11,390 research outputs found

    Preserving preference rankings under non-financial background risk

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    We investigate the impact of a non-financial background risk ˜" on the preference rankings between two independent financial risks ˜z1 and ˜z2 for an expected-utility maximizer. More precisely, we provide necessary and sufficient conditions for the alternative (x0 + ˜z1, y0 + ˜") to be preferred to (x0 + ˜z2, y0 + ˜") whenever (x0 + ˜z1, y0) is preferred to (x0 + ˜z2, y0). Utility functions that preserve the preference rankings are fully characterized. Their practical relevance is discussed in light of recent results on the constraints for the modeling of the preference for the disaggregation of harms.Multivariate risk, Background risk, Disaggregation of harms, Risk independence

    Preserving preference rankings under non-financial background risk

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    International audienceWe investigate the impact of a non-financial background risk ˜" on the preference rankings between two independent financial risks ˜z1 and ˜z2 for an expected-utility maximizer. More precisely, we provide necessary and sufficient conditions for the alternative (x0 + ˜z1, y0 + ˜") to be preferred to (x0 + ˜z2, y0 + ˜") whenever (x0 + ˜z1, y0) is preferred to (x0 + ˜z2, y0). Utility functions that preserve the preference rankings are fully characterized. Their practical relevance is discussed in light of recent results on the constraints for the modeling of the preference for the disaggregation of harms

    Apportioning of Risks via Stochastic Dominance

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    Consider a simple two-state risk with equal probabilities for the two states. In particular, assume that the random wealth variable Xi dominates Yi via ith-order stochastic dominance for i = M,N. We show that the 50-50 lottery [XN + YM, YN + XM] dominates the lottery [XN + XM, YN + YM] via (N + M)th-order stochastic dominance. The basic idea is that a decision maker exhibiting (N + M)th-order stochastic dominance preference will allocate the state-contingent lotteries in such a way as not to group the two "bad" lotteries in the same state, where "bad" is defined via ith-order stochastic dominance. In this way, we can extend and generalize existing results about risk attitudes. This lottery preference includes behavior exhibiting higher order risk effects, such as precautionary effects and tempering effects.downside risk, precautionary effects, prudence, risk apportionment, risk aversion, stochastic dominance, temperance

    Distributional Orderings: An Approach with Seven Flavours

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    We examine individuals' distributional orderings in a number of contexts. This is done by using a questionnaire-experiment that is presented to respondents in any one of seven "flavours" or interpretations of the basic distributional problem. The flavours include inequality, risk, social welfare and justice. The issue of personal involvement in the distributional comparison is explicitly addressed.social welfare, inequality, justice, risk, questionnaire experiments.

    Average Crop Revenue Election (ACRE) Program or Traditional Government Payment Programs: What Factors Matter?

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    Rankings of different risk management portfolios including Average Crop Revenue Election (ACRE), traditional government payment programs, crop insurance and hedging in futures; and optimal choices of insurance coverage levels and hedge ratios are evaluated for a representative central Indiana corn farm, using Monte Carlo simulation and optimization of expected utilities. The changes of preference between ACRE and traditional government programs under comprehensive scenarios of price and yield risks are studied. Also, Interactions between ACRE and other risk management instruments are examined, and government costs and risk management efficiencies between ACRE and traditional government programs are compared. The results show a strong preference of ACRE for the representative central Indiana corn farm in 2009, due to high ACRE guarantee price and expected drop in corn price from 2008 level. Even if the farm faces weak dependence between farm and aggregate yield, the risk could not offset the addition value ACRE could provide for this year. Also, it is found that there are synergistic effects between ACRE and two individual crop insurance plans but antagonistic effects between ACRE and group insurance plans. ACRE is more efficient than traditional government programs in terms of expected program costs.ACRE, Farm Bill, crop insurance, willingness to pay, government expenditure, government programs, Agricultural and Food Policy, Agricultural Finance, Risk and Uncertainty,

    Reducing Inequality in Higher Education: Where Do We Go From Here?

