redistributive tax are almost entirely in accordance with self‐interest: above‐average earners vote for low tax rates and below‐average earners vote for high tax rates. A measure of subjects' preferences for fairness or equality, their self‐reported economic ideology, is not directly related to their voting behavior in this experiment. Because the ideology measure should be correlated with any intrinsic preferences regarding inequality aversion, we conclude that any preferences for fairness or inequality that our subjects possess are not strong enough to overcome self‐interest in this context. We do, however, find evidence for a possible indirect effect of ideology on choice behavior in that more conservative subjects tend to be more responsive to their self‐interest than the more liberal subjects. (JEL C90, D63)     

ROBUSTNESS OF BIDDER PREFERENCES AMONG AUCTION INSTITUTIONS

In previous work, we found that bidders strongly prefer the ascending to the first‐price sealed‐bid auction on a ceteris paribus basis, but perhaps surprisingly, they are not willing to pay up to an entry price for the ascending auction that would equalize the profits. Risk aversion was proposed as an explanation. In this study, we examine two alternative explanations for the observed behavior: loss aversion and aversion to the dynamic bidding process. We find that neither alternative explanation can account for bidders’ auction choice behavior, leaving risk aversion as the only unfalsified hypothesis. (JEL C91, D44)     

RISK PREFERENCE ESTIMATION IN THE NONLINEAR MEAN STANDARD DEVIATION APPROACH

Risk preferences and technology are jointly estimated in the nonlinear mean-standard deviation framework for a competitive firm model under price risk. A utility function is proposed that nests various risk preference structures and risk neutrality as empirically refutable special cases. The empirical application using firm-level data finds evidence of decreasing absolute risk aversion, differences in the nature of relative risk aversion by firm size, and little support for the widely used linear mean-variance framework. The estimation results also show that ignoring risk and risk preferences can substantially overestimate output supply and input demand elasticities.     

LOSS AVERSION AND MANAGERIAL DECISIONS: EVIDENCE FROM MAJOR LEAGUE BASEBALL

Previous research indicates that management changes are important events for organizations, partly because they lead to reversals of poor prior decisions. An unanswered question is why replacing the manager seems to be necessary for reversing poor decisions. One explanation is that managers have an irrational behavioral aversion to admitting mistakes (loss aversion). We test this hypothesis with a research design that mitigates many of the measurement problems associated with investment decisions in traditional corporate settings, and that allows us to distinguish agency cost from loss aversion as explanations. Using Major League Baseball data, we find that new managers, compared to continuing managers, are more likely to divest low‐performing players. Moreover, when the manager is new and the previous manager was responsible for acquiring a player who is underperforming, the likelihood of player divestiture is significantly higher relative to low performers acquired by earlier managers. Experience of the acquiring manager does not affect the likelihood that the manager retains a low performer, suggesting that it is loss aversion, and not career concerns, that motivates acquiring managers to retain low performers. The findings suggest that loss aversion plays a significant role in managerial decisions and managerial turnover. (JEL J6, L8, D8)     

WAGES,RENTS, AND HETEROGENEOUS MOVING COSTS

The model of compensating differentials in regional labor and land markets was formalized by Roback (1982) . The model interprets regional differences in constant quality wages and rents as compensating firms and residents for inter‐regional differences in amenities. This paper extends the Roback model to allow for moving costs which vary among a city's residents and businesses. This modification of the model generates new interpretations of regional differences in rents and wages. The theoretical results suggest that the interpretation of inter‐city rent and wage differentials as compensating is misguided, that such differentials are inappropriate as weights in Quality of Life (QOL) comparisons, and stresses the importance of local housing market parameters in the determination of these differentials. The importance of amenities is retained, but housing supply becomes the main other determinant of regional rents. Housing supply was ignored in the literature following on Roback's initial insight. We show that interactions between amenities and housing supply will bias QOL rankings. Finally, we support the empirical importance of heterogeneous moving costs by demonstrating the effects of exogenous supply constraints on local housing prices. (JEL R31)     

