Metatickles and the dynamics of deliberation

The traditional or orthodox decision rule of maximizing conditional expected utility has recently come under attack by critics who advance alternative causal decision theories. The traditional theory has, however, been defended. And these defenses have in turn been criticized. Here, I examine two objections to such defenses and advance a theory about the dynamics of deliberation (a diachronic theory about the process of deliberation) within the framework of which both objections to the defenses of the traditional theory fail.     

Fairness,Public Good,and Emotional Aspects of Punishment Behavior

We report an experiment on two treatments of an ultimatum minigame. In one treatment, responders reactions are hidden to proposers. We observe high rejection rates reflecting responders intrinsic resistance to unfairness. In the second treatment, proposers are informed, allowing for dynamic effects over eight rounds of play. The higher rejection rates can be attributed to responders provision of a public good: Punishment creates a group reputation for being tough and effectively educate proposers. Since rejection rates with informed proposers drop to the level of the treatment with non-informed proposers, the hypothesis of responders enjoyment of overt punishment is not supported.     

Objective knowledge out of ignorance: Popper on body,mind, and the third world

In the fifties, Popper defended an interactionistic version of body-mind dualism. It distinguished between the world of physical bodies and states and the world of mental states. Later he added a third world of objective thought contents. He claims the assumption that there is the third world is a necessary presupposition of problem-solving in general and of his philosophy of science in particular. The present article contains separate reasonings to the effect that this presupposition is neither necessary nor even possible. It is further argued that postulating the existence of entities makes sense only relative to a criterion of ontological commitment, which Popper does not mention and obviously does not have, and that in addition it presupposes a theory, which is tentatively accepted as true and which according to the criterion implies the existence of the entities. But as yet there is no testable theory involving terms like mind, intention etc., which made the notion that itself or its terms are essentially different from what is already known in the empirical sciences at least plausible. Therefore the body-mind controversy is still pointless. Popper's stand on it seems to be but a reflex of his anti-behavioristic and anti-psychologistic attitude.     

Group decision making under uncertainty a note on the aggregation of “ordinal probabilities”

This paper is a first attempt to study the problem of aggregation of individual ordinal probabilistic beliefs in an Arrowian framework. We exhibit some properties an aggregation rule must fulfil; in particular we prove the existence of a quasi-dictator.     

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.     

Rush and Procrastination Under Hyperbolic Discounting and Interdependent Activities

We analyze the decision of individuals with time-inconsistent preferences to invest in projects yielding either current costs and future benefits or current benefits and future costs. We show that competition between agents for the same project mitigates the tendency to procrastinate on the first type of activities (i.e. to undertake them too late) and to rush on the second one (i.e. to undertake them too early). Competition can therefore increase the expected welfare of each individual. On the contrary, complementarity of projects exacerbates the tendency to rush and to procrastinate and therefore it can decrease the expected welfare of each individual.     

Far-sighted equilibria in 2 × 2, non-cooperative,repeated games

Consider a two-person simultaneous-move game in strategic form. Suppose this game is played over and over at discrete points in time. Suppose, furthermore, that communication is not possible, but nevertheless we observe some regularity in the sequence of outcomes. The aim of this paper is to provide an explanation for the question why such regularity might persist for many (i.e., infinite) periods.Each player, when contemplating a deviation, considers a sequential-move game, roughly speaking of the following form: if I change my strategy this period, then in the next my opponent will take his strategy b and afterwards I can switch to my strategy a, but then I am worse off since at that outcome my opponent has no incentive to change anymore, whatever I do. Theoretically, however, there is no end to such reaction chains. In case that deviating by some player gives him less utility in the long run than before deviation, we say that the original regular sequence of outcomes is far-sighted stable for that player. It is a far-sighted equilibrium if it is far-sighted stable for both players.     

Comparative Risk Sensitivity with Reference-Dependent Preferences

Experimental evidence suggests that individuals are risk averse over gains and risk seeking over losses (i.e., they have S-shaped utility functions in an expected utility setting) and that they are loss averse. Furthermore, the evidence leads to a single definition of S-shaped utility, but it has led to several alternative specifications of loss aversion. This paper characterizes the relations more S-shaped than and more loss averse than for a utility function, and in so doing arrives at a new definition of loss aversion based on average instead of marginal utility.     

A strategic foundation for the cooperator's advantage

Orbell and Dawes develop a non-game theoretic heuristic that yields a cooperator's advantage by allowing players to project their own cooperate-defect choices onto potential partners (1991, p. 515). With appropriate parameter values their heuristic yields a cooperative environment, but the cooperation depends, simply, on optimism about others' behavior (1991, p. 526). In earlier work, Dawes (1989) established a statistical foundation for such optimism. In this paper, I adapt some of the concerns of Dawes (1989) and develop a game theoretic model based on a modification of the Harsanyi structure of games with incomplete information (1967–1968). I show that the commonly made conjecture that strategic play is incompatible with cooperation and the cooperator's advantage is false.     

