Substitutability, Experience, and the Value Disparity: Evidence from the Marketplace

Recent empirical evidence suggests that important disparities exist between willingness to pay and compensation demanded for the same good. These results, which clearly contradict closely held economic doctrines, have led some influential commentators to call for an entirely new economic paradigm to displace conventional neoclassical theory. This study examines the generality of these experimental findings by going to a well-functioning marketplace and examining more than 350 individual decisions across two incentive-compatible elicitation mechanisms. The data suggest that behavior of individuals with intense experience approaches neoclassical predictions: any observed WTA/WTP disparity amongst this group is negligible.WTP/WTA disparity, Field experiment, Marketlike experience

Conditionally externally Bayesian pooling operators in chain graphs

We address the multivariate version of French’s group decision problem where the m members of a group, who are jointly responsible for the decisions they should make, wish to combine their beliefs about the possible values of n random variables into the group consensus probability distribution. We shall assume the group has agreed on the structure of associations of variables in a problem, as might be represented by a commonly agreed partially complete chain graph (PCG) we define in the paper. However, the members diverge about the actual conditional probability distributions for the variables in the common PCG. The combination algorithm we suggest they adopt is one which demands, at least on learning information which is common to the members and which preserves the originally agreed PCG structure, that the pools of conditional distributions associated with the PCG are externally Bayesian (EB). We propose a characterization for such conditionally EB (CEB) poolings which is more general and flexible than the characterization proposed by Genest, McConway and Schervish. In particular, such a generalization allows the weights attributed to the joint probability assessments of different individuals in the pool to differ across the distinct components of each joint density. We show that the group’s commitment to being CEB on chain elements can be accomplished by the group being EB on the whole PCG when the group also agrees to perform the conditional poolings in an ordering compatible with evidence propagation in the graph

The cost of fair divisions: An experimental investigation of Ultimatum Games with groups

I investigated the effect of the presence of a group of non-active subjects upon the behavior of active players in a Ultimatum bargaining game. In the experiment a subject with the role of P has to offer a share r of a sum S to a subject with the role of AR who belongs to a group and decides on behalf of his group’s members (players R). If AR rejects the P’s offer, both active and non-active players get zero, if AR accepts the offer then P gets S - r while r is equally divided between AR and the members of his group. Every subject assumes all the three roles (P, AR and R) and the group size is manipulated keeping constant the share S/N (with N=number of subjects, either active or non active, involved in the game) Data suggest that active players tend to behave as they were playing a standard two-person Ultima- tum game. A clear insensitivity to changes in group size by subjects playing as P, emerging in the main experiment, is compatible with the hyphotesis that at the basis of their behavior there is a willingness to gain a payoff which satisfies an ex-ante fixed aspiration level, that for most of them corresponds to about half of S. The interpretation of the decisions taken by subjects under the AR role is more complicated as, although most of them show a behavior which is compatible with the one observed in the standard Ultimatum Game, a non-negligible share of players fix very low acceptance thresholds that could be explainained in terms of a shift from the willingness to punish unfair behaviors to the responsibility for others’ wellbeing.

The character of demand in mature organic food markets: Great Britain and Denmark compared

We investigate the organic food market in two selected European countries, Great Britain and Denmark, identifying main differences and similarities. We focus particularly on consumer preferences and priorities, labelling schemes, supply and sales channels, as a basis for assessing market stability and prospects for future growth. We employ a unique set of household panel data that includes information on stated values and concerns, as well as registered purchasing behaviour. Most organic food on both markets is produced and processed by large-scale industrialised units and distributed through concentrated mainstream sales channels, consumer confidence being sustained at present by organic labelling schemes that appear to function well. However, a parallel market, based on various types of direct sales to heavy users, prevails. We find that organic food purchase decisions are primarily motivated by ‘private good’ attributes such as freshness, taste and health benefits, attributes that may be perceived as being compatible with modern production and sales structure. More traditional ‘public good’ organic attributes, such as environmental and animal welfare attributes, small scale production and local supply, are less compatible with current market structure, but are also accorded less priority by the majority of consumers in practice. Mature markets for organic foods nevertheless may constitute a source of consumer dissatisfaction, particularly in the group of organic heavy users