PAYOFF LEVELS,LOSS AVOIDANCE,AND EQUILIBRIUM SELECTION IN GAMES WITH MULTIPLE EQUILIBRIA: AN EXPERIMENTAL STUDY

Game theorists typically assume that changing a game's payoff levels—by adding the same constant to, or subtracting it from, all payoffs—should not affect behavior. Although this invariance is an implication of the theory when payoffs mirror expected utilities, it is an empirical question when “payoffs” are actually money amounts. Loss avoidance is a phenomenon where payoff‐level changes matter when they change the signs of payoffs: gains become losses or vice versa. We report the results of a human‐subjects experiment designed to test for two types of loss avoidance: certain‐loss avoidance (avoiding a strategy leading to a sure loss, in favor of an alternative that might lead to a gain) and possible‐loss avoidance (avoiding a strategy leading to a possible loss, in favor of an alternative that leads to a sure gain). Subjects in the experiment play three versions of Stag Hunt, which are identical up to the level of payoffs, under a variety of treatments. We find strong evidence of behavior consistent with certain‐loss avoidance in the experiment. We also find evidence of possible‐loss avoidance, although weaker than that for certain‐loss avoidance. Our results carry implications for theorists modeling real‐life situations with game theory and for experimenters attempting to test theory and interpret observed behavior in terms of theory. (JEL D81, C72, C73)     

Exploring Parents' Experiences and Reactions to Adolescents' Hyperactivity,Impulsivity, and Attention Problems

Adolescents' hyperactivity, impulsivity, and attention problems (HIA) have been shown to make parents feel powerless. In this study, the authors examined whether these feelings were dependent on parents' experiences with their older children. Two models that offer different predictions of how parents make use of their earlier experiences when raising their later‐born children were explored: the learning‐from‐experience model and the spillover model. The authors used reports from 372 parents with 1 child (M_age = 11.92) and 198 parents with 2 children (M_age = 11.89 and 14.35) from a small town in a European country. The results did not support a learning‐from‐experience process. Instead, consistent with a spillover process, parents felt particularly powerless about their younger children with HIA if they also felt powerless about their older children. This study suggests that parents' experiences of raising their older children are important for their reactions to HIA in their younger children     

ARE THE DISABLED LESS LOSS AVERSE? EVIDENCE FROM A NATURAL POLICY EXPERIMENT

Research findings show that disabled persons often develop physical and psychological mechanisms to compensate for disabilities. Coping mechanisms may not be limited to the psychophysiological domain and may extend to cognitive bias and loss aversion. In this study, we apply unique microdata from a natural policy experiment to assess the role of loss aversion in home purchase among nondisabled and disabled households. Results of survival analysis indicate that the physically disabled are substantially less loss averse in home purchase. Furthermore, loss aversion varies with other population characteristics and attenuates with degree of disability. Findings provide new evidence of diminished cognitive bias and more rational economic decision‐making among the physically disabled. (JEL D03, C9, R38)     

RISK PREFERENCES AND EXPECTED UTILITY: EVIDENCE FROM LABOR SUPPLY DATA

This paper adds to the growing body of evidence that observed risk preferences are not consistent with expected‐utility theory. Using the link between labor supply decisions and utility as outlined by Chetty (“A Bound on Risk Aversion Using Labor Supply Elasticities.” The American Economic Review, 96(5), 2006, 1821–34), I compute the curvature of utility over wealth for 3,900 individuals in the 1996 Panel Study of Income Dynamics. I then compare this estimate to a measure of relative risk aversion based on the respondents' answers to hypothetical gambling questions and find virtually zero correlation. Finally, I investigate how the two measures and their correlations change by demographic groups and risky behavior. (JEL C81, D80, J22)     

DESPERATION OR DESIRE? THE ROLE OF RISK AVERSION IN MARRIAGE

Because of the uncertainty inherent in searching for a spouse and the uncertainty of the future quality and state of the marriage itself, risk attitudes likely directly impact the timing of marriage. The effect of an individual’s risk aversion, measured via a series of hypothetical gambles over income on time to marriage, is examined using survival analysis. I find risk aversion significantly affects time to marriage, with more risk averse respondents marrying sooner than their more risk‐loving counterparts. Within‐family analyses using sibling data reveal a similar pattern. In addition, the effect of risk aversion on time to marriage is larger in magnitude and more statistically significant for men. One possible explanation for the different results between the sexes is that women value risk aversion as a desirable trait in potential mates. (JEL J10, J11, J12, J16)     

Factors affecting infant toy preferences: Age,gender, experience,motor development,and parental attitude

In contrast to the anecdotal claim that “male infants like cars and female infants like dolls,” previous studies have reported mixed findings for gender‐related toy preferences in infancy. In Experiment 1, we explored the emergence of gender‐related preferences using face–car pairs (Experiment 1a, n = 51, 6–20 months) or face–stove pairs (Experiment 1b, n = 54, 6–20 months). In Experiment 2 (n = 42, 14–16 months), we explore the effect of toy properties, infants' past toy exposure, activity levels, and parental attitudes on such preferences using a wider range of toys. For both studies, infants demonstrated a general preference for faced stimuli over other objects, except for male infants who showed no preference between dolls and cars at around 15 months. Infants' prior experience participating in motor‐intensive activities, with wheeled toys and parental attitudes appeared to relate to female infants' preferences for dynamic toys. These results indicate a range of factors influence gendered toy preferences and suggest that nurture plays an important role.     

