The effects of loss aversion on deceptive advertising policies

We extend the deceptive advertising model of Piccolo et al. (RAND J Econ 46(3):611–624, 2015) to a framework in which consumers may be loss averse. There are two sellers, competing on prices and offering experience goods with some differences in quality. Prospective customers may be harmed by deceptive advertising: a marketing practice that can induce them to make bad purchases. We show that although deceptive advertising occurs depending on the degree of consumers’ loss aversion, this behavioral bias does not reflect on firms’ prices. Nevertheless, the presence of loss-averse consumers crucially changes the optimal deterrence rule that a Public Authority should adopt against false claims and misleading advertising. Unlike Piccolo et al. (2015), in this more general model, strong enforcements may improve the buyer welfare according to the degree of loss aversion.

     

Urban gradients alter the diversity,specific composition and guild distribution in tropical butterfly communities

The increasing expansion of the urban environment has been considered one of the causes of biodiversity loss. Due to the decrease of the quantity and quality of habitats, this process causes the restriction of organisms to sometimes-specific microhabitats. The patterns of variation of the biodiversity along the environmental gradients, however, are still poorly understood. This study evaluated how urban gradients affect the diversity, specific composition and frequency of guild of the community of butterflies. Butterflies were collected in three transects continuously traversing the urban, rural and preserved habitats using baited traps and by active sampling. We found that the urban gradient acts as an environmental filter in the butterfly communities, reducing the richness and frequency of guilds of frugivorous butterflies, structuring the community through turnover, but without effects in the abundance. This study shows the importance of the urban gradients approach in the butterfly community and its applicability in the management of urban areas in order to include native vegetation along the gradients, aiming at increasing environmental heterogeneity, to preserve butterflies and maintain the ecosystem services and network interactions in altered landscapes.

     

Pool size and the sustainability of optimal risk-sharing agreements

We study a risk-sharing agreement where members exert a loss-mitigating action which decreases the amount of reimbursements to be paid in the pool. The action is costly and members tend to free-ride on it. An optimal risk-sharing agreement maximizes the expected utility of a representative member with respect to both the coverage and the (collective) action such that efficiency is restored. We study the sustainability of the optimal agreement as equilibrium in a repeated game with indefinite number of repetitions. When the optimal agreement is not enforceable, the equilibrium with free-riding emerges. We identify an interesting trade-off: welfare generated by the optimal risk-sharing agreement increases with the size of the pool, but at the same time the pool size must not be too large for collective choices to be self-enforcing. This generates a discontinuous effect of pool size on welfare.