Framing,probability distortions,and insurance decisions

A series of studies examines whether certain biases in probability assessments and perceptions of loss, previously found in experimental studies, affect consumers' decisions about insurance. Framing manipulations lead the consumers studied here to make hypothetical insurance-purchase choices that violate basic laws of probability and value. Subjects exhibit distortions in their perception of risk and framing effects in evaluating premiums and benefits. Illustrations from insurance markets suggest that the same effects occur when consumers make actual insurance purchases.Presented at the Conference onMaking Decisions about Liability and Insurance, The Wharton School, University of Pennsylvania, Philadelphia, PA, 6–7 December, 1991. This research is supported by National Science Foundation Grant SES88-09299. The authors thank Jon Baron, Colin Camerer, Neil Doherty, Paul Kleindorfer, Amos Tversky, and two anonymous referees for many helpful comments. We particularly acknowledge the efforts of Matthew Robinson and Penny Pollister for their help with data analysis.     

Why Do Interest Groups Engage the Judiciary? Policy Wishes and Structural Needs*

Objectives. We test two competing explanations in order to answer the question: Why do organized interests choose to engage in advocacy behavior? The first turns on the notion that concerns with policy success are the principal forces affecting a group's choice. To a lesser degree, issues of group maintenance have also been identified as entering into organized interests' decisional calculus. Method. Using survey data supplemented with confidential interviews of organized interests, we systematically examine the power of both accounts to explain the decision of groups to locate their energies in the federal judiciary. Consequently, in the penultimate section of the article, we specify and test a comprehensive model of interest group litigation behavior. Results. In the resulting multivariate analysis, we find that forces associated with both avenues of explanation for interest group advocacy behavior have substantial statistical purchase and empirical traction. Conclusion. Our findings did not show a dominate role for maintenance concerns; however, clearly, a group's assessment of where, and possibly whether, to act is not an easy calculation based on the receptiveness of a venue and the available balance in the bank account. Groups must attend to their members and their competition. Explanations of group advocacy omitting such concerns are inherently flawed.     

Social protection in the Republic of Korea: Social insurance and moral hazard

Abstract As reported in numerous studies, the system of social protection in the Republic of Korea long remained underdeveloped because of the priority given instead to economic growth. The past few years have seen major changes, however. The government decided to apply the theory of “productive welfare”, thereby committing itself to introducing a system of universal statutory social insurance which is intended to set the seal on a new social compact and which may, ultimately, impact on the model of socioeconomic development itself. This article outlines the recent changes in insurance against sickness, unemployment and old age and goes on to describe the moral hazard facing the new system of social insurance and the need for a form of joint management in order to minimize this hazard.     

Modified mantel-haenszel procedures for matched pairs

In the prospective study of a finely stratified population, one individual from each stratum is chosen at random for the “treatment” group and one for the “non-treatment” group. For each individual the probability of failure is a logistic function of parameters designating the stratum, the treatment and a covariate. Uniformly most powerful unbiased tests for the treatment effect are given. These tests are generally cumbersome but, if the covariate is dichotomous, the tests and confidence intervals are simple. Readily usable (but non-optimal) tests are also proposed for poly-tomous covariates and factorial designs. These are then adapted to retrospective studies (in which one “success” and one “failure” per stratum are sampled). Tests for retrospective studies with a continuous “treatment” score are also proposed.     

Bayesian Analysis of Stochastic Volatility Models

New techniques for the analysis of stochastic volatility models in which the logarithm of conditional variance follows an autoregressive model are developed. A cyclic Metropolis algorithm is used to construct a Markov-chain simulation tool. Simulations from this Markov chain converge in distribution to draws from the posterior distribution enabling exact finite-sample inference. The exact solution to the filtering/smoothing problem of inferring about the unobserved variance states is a by-product of our Markov-chain method. In addition, multistep-ahead predictive densities can be constructed that reflect both inherent model variability and parameter uncertainty. We illustrate our method by analyzing both daily and weekly data on stock returns and exchange rates. Sampling experiments are conducted to compare the performance of Bayes estimators to method of moments and quasi-maximum likelihood estimators proposed in the literature. In both parameter estimation and filtering, the Bayes estimators outperform these other approaches.     