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    [Excerpt] Differences in inequality in college enrollment rates across students from families of different socioeconomic levels have only marginally narrowed since the early 1970s. Moreover, students from lower-income families are much more likely to start higher education in two-year public colleges and public four-year institutions than are their higher income counterparts. Among students who initially enter four-year institutions, six year graduation rates of students from families with incomes of less than 50,000aresubstantiallylessthanthegraduationratesofstudentsfromfamilieswithincomesofmorethan50,000 are substantially less than the graduation rates of students from families with incomes of more than 75,000. Finally, at a set of our nation’s most selective private colleges and universities, the proportion of students coming from families whose family incomes are in the lowest two-fifths of the distribution of family income, averaged only about 10% in recent years. I begin in the next section by discussing some of the forces influencing public and private higher education in the United States in recent years that have worked against improving access and persistence of students from the lower tail of the family income distribution. Where students go to college may be as important as whether they go to college, as a considerable body of research shows that, other factors held constant, students who attend better-funded more-selective colleges earn higher post graduation earnings, with this effect being greatest for students who come from lower income families. Hence I also discuss why it became increasingly difficult for students from lower income families to enroll at top public and private institutions during the period. Spurred by public attention that has been drawn to the under representation of students from lower income families, both selective public and private universities have begun to institute policies to improve their access to talented students from lower income families. The next section discusses a number of these strategies and provides preliminary estimates for some of their success to date. Efforts have also been made to enhance college preparedness of lower income high school students and to provide them with improved information about college costs, the availability of financial aid, and prerequisites needed to succeed in college; a few issues related to these efforts are discussed in the following section. Finally, I speculate about directions that future institutional and public policies might take

    Backing the horse or the jockey? Due diligence, agency costs, information and the evaluation of risk by business angel investors

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    This paper explores the argument that business angel investors are more concerned with managing and minimising agency risk than market risk. Based on data on the due diligence process from a survey of business angels in the UK, the paper concludes that business angels do view entrepreneur characteristics and experience as having the greatest impact on the perceived riskiness of an investment opportunity. Further, they emphasise personal and informal over formal sources of information in the due diligence process, and seek information on both the entrepreneur and the venture in determining valuation. Indeed, the reliance of business angels on short-term and subjective information to value investment opportunities leads to the conclusion that their approach to valuation is not a function of the conventional protocols of financial analysis, but of personal relations and assessment

    Operationalizing Individual Fairness with Pairwise Fair Representations

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    We revisit the notion of individual fairness proposed by Dwork et al. A central challenge in operationalizing their approach is the difficulty in eliciting a human specification of a similarity metric. In this paper, we propose an operationalization of individual fairness that does not rely on a human specification of a distance metric. Instead, we propose novel approaches to elicit and leverage side-information on equally deserving individuals to counter subordination between social groups. We model this knowledge as a fairness graph, and learn a unified Pairwise Fair Representation (PFR) of the data that captures both data-driven similarity between individuals and the pairwise side-information in fairness graph. We elicit fairness judgments from a variety of sources, including human judgments for two real-world datasets on recidivism prediction (COMPAS) and violent neighborhood prediction (Crime & Communities). Our experiments show that the PFR model for operationalizing individual fairness is practically viable.Comment: To be published in the proceedings of the VLDB Endowment, Vol. 13, Issue.

    Assessing Globalization's Critics: "Talkers Are No Good Doers???"

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    This paper is about the critics of the "doers" of globalization. It describes who they are, where they came from, what they want, how economists, policymakers, and others might understand them better, and where globalization might head from here. Many critics are themselves strongly internationalist and want to see globalization proceed, but under different rules. Some, particularly the protesters in the streets, focus mainly on what is wrong with the world. But some of them put forward broad alternative visions and others offer detailed recommendations for alleviating the problems they see arising from status quo globalization. Most of them have roots in long-standing transnational advocacy efforts to protect human rights and the environment and reduce poverty around the world. What brings them together today is their shared concern that the process by which globalization's rules are being written and implemented is undermining democracy and failing to spread the benefits broadly. This paper sketches the key issues and concerns that motivate the critics in a way that is broadly representative and intelligible to economists. It finds more resonance for the critics' agenda in economics than they commonly recognize. And it attempts to capture the concerns of Southern as well as Northern critics and to analyze the issues that divide as well as bring them together. Finally, it evaluates those issues and alternative proposals on which even globalization enthusiasts and the critics might come together cooperatively.globalization
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