Accommodating stake effects under prospect theory

One of the stylized facts underlying prospect theory is a four-fold pattern of risk preferences. People have been shown to be risk seeking for small probability gains and large probability losses, while being risk averse for large probability gains and small probability losses. Another fourfold pattern of risk preferences over outcomes, postulated by Harry Markowitz in 1952, has received much less attention and is currently not integrated into prospect theory. In two experiments, we show that risk preferences may change over outcomes. While we find people to be risk seeking for small outcomes, this turns to risk neutrality and later risk aversion as stakes increase. We then show how a one-parameter logarithmic utility function fits such stake effects significantly better under prospect theory than the power or exponential functions mostly used when fitting prospect theory models. We further investigate the extent to which the use of ill-suited functional forms to represent utility may result in violations of prospect theory, and whether such violations disappear when using logarithmic utility

Experimenting in the lab in economics and monetary incentives

Review in : REVUE D'ECONOMIE POLITIQUE Volume: 116 Issue: 3 Abstract: A strong positive relation is generally assumed between monetary incentives and effort on the one hand, and between effort and performance on the other hand, which legitimates the introduction of monetary incentives in economic laboratory experiments. Still, the empirical impact of incentives on effort and/or performance appears to be rather mixed or even negative. We examine the ins and outs of the debate since they all are,International audienceA strong positive relation is generally assumed between monetary incentives and effort on the one hand, and between effort and performance on the other hand, which legitimates the introduction of monetary incentives in economic laboratory experiments. Still, the empirical impact of incentives on effort and/or performance appears to be rather mixed or even negative. We examine the ins and outs of the debate since they all are, in a more or less radical manner, an invitation to a more pragmatic attitude towards incentives. We first show that embarrassing empirical results cannot be ascribed to an alleged inappropriateness of the incentive procedure (as regards the level of incentives or the procedure itself), We then examine the robustness of the relation between incentives, effort, and performance and elaborate upon the reasons why incentives sometimes do not enhance (or even damage) effort and/or why effort sometimes does not induce better performance (whether it be ineffective or harmful upon it), Next, we discuss the peculiar case of experimentation in the loss domain, which raises the more fundamental question of whether monetary incentives can be introduced. We finally conclude on the need of a pragmatic use of monetary incentives, depending on the very features of the experimental design (including subjects' cognitive and psychological characteristics)

Experimental study of the effect of arc root fluctuations on the injection in suspension plasma spraying

International audienceSuspension plasma spraying (SPS) allows depositing finely structured coatings. This paper presents an analysis of the influence of plasma instabilities which control the interaction plasma jet-zirconia suspension. A particular attention is paid to the treatment of suspension jet or drops according to the importance of voltage fluctuations (linked to those of arc root) and depending on the different spray parameters such as the plasma forming gas mixture and the suspension momentum. By observing the suspension drops injection with a fast shutter camera and a laser flash triggered by a defined transient voltage level of the plasma torch, the influence of plasma fluctuation on drops fragmentation is studied through the deviation and dispersion trajectories of droplets within the plasma jet

Suspension plasma spraying of zirconia coatings : process and coating structure

International audienceSuspension plasma spraying (SPS) permits to manufacture finely structured coatings (nano- or submicron-sized) coatings. Compared to conventional plasma spraying, SPS exhibit several major differences: i) a more pronounced sensitivity to arc root fluctuations; ii) a shorter spray distance; iii) a higher thermal flux transmitted from the plasma flow to the substrate. Several operating parameters play relevant roles in the suspension processing and the coating architecture