Measuring ambiguity preferences: A new ambiguity preference survey module

Journal of Risk and Uncertainty - Ambiguity preferences are important to explain human decision-making in many areas in economics and finance. To measure individual ambiguity preferences, the...     

Recent developments in modeling preferences: Uncertainty and ambiguity

In subjective expected utility (SEU), the decision weights people attach to events are their beliefs about the likelihood of events. Much empirical evidence, inspired by Ellsberg (1961) and others, shows that people prefer to bet on events they know more about, even when their beliefs are held constant. (They are averse to ambiguity, or uncertainty about probability.) We review evidence, recent theoretical explanations, and applications of research on ambiguity and SEU.Thanks to Jonathan Baron, James Dow, Peter Fishburn, Itzhak Gilboa, Gordon Hazen, Howard Kunreuther, Tomas Phillipson, David Schmeidler, Amos Tversky, the editor, and several anonymous referees for corrections and helpful comments. Camerer's contribution to this work was supported by the National Science Foundation, grant no. SES 88-09299. Weber's contribution was supported by the Deutsche Forschungsge-meinschaft, grant no. WE 993/5-1.     

Development and validation of the Dutch Social Attunement Questionnaire (SAQ)

The social plasticity hypothesis proposes that social attunement, that is, the adaptation to and harmonization with one's environment, plays a crucial role in the risk for developing alcohol use disorders (AUDs) during adolescence, whereas in adulthood it paradoxically may make individuals more sensitive to the social pull to reduce drinking. This study aimed to develop a valid measure of social attunement: the social attunement questionnaire (SAQ). A total of 26 items were developed and the questionnaire was completed by 576 Dutch mid to late adolescents and adults over three rounds of online data collection. Using exploratory factor analysis in part of the sample (N = 373), the final questionnaire was reduced to two subscales with a total of 11 items. This structure was confirmed using confirmatory factor analysis in the second part of the sample (N = 203). Results showed that the SAQ has acceptable internal consistency, good measurement invariance to gender, and subscales assessing both cognitive as well as behavioural components of social attunement. In line with expectations on alcohol use settings, SAQ scores were not associated directly with alcohol use, but they were predictive of alcohol use when taking into account the interaction between perceived peer drinking and age. The SAQ appears suitable for the assessment of social attunement in (young) adult men and women, particularly assessing the role of social attunement in alcohol use settings. Further research is needed to confirm the utility of the SAQ in older adults and a broader variety of social settings.     

Shifting the Pension Mix: Consequences for Dutch and Danish Women

All European countries are aiming to reform their pension systems in line with two conceptual ideas: firstly, that systems should combine public, occupational and private pensions; secondly, that entitlements should be individualized. The Dutch and the Danish pension systems already consist of these three different pensions with relatively individualized entitlements and in a way form an ideal type of pension system. However, these systems are far from ideal since they are deeply gender biased. The positive effects of citizenship‐based state pensions conceal the negative ones. In addition, recent developments in the combination of the pension schemes counteract the positive effects. Given the male‐oriented norm when it comes to full pension entitlements, and given the fact that life courses are still gendered, these countries’ systems and developments have negative effects for women.     

(Im)mobility: regional population structures in Aboriginal Australia

The socio‐cultural factors underlying contemporary Aboriginal settlement and mobility patterns are invisible to the categorisations that underpin both demographic modelling and policy that relies on that modelling. Taking the Yolngu people of north east Arnhem Land as a case study, this paper elaborates an anchored network model consisting of three tiers—an ontologically prior ancestral geography, with its associated contemporary settlements, to which kin‐based networks are anchored by nodal individuals. While the content of each tier may vary across the continent, this model can potentially be applied wherever Aboriginal Australians continue to live in kin‐based social universes. It is argued that constructing a ‘recognition space’ between conventional demographic categories and Aboriginal categorisations of their socio‐spatial universes would lead to more informed policy‐making on the part of government. Such policies would take account of the aspirations of Aboriginal people rather than imposing upon them the state's aspirations for them.     

