Ambiguity and Gender Differences in Financial Decision Making: An Experimental Examination of Competence and Confidence Effects.

This paper reports the results of an experiment that brings together psychological measures of competence and overconfidence with laboratory economic measures of individual valuations of uncertainty. We examine the valuations of risky and ambiguous lotteries in a financial decision context. The experiment can be viewed in two parts. The first part replicates an experimental design reported by Heath and Tversky (1991) but within a financial market context. This part produces two measures: 1) competence, the perception of feeling knowledgeable or competent in an area and 2) overconfidence, the well documented result that many individuals overestimate their ability. These measures, together with an indicator of objective knowledge, were used to explain elicited certainty equivalents in the second part of the experiment. Certainty equivalents were elicited for lotteries that were contingent on the price movements of real stock and bond funds, the price changes of simulated virtual funds, and pure risk lotteries. These represent three different levels of uncertainty: two-sided ambiguity, one-sided ambiguity and pure risk. Our results show a significant relationship between individual overconfidence and competence measures and elicited values of lotteries in a financial decision context. Further, the interaction of overconfidence, competence and knowledge measures with gender produce nearly opposite effects.risk, ambiguity, overconfidence, gender, financial decision making, economic experiments

Disaster Loses in the Developing World: Evidence from the August 1999 Earthquake in Turkey

The purpose of this study is to investigate the impacts of a natural disaster on a developing country’s economy. In that sense, we look at the impact of August 1999 earthquake in Turkey on two important macroeconomic indicators of the Turkish economy (Real Output and Employment) with recovery policies followed by the government and international donors. Our results indicate that the earthquake had a significant immediate negative impact on both output and employment growth in Turkey. While output growth reverted back to its predisaster pattern after the initial shock, employment growth did not recover. The earthquake had both a short run and long run influence on the Turkish economy. This study will develop understanding of the possible effects of future earthquakes. Also, it will help the Turkish Government evaluate already-applied mitigation measures (like Turkish Catastrophe Insurance Pool etc.) and guide the preparation for forthcoming disasters since scientists have reached a consensus that a major earthquake is expected in Istanbul.

THE UNITED STATES IN THE GLOBAL SOYBEAN MARKET: WHERE DO WE GO FROM HERE?

This study applies the concept of a dynamic dominant-firm oligopoly model to the international soybean market. It has been suggested that the international soybean market should be viewed as an oligopoly among exporting nations. Consistent with Gaskins (1971) dynamic dominant firm model, our results indicate that the current U.S. loan deficiency-payment prices and their predecessors created an environment in which smaller (fringe) exporters could prosper and expand. The reduction of U.S. market share is thus a logical outcome of an "optimally managed decline" a la Gaskins. The study finds U.S. market share to decline at a reducing rate and predicts U.S. market share eventually to stabilize, given the expanding international market for soybeans and products. Recognition of the structure of international soybean market has policy implications for the 2002 farm program as the classic dominant firm model suggests.Crop Production/Industries, International Relations/Trade,

Market Forces and Price Ceilings: A Classroom Experiment

The effect of price controls on competitive equilibrium is a standard topic in many undergraduate economics courses. This classroom experiment demonstrates the effect of rent control (price ceilings) on the market for apartments. As participants in the experiment, students experience the effect of a price ceiling as buyers (renters) and sellers (landlords). The classroom-posted offer market exhibits a shortage under a binding price ceiling. Further, we explore a secondary response to rent control. When given the opportunity, landlords lower the quality of the apartments by reducing maintenance expenditures under the price ceiling, thus moving the market back to equilibrium. Since many students are themselves renters, they should relate to changes in quality due to lower maintenance by landlords. This experiment will stimulate discussion on market forces and on public policy aimed at restricting prices.

Measuring the Regional Economic Response to Hurricane Katrina

Naturkatastrophe; Sturm; Makroökonomischer Einfluss; USA

Homeowner Preference for Household-level Flood Mitigation in US: Analysis of a Discrete Choice Experiment

This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (https://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.The Federal Emergency Management Agency (FEMA) offers a portfolio of flood risk mitigation options for high-risk homeowners, hoping to reduce flood damages. Buyout (home acquisition) and home retrofit (e.g., home elevation) are candidates available to homeowners. FEMA has recently amended and increased its buyout efforts. This study examines homeowners’ stated preference for buyout and home elevation contracts using survey data. Results indicate multiple factors influence the decision to participate in home acquisition and elevation programs. Importantly, we find that preferences vary with the timing (whether the contract is offered before or after a damage event) of the contract offered.ECU/Cambridge Open Access Publishing Agreemen

Strategic Manipulation of Pollution Permit Markets: An Experimental Approach

In this paper we employ experimantal economic methods to examine the effect of market structure on the use of marketable emmisions permits. In particular, we ask whether firms can strategically manipulate a product market using marketable emissions permits. Subjects participate in two markets, a permit market and a product market. They use permits to reduce the cost of production of the final goods that they sell in the product market. Four treatments are used to test the effects of initial permit allocation and market structure. The first two treatments explore "simple" manipulation. In this case firms are all price takers in the product market but must compete both in the permit and final product markets, thus opening the potential use of permits as a form of market predation. Results show that in a market with one dominant firm and a number of fringe firms, strategic manipulation occurs repeatedly in the laboratory as the dominant firm uses licenses in an inefficient manner in order to minimize its costs, increase its profits and exclude rivals in the product market. Further these finding indicate, that far from improving market efficiency and decreasing the cost to society of pollution control, implementation of tradable permit markets where there are firms in a position of market power may decrease efficiency.

Dynamic modeling of public and private decision-making for hurricane risk management including insurance, acquisition, and mitigation policy

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.We develop a computational framework for the stochastic and dynamic modeling of regional natural catastrophe losses with an insurance industry to support government decision-making for hurricane risk management. The analysis captures the temporal changes in the building inventory due to the acquisition (buyouts) of high-risk properties and the vulnerability of the building stock due to retrofit mitigation decisions. The system is comprised of a set of interacting models to (1) simulate hazard events; (2) estimate regional hurricane-induced losses from each hazard event based on an evolving building inventory; (3) capture acquisition offer acceptance, retrofit implementation, and insurance purchase behaviors of homeowners; and (4) represent an insurance market sensitive to demand with strategically interrelated primary insurers. This framework is linked to a simulation-optimization model to optimize decision-making by a government entity whose objective is to minimize region-wide hurricane losses. We examine the effect of different policies on homeowner mitigation, insurance take-up rate, insurer profit, and solvency in a case study using data for eastern North Carolina. Our findings indicate that an approach that coordinates insurance, retrofits, and acquisition of high-risk properties effectively reduces total (uninsured and insured) losses.Wiley Open Access Accoun