Dynamically Consistent Preferences with Quadratic Beliefs

This article characterizes a family of preference relations over uncertain prospects that (a) are dynamically consistent in the Machina sense and, moreover, for which the updated preferences are also members of this family and (b) can simultaneously accommodate Ellsberg- and Allais-type paradoxes.Replacing the "mixture independence" axiom by "mixture symmetry" proposed by Chew, Epstein, and Segal (1991) for decision making under objective risk, and requiring that for some partition of the state space the agent perceives ambiguity and so prefers a randomization over outcomes across that partition (proper uncertainty aversion), preferences can be represented by a (proper) quadratic functional. This representation may be further refined to allow a separation between the quantification of beliefs and risk preferences that is closed under dynamically consistent updating.     

Coverage Properties of Confidence Intervals for Generalized Additive Model Components

Abstract. We study the coverage properties of Bayesian confidence intervals for the smooth component functions of generalized additive models (GAMs) represented using any penalized regression spline approach. The intervals are the usual generalization of the intervals first proposed by Wahba and Silverman in 1983 and 1985, respectively, to the GAM component context. We present simulation evidence showing these intervals have close to nominal ‘across‐the‐function’ frequentist coverage probabilities, except when the truth is close to a straight line/plane function. We extend the argument introduced by Nychka in 1988 for univariate smoothing splines to explain these results. The theoretical argument suggests that close to nominal coverage probabilities can be achieved, provided that heavy oversmoothing is avoided, so that the bias is not too large a proportion of the sampling variability. The theoretical results allow us to derive alternative intervals from a purely frequentist point of view, and to explain the impact that the neglect of smoothing parameter variability has on confidence interval performance. They also suggest switching the target of inference for component‐wise intervals away from smooth components in the space of the GAM identifiability constraints.     

An Analysis of the Distribution of Combinations Chosen by UK National Lottery Players

This paper is concerned with the behaviour of lottery players when they get to choose their own numbers. Most lotto players do not pick combinations at random, but prefer more idiosyncratic techniques when they fill in the play grid. This is highlighted when the actual distribution of combinations for a single draw in the UK National Lottery is examined. A new model of gambler choice is developed and specified, and the resulting distribution of combinations fitted to the empirical data. Various implications of the model are discussed, such as the expected value of lotto tickets for different types of player.     

EDUCATIONAL BENEFITS AND MILITARY SERVICE: AN ANALYSIS OF ENLISTMENT,REENLISTMENT, AND VETERANS' BENEFIT USAGE 1991–2005*

Montgomery GI Bill (MGIB) educational benefits are a prime recruiting tool in today's all‐volunteer military. This paper studies the effects of changes in education benefits using data of the period 1990–2005. Higher benefits lead to higher separation due to both pure incentive effects and by attracting more college‐oriented youth into military service. We deal with potential selection issues by distinguishing between anticipated and unanticipated benefit changes. Higher education benefits are associated with higher separation from the Army and Air Force, but not the other services. A $10,000 increase in MGIB benefits is estimated to increase usage by about 5 percentage points, but the duration of usage is estimated to be insensitive to benefit levels. (JEL H52, I21, J24)     

Police and Social Work Relations--Problems and Possibilities

Summary The Barclay Report advocates a closer working partnership betweensocial workers and citizens; various policing policies are basedon similar foundations. Government policies place considerableemphasis on inter-agency work involving the police and the socialservices. In this paper, it is argued that co-operative inter-agencywork seems feasible between managers in the social servicesand in the police. When the perspectives of fieldworkers inboth services are considered conflict and suspicion seems toprevail. It is argued that once some of the myths surroundingthe practice of police and social work are pared away, a newbasis for the appreciation and development of inter-agency workmay be apparent.