The sexual partnerships of people with serious mental illness

We compared the sexualities of people with serious mental illness and the general population using the National Health and Social Life Survey (Laumann et al., 1994) and the Indiana Mental Health Services and HIV Risk Study (Wright, 2003). We investigated whether and how the sexual behaviors and relationships of people with serious mental illness differ from the general populations and identified factors differently influencing the organization of sexuality in these two groups. We found evidence that the relationships of people with serious mental illness are characterized by less intimacy and commitment than those of the general population. Additionally, although people with serious mental illness use condoms more consistently, they are also more likely to have concurrent relationships and tend to have sex sooner with new partners, which may contribute to a higher risk of contracting HIV. Our findings point to a need for a paradigm shift in the way that clinicians and researchers conceptualize and manage client sexuality. A less individualistic approach that takes into consideration the relationship context and social and institutional constraints is needed.     

Sexual identity development among gay, lesbian, and bisexual youths: consistency and change over time

A longitudinal report of 156 gay, lesbian, and bisexual youths examined changes in sexual identity over time. Fifty-seven percent of the youths remained consistently self-identified as gay/lesbian, 18% transited from bisexual to gay/lesbian, and 15% consistently identified as bisexual over time. Although youths who consistently identified as gay/lesbian did not differ from other youths on time since experiencing sexual developmental milestones, they reported current sexual orientation and sexual behaviors that were more same-sex centered and they scored higher on aspects of the identity integration process (e.g., more certain, comfortable, and accepting of their same-sex sexuality, more involved in gay-related social activities, more possessing of positive attitudes toward homosexuality, and more comfortable with others knowing about their sexuality) than youths who transited to a gay/lesbian identity and youths who consistently identified as bisexual. Contrary to the hypothesis that females are more sexually fluid than males, female youths were less likely to change identities than male youths. The finding that youths who transited to a gay/lesbian identity differed from consistently gay/lesbian youths suggests that identity integration continues after the adoption of a gay/lesbian sexual identity.     

Fiscal Foresight and Information Flows

News—or foresight—about future economic fundamentals can create rational expectations equilibria with non‐fundamental representations that pose substantial challenges to econometric efforts to recover the structural shocks to which economic agents react. Using tax policies as a leading example of foresight, simple theory makes transparent the economic behavior and information structures that generate non‐fundamental equilibria. Econometric analyses that fail to model foresight will obtain biased estimates of output multipliers for taxes; biases are quantitatively important when two canonical theoretical models are taken as data generating processes. Both the nature of equilibria and the inferences about the effects of anticipated tax changes hinge critically on hypothesized information flows. Different methods for extracting or hypothesizing the information flows are discussed and shown to be alternative techniques for resolving a non‐uniqueness problem endemic to moving average representations.     

Marketing Is from Mars,IT Is from Venus: Aligning the Worldviews for Firm Performance

A typical firm is operated by multiple functional managers who may collaborate as well as compete to achieve firm performance. In the digital age, firm performance is essentially customer‐dependent and technology‐dependent, with both marketing and information technology (IT) playing key roles. Unfortunately the two functions often have very different worldviews. We show how these differences can damage firm performance, and suggest ways to mitigate this damage. We build a worldview difference model, synthesized from multiple disciplines. The model is tested using both matched and nonmatched observations from marketing and IT managers, and is analyzed with hierarchical linear models using both perceptual and objective firm performance data over a 4‐year period. We find that differences between the beliefs and perceptions of marketing managers and IT managers generate a negative impact on firm performance, and suggest appropriate technology‐culture associations to effectively align their worldviews for firm performance. To improve firm performance, a cross‐functional appreciation for market and technology drivers can be achieved by making marketing managers more learning‐oriented and by providing IT managers a culture that is congruent with technology.