Role-reversibility, stochastic ignorance, and social cooperation

This paper studies the effect of role-reversibility and stochastic ignorance, conditions that minimize the strategic bias of individual choice, on social cooperation. Under role-reversibility, each agent maximizes her expected payoff, knowing the status quo at the time of the action as well as the ex ante probabilities about her future roles. In contrast, under stochastic ignorance, players make their choices under a Harsanyi-type veil of uncertainty. Without the role-specific context influencing the judgment of the individual, cooperative norms emerging under stochastic ignorance are more likely to be close to first-best than are norms chosen under conditions of role-reversibility.     

Risk, complexity, and deviations from expected-value maximization: Results of a lottery choice experiment

Varying several parameters of single-stage lottery choice tasks we investigate the question which features of a decision task lead subjects to deviate from maximizing expected monetary value (EV). Despite small differences in EV between the two lotteries in the choice sets, the subjects on average chose the lottery with the higher EV in every task. Risk avoidance occurs, but not consistently over all tasks. Further results are that subjects prefer less complex lotteries over more complex ones, and that risk matters the more the less complex the decision task is.     

Risky choice in interpersonal context: Do people dare because they care?

This paper presents an experimental study investigating the interplay of individuals’ other-regarding preferences and individuals’ risk attitude. Participants (N = 120) had to make choices between a certain and risky payoff only for themselves (individual context) and choices in which the participants were paired with another randomly assigned participant who functioned as a passive recipient (interpersonal context). In the interpersonal context the risky option was beneficial for the other person while the certain option was not. Thus, the interpersonal choice context was an abstract representation of the incentive structure in helping situations, which yield risk only for the helper. Risky options in the interpersonal context yielded different payoff distributions, which allowed us to identify how considerations of fairness affect interpersonal risky choices. To assess other-regarding preferences, a dictator game was played. First we found that participants were generally less risk averse in the interpersonal choices; however, the degree of risk aversion was affected by the distribution of payoffs between decider and recipient. Furthermore, we found that changes of risk aversion in an interpersonal context could be predicted with the proposed splits in the dictator game.     

Money illusion,financial literacy and numeracy: Experimental evidence

Money illusion is usually defined as the inability of individuals to correctly account for inflation or deflation when making decisions. Empirical evidence shows that money illusion matters in financial decisions, particularly those made by households. In this article, we analyze money illusion at the individual level within the context of financial choices and study its relationship with numeracy and financial literacy. To do so, we propose an original measure of money illusion via an experimental task. This task consists of a series of choices between a pair of simple bonds whose returns are affected only by inflation (or deflation). We provide a fine-grained measure of money illusion that is correlated with typical measures (questionnaires) of it. Moreover, we show that money illusion depends on the choice context (e.g., inflation or deflation) and participants’ abilities. Individuals with financial knowledge are less sensitive to money illusion than others, while there is no evidence of an impact of numeracy.     

TESTING COMMITMENT COST THEORY IN CHOICE EXPERIMENTS

In choice experiments, it is commonly assumed that individuals make choices in static and certainty decision‐making conditions. Real‐world choices, however, are usually made in a dynamic setting. Committing a purchase decision under conditions of uncertainty might have a “Commitment Cost” (CC). In this study, we test CC theory using a nonhypothetical choice experiment. Specifically, we test whether choice behavior and willingness to pay estimates differ when individuals have the option to gain present or delayed information or reverse the transaction. Our results suggest that the construction of a dynamic decision context can be relevant in the design of choice experiments. (JEL C90, C93, Q18)     

Rights and the liberal paradoxes

Traditional social choice theory does not distinguish between the choices and the preferences of an individual. However, it is often rational for an individual to make choices that do not follow his preferences, e.g. when he makes compromises with other individuals. A social choice format is introduced with separate representations for choice and preference. It is shown how different types of rights and other legal positions can be expressed in this format. Definitions are given of what it means for rights to be compatible and for a set of rights to be respected. Further, it is shown that much weaker (and fully plausible) conditions are needed to avoid Sen's paradox (the impossibility of a Paretian liberal) in this social choice format than in a traditional format that does not distinguish between choices and preferences. As an example of this, Sen's paradox can be avoided if each individual, ceteris paribus, prefers that her choices be respected in matters that belong to her own personal sphere.An earlier version of this paper has been discussed at a Swedish-English Symposium on Rights and Rationality. I would like to thank the participants, Peter Gärdenfors, William Hart, Stig Kanger, David Kelsey, Prasanta Pattanaik, and Robert Sugden for valuable comments.     