Process fairness,outcome fairness,and dynamic consistency: Experimental evidence for risk and ambiguity

Literature on fairness preferences distinguishes between outcome fairness, concerning the final allocation of payoffs, and process fairness, concerning the expected allocation of payoffs. It is not obvious, however, whether process fairness can consistently be implemented. Once uncertainty is resolved and outcomes are determined, the ex-ante procedurally fair decision maker may become consequentialist ex-post, and reconsider her choice on the basis of the observed outcomes. We present experimental evidence on dynamic consistency of social preferences under both known risk and ambiguity. A significant share of people subscribe to process fairness both before and after the resolution of uncertainty.     

Selection for Professional Training: The English and the American Experience

Summary Of the many issues arising from the Vyas case in England andthe Bakke case in the United States those of positive discrimination,selection on racial grounds, the nature and purpose of professionaltraining and the nature of fairness in selection for such training,are considered.     

Recursive expected utility and the separation of attitudes towards risk and ambiguity: an experimental study

We use the multiple price list method and a recursive expected utility theory of smooth ambiguity to separate out attitude towards risk from that towards ambiguity. Based on this separation, we investigate if there are differences in agent behaviour under uncertainty over gain amounts vis-a-vis uncertainty over loss amounts. On an aggregate level, we find that (i) subjects are risk averse over gains and risk seeking over losses, displaying a “reflection effect” and (ii) they are ambiguity neutral over gains and are mildly ambiguity seeking over losses. Further analysis shows that on an individual level, and with respect to both risky and ambiguous prospects, there is limited incidence of a reflection effect where subjects are risk/ambiguity averse (seeking) in gains and seeking (averse) in losses, though this incidence is higher for ambiguous prospects. A very high proportion of such cases of reflection exhibit risk (ambiguity) aversion in gains and risk (ambiguity) seeking in losses, with the reverse effect being significantly present in the case of risk but almost absent in case of ambiguity. Our results suggest that reflection across gains and losses is not a stable individual characteristic, but depends upon whether the form of uncertainty is precise or ambiguous, since we rarely find an individual who exhibits reflection in both risky and ambiguous prospects. We also find that correlations between attitudes towards risk and ambiguity were domain dependent.      

At the nexus of risk and time preferences: An experimental investigation

Although many economic decisions involve choices between uncertain outcomes occurring at different times, most theoretical and empirical work restricts attention to one dimension or another. In this paper, we investigate whether both risk and time preferences can be represented by a single parameter. We collect experimental data to estimate models which allows for a disentanglement of risk and time preferences. Results reveal that the discounted expected utility model assumption, that risk and time preferences can be explained by a single parameter, is not supported by the data. The model estimates imply people prefer to delay the resolution of risky outcomes.     

The American and French Revolutions of the Eighteenth Century (An Attempt at a Comparative Characterization)

Recently there have appeared in the United States of America works that compare the American Revolution in the eighteenth century with other revolutions, primarily that closest to it in time - the French revolution. This subject is truly of considerable interest. Currently it is attracting special attention as a consequence of the propaganda campaign, now taking on broad scope, in connection with the preparations for the two-hundredth anniversary of the American Revolution, to be marked in 1976. One of the goals of this campaign is to demonstrate the "advantages" of the American type of revolution. The present author, while making no claim to comprehensive treatment of the problem, will try to touch upon certain current questions of the comparative history of the two eighteenth century revolutions.     

Interest rate setting at the ECB: Individual preferences and collective decision making

We investigate whether the members of the Governing Council of the European Central Bank take into account the specific economic conditions of their states of origin, to set the interest rates for the euro area. Testing the national-based view against the Europeanist perspective is a challenging issue, because voting inside the Governing Council is secret, and the final outcome depends both on the individual preferences and the procedures followed by the Governing Council to arrive at a decision. Accordingly, we model interest rate setting as a two-stage process: first, each member of the Governing Council sets his/her preferred rate, and next the Governing Council meets and decides the actual figure. Our empirical analysis shows that domestic developments play a major role in determining the preferred interest rate of the each member; and that some members exert agenda setting power, that precludes some interest rate policies to be considered at the meeting.