Incentive Compatibility and Incomplete Information

It is by now reasonably well known that when informationally decentralized processes are used to make collective choice decisions or to allocate resources, individuals may find it in their interest to distort the information they provide and that these distortions may lead to non-optimal group decisions. In the social choice context, this has been formalized in the Gibbard-Satterthwaite Theorem, which states that all non-dictatorial rules will have this property. In a different context, Hurwicz has shown that there is a private goods neo-classical exchange economy such that any decentralized mechanism which selects Pareto-optimal allocations and which has a no-trade option will have this property. Roberts has provided a similar example in the public goods context. Other work (e.g., Green-Laffont, Groves-Loeb, Hurwicz, and Walker) indicates that, for mechanisms designed to select efficient outcomes, in most environments some agent will have an incentive to misrepresent his information and thus to manipulate the mechanism. All these results lead one to the conjecture that it is almost impossible to design any mechanism for group decisions which is compatible with individual incentives and efficiency

Electronic Device Selection in Industrial Products and Machinery Industry: Comparative Analysis with Ocra and Maut Method

The diversity and abundance of product alternatives lead to vagueness on decisions related to procurement, production, and R & D management processes along with other decisions taken within the company and render purchasing, production and R&D decision processes, much more effortful. As choosing appropriate and effective decisions within purchasing, production, R&D, and all other departments are of great importance in today’s competitive business environment, firms are strongly encouraged to concentrate on their decision processes. Within the scope of this study, the purchase decisions of electronic device alternatives are being analysed in industrial products and machinery industry with OCRA method. The importance levels of evaluation criteria for the purchase are obtained out of 100 points. These importance levels are then being used in OCRA method in an attempt to evaluate various electronic device alternatives. In order to scrutinize the results, it can be said that the same data set is compatible with MAUT, which is another multi-criteria decision making method. Information regarding the evaluation criteria as well as alternatives of electronic device has been gathered through focus group study that includes marketing and purchasing managers. The results provide useful information for the sector

Temporal isolation of neural processes underlying face preference decisions

Decisions about whether we like someone are often made so rapidly from first impressions that it is difficult to examine the engagement of neural structures at specific points in time. Here, we used a temporally extended decision-making paradigm to examine brain activation with functional MRI (fMRI) at sequential stages of the decision-making process. Activity in reward-related brain structures—the nucleus accumbens (NAC) and orbitofrontal cortex (OFC)—was found to occur at temporally dissociable phases while subjects decided which of two unfamiliar faces they preferred. Increases in activation in the OFC occurred late in the trial, consistent with a role for this area in computing the decision of which face to choose. Signal increases in the NAC occurred early in the trial, consistent with a role for this area in initial preference formation. Moreover, early signal increases in the NAC also occurred while subjects performed a control task (judging face roundness) when these data were analyzed on the basis of which of those faces were subsequently chosen as preferred in a later task. The findings support a model in which rapid, automatic engagement of the NAC conveys a preference signal to the OFC, which in turn is used to guide choice

Effects of mental accounting on intertemporal choice

Two experiments with undergraduates as subjects were carried out with the aim of replicating and extending previous results showing that the implication of the behavioral life-cycle hypothesis (H. M. Shefrin & R. H. Thaler, 1988) that people classify assets in different mental accounts (current income, current assets, and future income) may explain how consumption choices are influenced by temporary income changes. In both experiments subjects made fictitious choices between paying for a good in cash or according to a more expensive installment plan after they had received an income which was either less, the same, or larger than usual. In Experiment 1 subjects were supposed to have savings so that the total assets were equal, whereas in Experiment 2 the total assets varied. The results of both experiments supported the role of mental accounts in demonstrating that subjects were unwilling to pay in cash after an income decrease even though they had access to saved money. Thus, in effect they chose to pay more for the good than they had to. Indicating a need for further refinement of the concept of mental account, choices to pay in cash after an income decrease tended to be more frequent when the consumption and savings motives were compatible than when they were incompatible. Furthermore, increasing the total assets made subjects more willing to pay in cash after an income decrease