Majority vote of even and odd experts in a polychotomous choice situation

The performance of majority vote by an odd number of voters in a dichotomous situation is a much-studied subject. In this paper, we study the performance of group consensus in a situation of polychotomous choice. The differences in majority vote behaviour between even and odd numbers of expert panellists are examined, and the effects of adding new members are derived. Unlike the dichotomous model, optimality in the present context may not be uniquely defined, so the probabilities of the consensus being correct or erroneous are both considered as the number of experts is increased.     

Coherent decision analysis with inseparable probabilities and utilities

This article explores the extent to which a decision maker's probabilities can be measured separately from his/her utilities by observing his/her acceptance of small monetary gambles. Only a partial separation is achieved: the acceptable gambles are partitioned into a set of belief gambles, which reveals probabilities distorted by marginal utilities for money, and a set of preference gambles, which reveals utilities reciprocally distorted by marginal utilities for money. However, the information in these gambles still enables us to solve the decision maker's problem: his/her utility-maximizing decision is the one that avoids arbitrage (i.e., incoherence or Dutch books).     

Simulation methodology

Operational researchers, management scientists, and industrial engineers have been asked by Russell Ackoff to become systems scientists, yet he stated that Systems Science is not a science. (TIMS Interfaces, 2 (4), 41). A. C. Fabergé (Science 184, 1330) notes that the original intent of operational researchers was that they be scientists, trained to observe. Hugh J. Miser (Operations Research 22, 903), views operations research as a science, noting that its progress indeed is of a cyclic nature.The present paper delineates explicitly the attributes of simulation methodology. Simulation is shown to be both an art and a science; its methodology, properly used, is founded both on confirmed (validated) observation and scrutinised (verified) art work.The paper delineates the existing procedures by which computer-directed models can be cyclically scrutinised and confirmed and therefore deemed credible. The complexities of the phenomena observed by social scientists are amenable to human understanding by properly applied simulation; the methodology of the scientist of systems (the systemic scientist).

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Résumé Russell Ackoff propose à ceux qui s'occupent de recherches opérationnelle, industrielle, et de gestion, d'agir en systems scientists, et pourtant il affirme que systems science n'est pas une science (TIMS Interfaces 2 (4), 41). A. C. Fabergé (Science 184, 1330) remarque, qu'à l'origine, le but de ceux qui s'occupaient de recherche opérationnelle était d'agir en hommes de science instruits à observer. Hugh J. Miser (Operational Research 22, 903) considère la recherche opérationnelle comme science, notant que ses progrès sont en effet de nature cyclique.La présente étude délimite explicitement les attributs de la méthode de la simulation. Il est démontré que la simulation est à la fois un art et une science; sa méthode, lorsqu'utilisée correctement, repose sur l'observation validée et le modèle vérifié.L'étude délimite les moyens actuels dont nous disposons pour vérifier et valider cycliquement les modèles bâtis à l'aide d'ordinateurs, établissant ainsi leur crédibilité. La nature complexe des phénomènes étudiés par les sciences sociales peut être comprise à l'aide de la simulation: la méthode dont se servent les hommes de science qui étudient les systèmes (les scientistes systémiques).

     

Impersonal probability as an ideal assessment based on accessible evidence: A viable construct?

When risk analysts and others refer to the true probability of an event, it is not easy to give it a meaning which is sound and useful as a communication device for regulatory, research planning, and related purposes. An interpretation is herein offered which, unlike Bayesian probability, is impersonal and does not depend on a particular assessor; unlike Carnap's logical probability, it does not depend on information actually to hand. It is a generalization of frequency and propensity interpretations of impersonal probability applicable to unique events: an ideal assessment based on currently accessible (not in general perfect) evidence. The argument is illustrated from decision-aiding experience which motivated the enquiry.This work was supported by the National Science Foundation, Division of Social and Economic Sciences. The author thanks John Pratt, Marvin Cohen, Dennis Lindley, Jon Baron, Kathy Laskey, and Stephen Watson for their most helpful review. They do not necessarily share his views.     

Minimax,information and ultrapessimism

Discussing the foundations of the minimax principle, Savage (1954) argued that it is utterly untenable for statistics because it is ultrapessimistic when applied to negative income, but claimed that such objection is not relevant when the principle is applied to regret. In this paper I rebut the latter claim. I first present an example where ultrapessimism, as Savage understood it, applies to minimax regret but not to minimax negative income. Then, for a sequential decision problems with two terminal acts and a finite number of states of nature, I give necessary and sufficient conditions for a decision rule to be ultrapessimistic, and show that for every payoff table with at least three states, be it in regret form or not, there exist an experiment such that the minimax rule is ultrapessimistic. I conclude with some more general remarks on information and the value of experimentation for a minimax agent.     

