Risk Taking of Executives under Different Incentive Contracts: Experimental Evidence

Classic financial agency theory recommends compensation through stock options rather than shares to induce risk neutrality in otherwise risk averse agents. In an experiment, we find that subjects acting as executives do also take risks that are excessive from the perspective of shareholders if compensated through options. Compensation through restricted company stock reduces the uptake of excessive risks. Even under stock-ownership, however, experimental executives continue to take excessive risks—a result that cannot be accounted for by classic incentive theory. We develop a basic model in which such risk-taking behavior is explained based on a richer array of risk attitudes derived from Prospect Theory. We use the model to derive hypotheses on what may be driving excessive risk taking in the experiment. Testing those hypotheses, we find that most of them are indeed borne out by the data. We thus conclude that a prospect-theory-based model is more apt at explaining risk attitudes under different compensation regimes than traditional principal-agent models grounded in expected utility theory

Risk Taking of Executives under Different Incentive Contracts: Experimental Evidence

Classic financial agency theory recommends compensation through stock options rather than shares to induce risk neutrality in otherwise risk averse agents. In an experiment, we find that subjects acting as executives do also take risks that are excessive from the perspective of shareholders if compensated through options. Compensation through restricted company stock reduces the uptake of excessive risks. Even under stock-ownership, however, experimental executives continue to take excessive risks—a result that cannot be accounted for by classic incentive theory. We develop a basic model in which such risk-taking behavior is explained based on a richer array of risk attitudes derived from Prospect Theory. We use the model to derive hypotheses on what may be driving excessive risk taking in the experiment. Testing those hypotheses, we find that most of them are indeed borne out by the data. We thus conclude that a prospect-theory-based model is more apt at explaining risk attitudes under different compensation regimes than traditional principal-agent models grounded in expected utility theory.prospect theory; expected utility theory; risk attitude; executive compensation; reference dependence; experimental finance

Responsibility Effects in Decision Making under Risk

We systematically explore decision situations in which a decision maker bears responsibility for somebody else's outcomes as well as for her own in situations of payoff equality. In the gain domain we confirm the intuition that being responsible for somebody else's payoffs increases risk aversion. This is however not attributable to a 'cautious shift' as often thought. Indeed, looking at risk attitudes in the loss domain, we find an increase in risk seeking under responsibility. This raises issues about the nature of various decision biases under risk, and to what extent changed behavior under responsibility may depend on a social norm of caution in situations of responsibility versus naive corrections from perceived biases. To further explore this issue, we designed a second experiment to explore risk-taking behavior for gain prospects offering very small or very large probabilities of winning. For large probabilities, we find increased risk aversion, thus confirming our earlier finding. For small probabilities however, we find an increase of risk seeking under conditions of responsibility. The latter finding thus discredits hypotheses of a social rule dictating caution under responsibility, and can be explained through flexible self-correction models predicting an accentuation of the fourfold pattern of risk attitudes predicted by prospect theory. An additional accountability mechanism does not change risk behavior, except for mixed prospects, in which it reduces loss aversion. This indicates that loss aversion is of a fundamentally different nature than probability weighting or utility curvature. Implications for debiasing are discussed

Sound attenuation apparatus

An apparatus is disclosed for reducing acoustic transmission from mechanical or acoustic sources by means of a double wall partition, within which an acoustic pressure field is generated by at least one secondary acoustic source. The secondary acoustic source is advantageously placed within the partition, around its edges, or it may be an integral part of a wall of the partition

Abstract concepts, language and sociality. From acquisition to inner speech

The problem of representation of abstract concepts, such as “freedom” and “justice”, has become particularly crucial in recent years, due to the increased success of embodied and grounded views of cognition. We will present a novel view on abstract concepts and abstract words. Since abstract concepts do not have single objects as referents, children and adults might rely more on input from others in learning them; we therefore suggest that linguistic and social experience play an important role for abstract concepts. We will discuss evidence obtained in our and other labs showing that processing of abstract concepts evokes linguistic interaction and social experiences, leading to the activation of the mouth motor system. We will discuss the possible mechanisms that underlie this activation. Mouth activation can be due to re-enactment of the experience of conceptual acquisition, which occurred through the mediation of language. Alternatively, it could be due to the re-explanation of the word meaning, possibly through inner speech. Finally, it can be due to a metacognitive process revealing low confidence on the meaning of our concepts. This process induces in us the need to rely on others to ask/negotiate conceptual meaning. We conclude that with abstract concepts words work as social tools: they extend our thinking abilities and push us to rely on others to integrate our knowledge