Modelling reference dependence for repeated choices: A horse race between models of normalisation

In the logit model, a choice between options is driven by payoff differences. Existing evidence on repeated choices suggests that the way payoff differences are evaluated depends on historically observed differences. We capture such reference dependence using the value normalisation approach developed in neuroscience. We use experimental data and run a horse race between various models with normalisation, including widely used divisive and range normalisation. We show that a parsimonious logit model with maximum difference normalisation has both the best goodness of fit and a strong quasi-out-of-sample predictive power. In this structural parameter-free logit model, an agent makes a choice based on the difference in payoffs in the previous period, normalised by the maximum difference in payoffs in two previous periods. The model has a wide range of applications, from studying learning dynamics in repeated games to predicting retirement plans choices.     

The Numerate Social Worker

Abstract

In social work education, almost all efforts to teach quantitative analysis are relegated to statistics and research courses. This approach suggests that the only value of quantitative thinking is in formal research. Arguing to the contrary, this paper outlines some reasons why numeracy is essential to day-to-day social work practice. The mathematics preparation of social work students is reviewed and some attributes of the numerate practitioner are described. Some beginning steps are recommended to implement the proposed instructional strategy of integrating real-life quantitative modules in the curriculum.

Numerate: marked by the capacity for quantitative thought and expression (Webster's, 1985)     

Decision Making Clusters in Retirement Savings: Gender Differences Dominate

This study explored the impact of demographic factors on individuals’ investment choice decisions in retirement savings funds. Analysis found identifiable member clusters across a large and diverse sample of almost 150,000 transactions. Results suggested that gender and risk are the most dominant factors with women showing a strong tendency to make lower risk investment choices. If this behavioural tendency is not addressed through education it will accentuate the hurdles women already face in accumulating adequate saving for retirement.     

Welfare, freedom of choice and composite utility in the logit model

Discrete choice models characterize the alternatives in the choice set by utilities/attributes. The decision making is described by a probability distribution over the choice set. In this paper we introduce a welfare measure based on expected payoff and expected freedom of choice for the simple one parameter logit model. In this case the welfare measure turns out to be the so called composite utility. This means that the composite utility can be interpreted as the combined benefit of expected payoff and expected freedom of choice. The proposed welfare measure can be extended to the linear-in-parameters logit model and nested logit models and others. The proposed welfare measure is formulated in terms of the choice probability distribution. It depends on the form of the probabilities, but not on any particular derivation of the distribution.     

Marriage Enrichment through Choice Awareness*

Choice Awareness is presented as a system which has helped couples make more constructive cognitive, affective, and behavioral choices. This system defines choice as behavior over which we have some control. Thus, choice is seen as a constant. CREST choices, caring, ruling, enjoying, sorrowing, and thinking/ working, include most behaviors, and are useful in enabling individuals to explore past behaviors and plan future interactions. Choice Awareness Workshops present the system through a structured group process which is useful in enriching a variety of relationships, including marriage. Research with the workshop process suggests gains in real-ideal marriage relationship congruence, and provides support for Choice Awareness theory.     

Mexican American women: impact of culture and education on work patterns

The lives of women of Mexican descent are being profoundly affected by their changing workforce participation. They are expected to make up the majority of the female workforce in service occupations by 2010. Based on the literature and personal clinical interactions two factors -- cultural values and education attainment -- consistently appear to have a strong impact on the occupational choices of Mexican American women. This article will explore the interdependence of work, culture, and education on women of Mexican origin.     

Trust,uncertainty and identity in health-related decision-making: the role of key professionals

There is a growing literature examining the way service users make choices in the context of complex and frequently changing forms of welfare provision and increasingly personalised services in England. Despite criticisms of the individualistic, consumerist assumptions underpinning these policies, little is known about the relational contexts of individuals’ lives and the role of professional support in choice-making. Drawing on interviews with ‘key professionals’, identified by service users as having played a crucial role in recent important choices, this paper explores how these choices are made with the support of those who are trusted to provide assistance. Placing ‘key professionals’ at the centre of the analysis, the distinct experiences of people with fluctuating and sudden-onset health conditions are examined. The analysis highlights the particular value of relationships that pay close attention to transitional health identities and the co-production of health-related decisions.     

Leaving your mamma: why so late in Italy?

