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.     

Neighbourhood Life,Social Capital and Perceptions of Safety in the Western Suburbs of Adelaide

In this paper we report on a South Australian study of perceptions of safety and aspects of neighbourhood life including social capital which involved the analysis of 2400 self‐completed questionnaires. A path analysis found that perceptions of safety were directly associated with gender, age, perceptions of neighbourhood pollution and neighbourhood trust, and indirectly associated with age, neighbourhood pollution and neighbourhood connections. We conclude with a discussion of the implications of the findings for public policy.     

The Distribution of Sums of Certain I.I.D. Pareto Variates

ABSTRACT

Though the Pareto distribution is important to actuaries and economists, an exact expression for the distribution of the sum of n i.i.d. Pareto variates has been difficult to obtain in general. This article considers Pareto random variables with common probability density function (pdf) f(x) = (α/β) (1 + x/β)^α+1 for x > 0, where α = 1,2,… and β > 0 is a scale parameter. To date, explicit expressions are known only for a few special cases: (i) α = 1 and n = 1,2,3; (ii) 0 < α < 1 and n = 1,2,…; and (iii) 1 < α < 2 and n = 1,2,…. New expressions are provided for the more general case where β > 0, and α and n are positive integers. Laplace transforms and generalized exponential integrals are used to derive these expressions, which involve integrals of real valued functions on the positive real line. An important attribute of these expressions is that the integrands involved are non oscillating.     

Business Angel Investment as an Informal Learning Process: Does Experience Matter?

This paper addresses the question of how the informal learning processes of angel investors shape the way in which they assess new investment opportunities. Previous research has suggested that angels learn from their previous investment activity. However, the measurement of investment experience as a function of years of investing and number of investments made does not take into account how, and to what extent, learning occurs and how it impacts investors’ decision-making. To address this deficiency, we suggest a dynamic model of informal learning which incorporates the informal learning typology developed by Schugurensky and extended by Bennett, as a conceptual framework to understand how learning experiences impact angel investment decisions. Based on interviews and verbal protocol analysis with 30 investors, we demonstrate how learning impacts learning processes and outcomes as angels assess an investment opportunity. The findings highlight the importance of supporting angel learning with support for angel groups and angel training programmes.