Preference Based Subjective Beliefs

We test the empirical content of the assumption of preference dependent beliefs using a behavioral model of strategic decision making in which the rankings of individuals over final outcomes in simple games influence their beliefs over the opponent’s behavior. This approach— by analogy with Psychological Game Theory—allows for interdependence between preferences and beliefs but reverses the order of causality. We use existing evidence from a multi-stage experiment in which we first elicit distributional preferences in a Random Dictator Game, then estimate beliefs in a related 2×2 effort game conditional on these preferences. Our structural estimations confirm our working hypothesis on how social preferences shape beliefs: subjects with higher guilt (envy) expect others to put less (more) effort, which reduces the expected difference in payoffs.Financial support from the Spanish Ministry of Economic Development (ECO2015-65820-P) and Generalitat Valenciana (Grupos 3/086) is gratefully acknowledged

Foundations of Bayesian Theory

This paper states necessary and sufficient conditions for the existence, uniqueness, and updating according to Bayes?rule, of subjective probabilities representing individuals?beliefs. The approach is preference based, and the result is an axiomatic subjective expected utility model of Bayesian decision making under uncertainty with statedependent preferences. The theory provides foundations for the existence of prior probabilities representing decision makers?beliefs about the likely realization of events and for the updating of these probabilities according to Bayes?rule.

Analyzing the Decision to Get Flu Shot: An Empirical Study

Influenza vaccination has been shown to be cost effective in reducing morbidity and mortality and in decreasing work absenteeism and use of health-care resources. The purpose of this study was to identify predictors and beliefs regarding people's vaccination decision against the influenza. It was hypothesized that Health Belief Model (HBM) categories, such as severity of illness, vaccine effectiveness and side effects of the vaccine, affect the decision to get flu shot. In addition, we examined psychological effects, such as time preference, subjective probability of flu, and attitude toward risk. A questionnaire surveys was conducted in the USA, in 2004. The questions included HBM categories and the psychological effects. The results indicate that the main predictors of past immunization against influenza are: the estimated effectiveness of the vaccination, periodic blood test, perceived severity of flu illness, side effects of vaccine (negative effect), having health anxieties, and subjective probability of being infected. Based upon these results, it is recommended to enlarging people's knowledge regarding the influenza illness, its potential risks, and the potential benefits of the vaccine.

Privately-Owned versus Shared Automated Vehicle: The Roles of Utilitarian and Hedonic Beliefs

Transportation systems will be likely transformed by the emergence of automated vehicles (AVs) promising for safe, convenient, and efficient mobility, especially if used in shared systems (shared AV or SAV). However, the potential tendency is observed towards owning AV as a private asset rather than using SAV. This calls for a research on investigating individuals’ attitude towards AV in comparison with SAV to recognize the barriers to the public’s tendency towards SAV. To do so, the present study proposes a modeling framework based on the theories in behavioral psychology to explain individuals’ preference for owning AV over using SAV, built as a latent (subjective) psychometric construct, by three groups of explanatory latent constructs including: (i) desire for searching for benefits, i.e., extrinsic motive manifested in utilitarian beliefs; (ii) tendency towards seeking pleasure and joy, i.e., intrinsic motive reflected in hedonic beliefs; and (iii) attitude towards three configurations of shared mobility, i.e., experience with car and ridesharing, bikesharing, and public transit. Estimated on a sample dataset from the State of California, the findings can shed initial lights on the psychological determinants of the public’s attitude towards owning AV versus using SAV, which can furthermore provide policy implications intriguing for policy makers and stakeholders. Of note, the findings reveal the strongest influential factor on preference for AV over SAV as hedonic beliefs reflected in perceived enjoyment. This preference is next affected by utilitarian beliefs, particularly perceived benefit and trust of stranger, followed by attitude towards car and ride sharin

Understanding the truth about subjectivity

Results of two experiments show children’s understanding of diversity in personal preference is incomplete. Despite acknowledging diversity, in Experiment 1(N=108), 6- and 8-year-old children were less likely than adults to see preference as a legitimate basis for personal tastes and more likely to say a single truth could be found about a matter of taste. In Experiment 2 (N=96), 7- and 9-year-olds were less likely than 11- and 13-yearolds to say a dispute about a matter of preference might not be resolved. These data suggest that acceptance of the possibility of diversity does not indicate an adult-like understanding of subjectivity. An understanding of the relative emphasis placed on objective and subjective factors in different contexts continues to develop into adolescence

Optimistic versus Pessimistic--Optimal Judgemental Bias with Reference Point

This paper develops a model of reference-dependent assessment of subjective beliefs in which loss-averse people optimally choose the expectation as the reference point to balance the current felicity from the optimistic anticipation and the future disappointment from the realisation. The choice of over-optimism or over-pessimism depends on the real chance of success and optimistic decision makers prefer receiving early information. In the portfolio choice problem, pessimistic investors tend to trade conservatively, however, they might trade aggressively if they are sophisticated enough to recognise the biases since low expectation can reduce their fear of loss

Evolutionarily stable in-group favoritism and out-group spite in intergroup conflict

We study conflict between two groups of individuals. Using Schaffer`s (1988) concept of evolutionary stability we provide an evolutionary underpinning for in-group altruism combined with spiteful behavior towards members of the rival out-group. We characterize the set of evolutionarily stable combinations of in-group favoritism and out-group spite and find that an increase in in-group altruism can be balanced by a decrease in spiteful behavior towards the out-group

Optimal choice and beliefs with ex ante savoring and ex post disappointment

We propose a new decision criterion under risk in which people extract both utility from anticipatory feelings ex ante and disutility from disappointment ex post. The decision maker chooses his degree of optimism, given that more optimism raises both the utility of ex ante feelings and the risk of disappointment ex post. We characterize the optimal beliefs and the preferences under risk generated by this mental process and apply this criterion to a simple portfolio choice/insurance problem. We show that these preferences are consistent with the preference reversal in the Allais’ paradoxes and predict that the decision maker takes on less risk compared to an expected utility maximizer. This speaks to the equity premium puzzle and to the preference for low deductibles in insurance contracts. Keywords: endogenous beliefs, anticipatory feeling, disappointment, optimism, decision under risk, portfolio allocation

Optimal choice and beliefs with ex ante savoring and ex post disappointment

We propose a new decision criterion under risk in which people extract both utility from anticipatory feelings ex ante and disutility from disappointment ex post. The decision maker chooses his degree of optimism, given that more optimism raises both the utility of ex ante feelings and the risk of disappointment ex post. We characterize the optimal beliefs and the preferences under risk generated by this mental process and apply this criterion to a simple portfolio choice/insurance problem. We show that these preferences are consistent with the preference reversal in the Allais’ paradoxes and predict that the decision maker takes on less risk compared to an expected utility maximizer. This speaks to the equity premium puzzle and to the preference for low deductibles in insurance contracts. Keywords: endogenous beliefs, anticipatory feeling, disappointment, optimism, decision under risk, portfolio allocation