In Italy, young adults tend to postpone their transition to adulthood and live with their parents until very late compared with other countries. A dynamic discrete choice model is proposed in which agents choose residential arrangements, together with labor supply and marital status, conditional on the economic and institutional framework and on other agents’ choices. The model is structurally estimated with the Simulated Method of Moments for non-student high-school graduate males and then used to assess, through a variety of counterfactual experiments, the relative importance of factors that are claimed to influence the choice to leave home in the existing literature: labor market conditions, parental resources, housing market conditions and social interaction. Results suggest that Italians choose to remain with their parents due to a combination of poor labor market conditions and high housing costs. The relatively high income of parents could contribute to the patterns observed by acting as an insurance against unemployment. Finally, estimates indicate that individuals tend to conform to a social norm, especially in the South of the country were family ties and the costs in terms of utility from not complying with expected behaviors appear to be stronger.

     

Time Preference and Life Cycle Consumption with Endogenous Survival

We provide a structural theory of time preference and derive a functional form of intertemporal preferences by postulating that individuals make their life-cycle consumption choices as if to maximize expected lifetime. This yields a nontime-separable expected utility representation where the inverse of the coefficient of intertemporal substitution exceeds the coefficient of relative risk aversion. The rate of time preference depends on the inverse of expected remaining lifetime and the effect of age on the productivity of consumption in affecting health. The preference formulation is applied in a standard intertemporal consumption model to illustrate the implied life-cycle consumption choices ( JEL D91, B41).     

It is not just escalation: The one dollar game revisited

This paper examines the one-dollar auction game ruling out escalation. The aim of the paper is to understand if players’ expectations about competitors’ moves are strong enough to induce at least one player to bid more than the auctioned euro. Any other bid represents an expected loss for the bidder, so he maximises his own payoff by choosing a bid, which produces a null expected payoff. The empirical results and the analysis based on them support theoretical findings. It is possible that the winner pays more than €1 to get €1 because of his expectations about competitors’ bids and because of his indifference over a certain interval. The results are symptoms of some risk aversion. In an English auction escalation leads to this result, but when escalation is ruled out, expectations and indifference of preferences can lead to the same result.     

Determining optimal placement for pop-up messages: evaluation of a live trial of dynamic warning messages for electronic gaming machines

Dynamic warning messages are a harm minimization strategy aimed at preventing or reducing gambling-related problems by assisting individuals to make informed choices about their gambling. Laboratory studies have demonstrated the efficacy of dynamic warnings in facilitating responsible gambling. This article presents the results of a trial of the related effectiveness of dynamic warnings appearing either in the middle or on the periphery of electronic gaming machines (EGMs) screens in commercial gambling venues. Regular gamblers (n = 667) were surveyed to assess their recall of warning messages and the perceived impact of message placement on thoughts and behaviours. Messages appearing in the middle of screens were recalled to a greater extent, and respondents reported that these were more impactful and useful than messages on the periphery of screens. As one of the first trials of dynamic warning messages in operating EGM venues, the results provide important verification and validation of previous laboratory research. Results demonstrate that dynamic warning messages appearing in the middle of an EGM screen during play are likely to be a more effective harm minimization intervention than messages on the periphery of EGM screens.     

Comparing a risky choice in the field and across lab procedures

Controlled laboratory experiments have become a generally accepted method for studying economic behavior, but there are two issues regarding the reliability of such work. The first pertains to the ability to generalize experimental results outside the laboratory. The second pertains to the impact the payment procedure has on observed behavior. This paper adds empirical insight into both issues. Using data from the promotional campaign of a bank and a laboratory experiment that closely mimics the same decision, we find similar levels of risk taking controlling for gender and age. We also compare behavior on this same risky choice across three distinct experimental payoff procedures: a single salient choice as in the field, multiple responses for similar choices with one selected at random for payment, and a single salient choice that has only a small probability of being implemented. We find nearly identical behavior across these three payment procedures.     

Klassenlage und Bildungsentscheidungen

This empirical study seeks to contribute to the explanation of class differences in educational opportunities in the transition from primary to secondary education. According to recent theoretical explanations the social inequality in education results — apart from the historical conditions and institutions of the educational system — from rational choices of parents about the continuation of their children’s education. There is a nexus between class specific evaluation of costs and benefits of higher education and educational choice, which depends on the parents’ resources and the selection and allocation function of the educational system. This interrelationship results in unequal educational attainment among the children of different social classes. These hypotheses are tested by employing a two-step model of the dynamics of choices and actual transition. Using panel data and logistic regression as well as considering the children’s social origin the rise of educational aspirations and the following transition to higher education tracks are analyzed. The results lend support to the mechanisms and processes assumed by the subjective expected utility approach. However, there is an open question about the historical persistence of class differences in education in spite of educational expansion and school reforms.