Responsibility Effects in Decision Making under Risk

We systematically explore decision situations in which a decision maker bears responsibility for somebody else's outcomes as well as for her own in situations of payoff equality. In the gain domain we confirm the intuition that being responsible for somebody else's payoffs increases risk aversion. This is however not attributable to a 'cautious shift' as often thought. Indeed, looking at risk attitudes in the loss domain, we find an increase in risk seeking under responsibility. This raises issues about the nature of various decision biases under risk, and to what extent changed behavior under responsibility may depend on a social norm of caution in situations of responsibility versus naive corrections from perceived biases. To further explore this issue, we designed a second experiment to explore risk-taking behavior for gain prospects offering very small or very large probabilities of winning. For large probabilities, we find increased risk aversion, thus confirming our earlier finding. For small probabilities however, we find an increase of risk seeking under conditions of responsibility. The latter finding thus discredits hypotheses of a social rule dictating caution under responsibility, and can be explained through flexible self-correction models predicting an accentuation of the fourfold pattern of risk attitudes predicted by prospect theory. An additional accountability mechanism does not change risk behavior, except for mixed prospects, in which it reduces loss aversion. This indicates that loss aversion is of a fundamentally different nature than probability weighting or utility curvature. Implications for debiasing are discussed.risk attitude; other-regarding preferences; prospect theory; agency; social norms

Risk Factors for Anaemia Among HIV Infected Children Attending Care and Treatment Clinic at Muhimbili National Hospital in Dar es Salaam, Tanzania

There is paucity of data describing the risk factors for anaemia among HIV infected children in Tanzania. This cross sectional study was carried out to determine the contributing factors for anaemia among HIV-infected children attending Muhimbili National Hospital in Dar es Salaam. Both univariate and multivariate logistic regression analyses were performed to identify possible factors associated with anaemia in HIV-infected children. A total of 75 (44%) patients among 167 recruited HIV-infected children aged 6 months to 59 months of were found to be anaemic (Hg<11g/dl). Multivariate logistic regression demonstrated that not being on HAART (OR 3.40, 95%CI (1.20-9.60), having CD4% <25% (OR 2.30, 95%CI (1.20-34.60), having a history of tuberculosis (TB) (OR 3.23, 95%CI (1.10-9.70) and having hookworm infestation (OR 5.97, 95%CI (1.92-18.4) were independent risk factors for anaemia among HIV infected children. The analyses also showed that being HIV positive for ≥ 2.5 years resulted into a low risk of severe anaemia compared to being HIV positive for < 2.5 years. Taking multivitamins (OR 0.07, 95%, CI (0.020-0.30) and antihelminthics (OR 0.27, 95%CI (0.10-0.74) were also protective against anaemia in children. Similar factors (with exception of using antihelmintics) were associated with severe anaemia. In conclusion the factors associated with anaemia in HIV infected children were multifactorial in nature. Efforts to correct anaemia in HIV infected children should include use of HAART and treatment of infections such as TB and hookworms

FY13 Planning Task Force Documents: University Library System, University of Pittsburgh, August 2011-June 2012

These documents provide a record of the work of the ULS FY13 Planning Task Force, which initiated and deployed a highly inclusive strategic planning process to analyze the library's strategic options, prioritize them, and identify key actions for implementation in FY13. The ULS FY13 Planning and Budget Report, submitted to the provost's office on 28 February 2012, incorporates the task force's recommended strategic priorities for FY13. Additional task force documents (e.g., meeting agendas, presentations by task force members, and materials related to the group's environmental scan) may be accessed via the library's internal site, Behind the Scenes, at http://bts.library.pitt.edu, under "General Planning.