A formulation of the determinism hypothesis

The author tries to formulate what a determinist believes to be true. The formulation is based on some concepts defined in a systems-theoretical manner, mainly on the concept of an experiment over the sets A ^m (a set of m-tuples of input values) and B ⁿ (a set of n-tuples of output values) in the time interval (t ₁, ..., t _k ) (symbolically E[t ₁,..., t _k , A ^m , B ⁿ ]), on the concept of a behavior of the system S ^m,n (=(A ^m , B ⁿ )) on the basis of the experiment E[t ₁, ..., t _k , A ^m , B ⁿ ] and, indeed, on the concept of deterministic behavior .... The resulting formulation of the deterministic hypothesis shows that this hypothesis expresses a belief that we always could find some hidden parameters.     

Equivalent decision trees and their associated strategy sets

The purpose of this paper is to examine the structure of individual decisions under uncertainty in extensive (i.e., decision-tree) form at a sufficient level of generality to encompass many traditional as well as novel criteria of general choice under uncertainty. Considerations both of structure and of strategic effect arise. In § 2 we define weak and strong forms of strategic equivalence of decision trees and describe partial-normalization procedures by which all economically defined complete pure strategies may be identified for the decider and for chance. In § 3 we examine characteristics of locally randomized, behavior strategies for the decider as the degree of normalization is varied, and we deduce useful properties of the function which specifies an outcome lottery for each behavior strategy of the decider in conjuction with a deterministic or stochastic selection by Chance. In § 4 we list a wide variety of choice criteria which may be invoked within the framework developed here.     

Substitution of indifferent options at choice nodes and admissibility: a reply to Rabinowicz

Tiebreak rules are necessary for revealing indifference in non- sequential decisions. I focus on a preference relation that satisfies Ordering and fails Independence in the following way. Lotteries a and b are indifferent but the compound lottery 0.5f, 0.5b is strictly preferred to the compound lottery 0.5f, 0.5a. Using tiebreak rules the following is shown here: In sequential decisions when backward induction is applied, a preference like the one just described must alter the preference relation between a and b at certain choice nodes, i.e., indifference between a and b is not stable. Using this result, I answer a question posed by Rabinowicz (1997) concerning admissibility in sequential decisions when indifferent options are substituted at choice nodes.     

Empirical evidence of two-attribute utility dependence on probability

We investigate utility dependence on probability using a new methodology that examines how indifference statements vary with the probability of obtaining times and costs of individual trips. Of 127 subjects, 8 supplied 3 (out of 3) sets of indifference statements consistent with probability independence. Those subjects with 2 or more sets of indifference statements violating probability independence exhibited a systematic dependence, in that knowing the direction of a subject's violation in one set of indifference statements would increase the likelihood of his or her violating other sets of indifference statements in the same direction. Data show that this systematic violation of dependence should not be attributed to artifacts of the experiment.     

The impact of risk attitude,uncertainty and disequilibria on optimal production and inventory

Summary The empirical facts seem to indicate that in real economies the effect of uncertainty tends to decrease production. The limitations of empirical investigations presented should be stressed: they were performed mainly on an aggregate level, they mainly refer to Austrian manufacturing, they rely heavily on questionnaires. Above all empirical investigation will never be able to decide normative questions or to explain the behavior in the general equilibrium. Nevertheless in the short run, given all the rigidities and disequilibria which exist, uncertainty tends to lower optimal production even in absence of risk aversion. Risk aversion becomes important for large, for once-for-all decisions, but it is not the only channel through which uncertainty changes decisions.Technological concavity created by concave marginal revenues or by convex marginal costs, marginal costs of uncertainty in disequilibria model or asymmetric costs of revisions of the preliminary decision are able to bias the decision downward in a real world economy without invokingPaper presented to the 2nd Conference on the Foundations of Risk and Utility (FUR), Venezia, 1984.     

On the foundations of mean-variance analyses

Let (, ) and (, ) be mean-standard deviation pairs of two probability distributions on the real line. Mean-variance analyses presume that the preferred distribution depends solely on these pairs, with primary preference given to larger mean and smaller variance. This presumption, in conjunction with the assumption that one distribution is better than a second distribution if the mass of the first is completely to the right of the mass of the second, implies that (, ) is preferred to (, ) if and only if either > or ( = and < ), provided that the set of distributions is sufficiently rich. The latter provision fails if the outcomes of all distributions lie in a finite interval, but then it is still possible to arrive at more liberal dominance conclusions between (, ) and (, ).This research was supported by the Office of Naval Research.