Risk Aversion and the Subjective Time Discount Rate: A Joint Approach

In this paper we analyze a large sample of individual responses to six lottery questions. We derive a simultaneous estimate of risk aversion and the time preference discount rate per individual. This can be done because the consumption of a large prize is smoothed over a larger time period. It is found that both parameters strongly vary over individuals, while they are moderately negatively correlated. Furthermore we explain the estimated relative risk aversion and time preference by income, age, gender, entrepreneurship and an obesity index. Very significant effects are found. If we explain relative risk aversion in a simple model where time discounting is ignored, we find completely different estimates for this parameter. We conclude that in the case of lotteries with big prizes a simultaneous estimate of risk aversion and time preference is needed in order to avoid misspecificationexpected utility, risk aversion, time preference, lotteries, hypothetical questions

Effect of flow forecasting quality on benefits of reservoir operation - a case study for the Geheyan reservoir (China)

This paper presents a methodology to determine the effect of flow forecasting quality on the benefits of reservoir operation. The benefits are calculated in terms of the electricity generated, and the quality of the flow forecasting is defined in terms of lead time and accuracy of the forecasts. In order to determine such an effect, an optimization model for reservoir operation was developed which consists of two sub-models: a long-term (monthly) and a short-term (daily) optimization sub-model. A methodology was developed to couple these two sub-models, so that both short-term benefits (time span in the order of the flow forecasting lead time) and long-term benefits (one year) were considered and balanced. Both sub-models use Discretized Dynamic Programming (DDP) as their optimization algorithms. The Geheyan reservoir on the Qingjiang River in China was taken as case study. Observed (from the 1997 hydrological year) and forecasted flow series were used to calculate the benefits. Forecasted flow series were created by adding noises to the observed series. Different magnitudes of noise reflected different levels of forecasting accuracies. The results reveal, first of all, a threshold lead time of 33 days, beyond which further extension of the forecasting lead time will not lead to a significant increase in benefits. Secondly, for lead times shorter than 33 days, a longer lead time will generally lead to a higher benefit. Thirdly, a perfect inflow forecasting with a lead time of 4 days will realize 87% of the theoretical maximum electricity generated in one year. Fourthly, for a certain lead time, more accurate forecasting leads to higher benefits. For inflow forecasting with a fixed lead time of 4 days and different forecasting accuracies, the benefits can increase by 5 to 9% compared to the actual operation results. It is concluded that the definition of the appropriate lead time will depend mainly on the physical conditions of the basin and on the characteristics of the reservoir. The derived threshold lead time (33 days) gives a theoretical upper limit for the extension of forecasting lead time. Criteria for the appropriate forecasting accuracy for a specific feasible lead-time should be defined from the benefit-accuracy relationship, starting from setting a preferred benefit level, in terms of percentage of the theoretical maximum. Inflow forecasting with a higher accuracy does not always increase the benefits, because these also depend on the operation strategies of the reservoir.\u

A Parametric Analysis of Prospect Theory's Functionals for the General Population

This paper presents the results of an experiment that completely measures the utility function and probability weighting function for different positive and negative monetary outcomes, using a representative sample of N = 1935 from the general public. The results confirm earlier findings in the lab, suggesting that utility is less pronounced than what is found in classical measurements where expected utility is assumed. Utility for losses is found to be convex, consistent with diminishing sensitivity, and the obtained loss aversion coefficient of 1.6 is moderate but in agreement with contemporary evidence. The estimated probability weighing functions have an inverse-S shape and they imply pessimism in both domains. These results show that probability weighting is also an important phenomenon in the general population. Women and lower educated individuals are found to be more risk averse, in agreement with common findings. Unlike previous studies that ascribed gender differences in risk attitudes solely to differences in the degree utility curvature, however, our results show that this finding is primarily driven by loss aversion and, for women, also by a more pessimistic psychological response towards the probability of obtaining the best possible outcome.loss aversion, utility for gains and losses, prospect theory, subjective probability weighting

A Parametric Analysis of Prospect Theory's Functionals for the General Population

This paper presents the results of an experiment that completely measures the utility function and probability weighting function for different positive and negative monetary outcomes, using a representative sample of N = 1935 from the general public. The results confirm earlier findings in the lab, suggesting that utility is less pronounced than what is found in classical measurements where expected utility is assumed. Utility for losses is found to be convex, consistent with diminishing sensitivity, and the obtained loss aversion coefficient of 1.6 is moderate but in agreement with contemporary evidence. The estimated probability weighing functions have an inverse-S shape and they imply pessimism in both domains. These results show that probability weighting is also an important phenomenon in the general population. Women and lower educated individuals are found to be more risk averse, in agreement with common findings. Unlike previous studies that ascribed gender differences in risk attitudes solely to differences in the degree utility curvature, however, our results show that this finding is primarily driven by loss aversion and, for women, also by a more pessimistic psychological response towards the probability of obtaining the best possible outcome.prospect theory, utility for gains and losses, loss aversion, subjective probability weighting

Application of virtual sensors in three-dimensional broadband active noise control and the effects on the quiet zones

This paper presents various experimental results of a real-time, multiple-channel, broadband Active Noise Control (ANC) system, employing the Remote Microphone Technique (RMT) as virtual sensing algorithm in different settings. The effects of virtual sensing on the shape and size of the quiet zone are experimentally investigated. To enhance the quiet zone, an acoustic energy density probe can be used as error sensor. Such a sensor not only measures sound pressure, but also the particle velocity in three directions, providing four signals to be minimized by the ANC system. The RMT is used to construct a virtual three dimensional, acoustic energy density probe, which is validated in real-time ANC. In conclusion, advantages, drawbacks and practical considerations of using RMT virtual sensing in active noise control are discussed

A simultaneous approach to the estimation of risk aversion and the subjective time discount rate

"In this paper we analyze a sample of 1,832 individuals who responded to six randomly generated lottery questions that differ with respect to chance, prize and the timing of the draw. Using a model that explicitly allows for consumption smoothing, we obtain an estimate of relative risk aversion of 82. Instead, assuming consumption to be immediate gives an estimate of 2, close to what is traditionally reported, while a model of full asset integration gives estimates higher by several orders of magnitude. Our results show that estimated risk aversion is sensitive to the assumptions made with respect to the consumption profile and that it is possible to determine the level of asset integration endogenously. The average subjective time discount rate, which includes a preference for the present, equals 6% per month. It is found that both parameters vary strongly over individuals and that the variation can be explained by income, age, gender, and entrepreneurship, consistent with the majority of previous evidence." [author's abstract

Potentials of type I interferon therapy in the treatment of pancreatic cancer

__Abstract__ Pancreatic cancer is a highly aggressive malignancy with limited treatment options. Over the last 30 years survival rates have barely been approved and research has focused on other treatment modalities like biological modulators such as type I interferons (IFNs). A few years ago several in vitro, in vivo and clinical studies have been conducted evaluating adjuvant IFN-α therapy after curative resection of pancreatic cancer and although these studies showed promis