Eliciting Gul’s Theory of Disappointment Aversion by the Tradeoff Method

Gul’s (1991) theory of disappointment aversion (DA) has several attractive features, being intuitive, analytically tractable, and parsimonious. In spite of this, the DA model has received little attention in practical applications, which may be partly due to the absence of a procedure to elicit the model. We show how the trade-off method, developed by Wakker and Deneffe (1996), can be used to elicit DA. Our elicitation method is parameter-free: it requires no assumption about utility and/or disappointment aversion. Quantitative tests of DA in three outcome domains, monetary gains, monetary losses, and life-years, suggest that the DA model is too parsimonious. Of the other models of disappointment aversion that have been proposed in the literature, our data are most consistent with the model of Loomes and Sugden (1986)

LE MAROC EST- IL UN PAYS ÉMERGENT ? (PREMIERE PARTIE)

La question de savoir si l’économie marocaine est une économie émergente a interpelé beaucoup d’économistes et devenue l’un des thèmes les plus débattus par les chercheurs et les penseurs depuis quelques années. Pour analyser cette question sur le plan scientifique, nous avons utilisé l’approche statistique pour comparer deux périodes : celle du Maroc de 1960 et celle du Maroc actuel. Les indicateurs socio-économiques appliqués dans notre étude ne prouvent pas que les structures économiques et sociales du Maroc actuel convergent vers ceux des pays développés

Reconciling Introspective Utility with Revealed Preference: Experimental Arguments Based on Prospect Theory

In an experiment, choice-based utilities are derived from choices under risk, and choiceless utilities from introspective strength-of-preference judgments. The well-known inconsistencies of risky utility, when analyzed through expected utility, are resolved by means of prospect theory. A consistent cardinal utility index for risky choice results. Remarkably, however, this cardinal index agrees well with the choiceless utilities. This finding suggests a relation between a choice-based and a choiceless concept. Such a relation would imply that direct judgments can provide useful data for economics, and can reinforce the revealed-preference approach. Implications for the classical debate on ordinal versus cardinal utility are discussed.This is a preprint of an article to be published in Journal of Econometric

Une association malformative exceptionnelle: situs inversus totalis et hernie rétro-costo-xyphoidienne

La hernie rétro-costo-xyphoïdienne est une malformation congénitale rare. Elle représente 3% de l'ensemble des hernies diaphragmatiques. Elle peut être isolée ou associée à d'autres malformations. Nous rapportons une observation rarissime d'hernie de Larrey-Morgagni et de situs inversus totalis découverts à la suite d'une détresse respiratoire néonatale

Measuring risk and time preferences in an integrated framework

We investigate time discounting under risk. To this end, we modify a popular multiple price list (MPL) design to elicit time discounting. Structural estimations of model parameters yield several new insights. For one, we find present bias to persist under risk, contrary to some previous evidence from the psychology literature. We further confirm the robustness of inverse-S shaped probability weighting. This is important inasmuch as random choice predicts the opposite shape in our setup. We also show that correcting for probability weighting under risk impacts the assessment of discount rates. Those are systematically underestimated under the commonly used, more restrictive, expected utility. (C) 2019 Elsevier Inc. All rights reserved

Do financial professionals behave according to prospect theory? An experimental study

Prospect theory is increasingly used to explain deviations from the traditional paradigm of rational agents. Empirical support for prospect theory comes mainly from laboratory experiments using student samples. It is obviously important to know whether and to what extent this support generalizes to more naturally occurring circumstances. This article explores this question and measures prospect theory for a sample of private bankers and fund managers. We obtained clear support for prospect theory. Our financial professionals behaved according to prospect theory and violated expected utility maximization. They were risk averse for gains and risk seeking for losses and their utility was concave for gains and (slightly) convex for losses. They were also averse to losses, but less so than commonly observed in laboratory studies and assumed in behavioral finance. A substantial minority focused on gains and largely ignored losses, behavior reminiscent of what caused the current financial crisis

A Tractable Method to Measure Utility and Loss Aversion under Prospect Theory

This paper provides an efficient method to measure utility under prospect theory, the most important descriptive theory of decision under uncertainty today. Our method is based on the elicitation of certainty equivalents for two-outcome prospects, a common way to measure utility. We applied our method in an experiment and found that most subjects were risk averse for gains and risk seeking for losses but had concave utility both for gains and for losses. This finding illustrates empirically that risk seeking and concave utility can coincide under prospect theory, a result that was derived theoretically by Chateauneuf and Cohen (1994). Utility was steeper for losses than for gains, which is consistent with loss aversion. Utility did not depend on the probability used in the elicitation, which offers support for prospect theory

Loss aversion under prospect theory: A parameter-free measurement

A growing body of qualitative evidence shows that loss aversion, a phenomenon formalized in prospect theory, can explain a variety of field and experimental data. Quantifications of loss aversion are, however, hindered by the absence of a general preference-based method to elicit the utility for gains and losses simultaneously. This paper proposes such a method and uses it to measure loss aversion in an experimental study without making any parametric assumptions. Thus, it is the first to obtain a parameter-free elicitation of prospect theory's utility function on the whole domain. Our method also provides an efficient way to elicit utility midpoints, which are important in axiomatizations of utility. Several definitions of loss aversion have been put forward in the literature. According to most definitions we find strong evidence of loss aversion, at both the aggregate and the individual level. The degree of loss aversion varies with the definition used, which underlines the need for a commonly accepted definition of loss aversion

Intertemporal Tradeoffs for Gains and Losses: An Experimental Measurement of Discounted Utility

This paper is the first to measure utility in intertemporal choice and presents new and more robust evidence on the discounting of money outcomes. Our measurement method is parameterfree in the sense that it requires no assumptions about utility or discounting. We found that intertemporal utility was concave for gains and convex for losses, consistent with a hypothesis put forward by Loewenstein and Prelec (1992). Utility in intertemporal choice was close to utility in decision under risk and uncertainty, suggesting that there may be one unifying concept of utility that applies to all of economics. The existence of one concept of utility is important for applied economics, because it largely reduces data requirements. Discount rates declined over time, but less so than has been observed in previous studies that assumed linear utility. Of the main discounted utility models, Loewenstein and Prelec’s (1992) generalized hyperbolic discounting model best fitted our data. The widely-used quasi-hyperbolic model fitted the data only slightly better than constant discounting. Finally, we obtained evidence of an asymmetry in discounting between gains and losses, which, in contrast with earlier findings, cannot be explained by a framing effect