Reference dependent preferences,hedonic adaptation and tax evasion: Does the tax burden matter?

We study the effects of the tax burden on tax evasion both theoretically and experimentally. We develop a theoretical framework of tax evasion decisions that is based on two behavioral assumptions: (1) taxpayers are endowed with reference dependent preferences that are subject to hedonic adaptation and (2) in making their choices, taxpayers are affected by ethical concerns. The model generates new predictions on how a change in the tax rate affects the decision to evade taxes. Contrary to the classical expected utility theory, but in line with previous applications of reference dependent preferences to taxpayers’ decisions, an increase in the tax rate increases tax evasion. Moreover, as taxpayers adapt to the new legal tax rate, the decision to evade taxes becomes independent of the tax rate. We present results from a laboratory experiment that support the main predictions of the model.     

Perceptions of Children’s Parental Preferences in Lesbian Two‐Mother Households

This study explores how lesbian mothers perceive their 3½‐year‐old children’s parental preferences in families in which one mother is genetically linked to the child. Thirty lesbian couples (60 women) were interviewed about their children’s parental preferences, their explanations of why preferences for one parent existed (or not), and their affective and behavioral reactions to such preferences. Many women acknowledged that their children, as infants, preferred their birth mothers due to biological factors (i.e., breastfeeding) or differential time spent with the child. Despite this initial preference, most women perceived little stability in children’s preferences over time, such that children preferred both mothers equally. Findings support the power of “social motherhood” in fostering maternal connections that transcend biological relatedness over time.     

OPTIMAL EMPLOYEE OWNERSHIP CONTRACTS UNDER AMBIGUITY AVERSION

The aim of this paper is to compute and describe the conditions of an optimal employee ownership contract between an employer and an ambiguity‐averse employee. We then introduce ambiguity aversion in the baseline model of Aubert et al. (2014) using the multiple prior preferences of Gilboa and Schmeidler (1989) and its extension proposed by Maccheroni et al. (2006). This model offers solutions that reconcile labor and financial economics and behavioral economics research findings on employee ownership. The paper focuses on the most common situation where employee ownership has a positive impact on corporate performance, but can also be used as an entrenchment mechanism. We determine the optimal company stock contribution, which corresponds to a perfect subgame Nash equilibrium in the ambiguity framework. Using the framework of Gilboa and Schmeidler (1989), we show that the optimal ownership contract is increasing with respect to the lower bound of the return expectation in the case of a high level of effort, and decreasing with respect to the upper bound of the return expectation in the case of a low level of effort. In the framework of Maccheroni et al. (2006), we prove that if aversion to ambiguity is sufficiently high, then we find the same behavior as in the case of no ambiguity. (JEL G11, G32, G34, J33)     

SELF‐EMPLOYMENT,EFFICIENCY WAGE,AND PUBLIC POLICIES

Empirical evidence suggests that unemployed workers are much more likely to become self‐employed than wage‐employed workers. Also, higher unemployment benefits significantly reduce the rate of self‐employment. This article develops a model of self‐employment which incorporates transitions between unemployment and self‐employment. It integrates two strands of theoretical literature—models of occupational choice and the efficiency wage models. In this model, a higher unemployment benefit reduces the self‐employment rate and the transition rate of unemployed workers to self‐employment, which is consistent with empirical evidence. (JEL J23, J58, J64)     

Aversion to inequality in Italy and its determinants

The main goal of this paper is to estimate the preferences of the Italian society towards equity in order to verify whether preferences (i) have changed across the years, and (ii) can be related to specific socio-demographic characteristics. Introducing equity concerns in the implementation of economic policies is a fundamental problem faced by both economists and policy makers. This paper uses a social welfare function à la Jorgenson and Slesnick to estimate societys aversion towards inequality by implement in a voting scheme for compiling individuals equity preferences in to a social choice by majority rule. The results show that preferences are highly polarized toward a low and a high concern for equity aversion and that this concern is significantly related with several sociodemographic characteristics. Among them, income plays an important role with richer people tending to favor less equity. Results also show that preferences towards equity have changed across the years.