Adequate Moods for Non-EU Decision Making in a Sequential Framework

In a dynamic (sequential) framework, departures from the independence axiom (IND) are reputed to induce violations of dynamic consistency (DC), which may in turn have undesirable normative consequences. This result thus questions the normative acceptability of non expected-utility (non-EU) models, which precisely relax IND. This paper pursues a twofold objective. The main one is to discuss the normative conclusion: we show that usual arguments linking violations of DC to departures from IND are actually based on specific (but usually remaining implicit) assumptions which may rightfully be released, so that it is actually possible for a non-EU maximizer to be dynamically consistent and thus avoid normative difficulties. Our second objective is to introduce a kind of 'reality principle' (through two other evaluation criteria) in order to mitigate the normative requirement when examining adequate moods for non-EU decision making.Non-expected utility, sequential choice, dynamic consistency, money pump, consequentialism.

The shape of the utility function under risk in the loss domain and the "ruinous losses" hypothesis: some experimental results

This paper reports some preliminary experimental results as regards the shape of the utility function for losses when elicited over a wide interval of consequences. Individual utility functions are elicited using the trade-off method, which, unlike standard elicitation procedures, is robust to probability weighting (and avoids most cognitive biases). Even though most utility functions exhibit the usual convex shape, nearly 25% of them appear to be inverse-S shaped, with convexity over moderate losses changing to concavity as losses grow. Though not conclusive (due mainly to the small size of our subject pool), this result brings some new support to the old idea that ruinous or unacceptable losses may induce some abrupt change in the shape of the utility function. Most importantly, it paves the way for more systematic investigation of the "ruinous losses" hypothesis.utility under risk, large losses, ruin, trade-off method, individual decision making under risk

Expérimentation de laboratoire et économie :<br />Contre quelques idées reçues et faux problèmes

International audienceDespite its increasing use and legitimacy, experimental methodology in economics has been subject to some criticism, an extreme version of which concludes to its irrelevance to its object. With no claim to exhaustiveness, the paper presents and discusses some arguments that we consider to be questionable – because they are suspected to hide either a strategic temptation when facing unpleasant experimental results or a fallacious view of experimental goals and potentialities or even an inadequate approach of economic reality itself – and shows that they are at best locally or partially valid. This allows us to remind the reader of the purposes of the experimental method, of its potentialities and limits as well as of some necessary precautions to adopt.En dépit de son utilisation et de sa légitimité croissantes, l'expérimentation de laboratoire en économie fait parfois l'objet de critiques qui peuvent aller jusqu'à remettre en cause la pertinence de l'outil. Sans prétendre à l'exhaustivité, nous revenons sur ceux de ces arguments qui revêtent selon nous un caractère discutable (parce qu'ils nous semblent selon les cas témoigner soit d'une tentation stratégique face à des résultats expérimentaux considérés comme gênants, soit d'une vision erronée des finalités et potentialités de la démarche, soit encore d'une lecture partielle de la réalité économique elle-même) afin de montrer que leur validité est au mieux locale et partielle. Nous en profitons pour rappeler les finalités de la méthode expérimentale, circonscrire son domaine d'application (i.e. ses potentialités et limites) et indiquer quelques précautions d'utilisation

The shape of the utility function under risk in the loss domain and the 'ruinous losses' hypothesis: some experimental results

International audienceThis paper reports some preliminary experimental results as regards the shape of the utility function for losses when elicited over a wide interval of consequences. Individual utility functions are elicited using the trade-off method, which, unlike standard elicitation procedures, is robust to probability weighting (and avoids most cognitive biases). Even though most utility functions exhibit the usual convex shape, nearly 25% of them appear to be inverse-S shaped, with convexity over moderate losses changing to concavity as losses grow. Though not conclusive (due mainly to the small size of our subject pool), this result brings some new support to the old idea that ruinous or unacceptable losses may induce some abrupt change in the shape of the utility function. Most importantly, it paves the way for more systematic investigation of the "ruinous losses" hypothesis

Adequate Moods for Non-EU Decision Making in a Sequential Framework: A synthetic Discussion

dernière version avant publicationIn a dynamic (sequential) framework, departures from the independence axiom (IND) are reputed to induce violations of dynamic consistency (DC), which may in turn have undesirable normative consequences. This result thus questions the normative acceptability of non expected-utility (non-EU) models, which precisely relax IND. This paper pursues a twofold objective. The main one is to discuss the normative conclusion: we show that usual arguments linking violations of DC to departures from IND are actually based on specific (but usually remaining implicit) assumptions which may rightfully be released, so that it is actually possible for a non-EU maximizer to be dynamically consistent and thus avoid normative difficulties. Our second objective is to introduce a kind of 'reality principle' (through two other evaluation criteria) in order to mitigate the normative requirement when examining adequate moods for non-EU decision making

Expérimentation de laboratoire et économie : contre quelques idées reçues et faux problèmes

En dépit de son utilisation et de sa légitimité croissantes, l’expérimentation de laboratoire en économie fait parfois l’objet de critiques qui peuvent aller jusqu’à la remise en cause de la pertinence de l’outil. Sans prétendre à l’exhaustivité, nous revenons sur ceux de ces arguments qui revêtent selon nous un caractère discutable (parce qu’ils nous semblent selon les cas témoigner soit d’une tentation stratégique face à des résultats expérimentaux considérés comme gênants, soit d’une vision erronée des finalités et potentialités de la démarche, soit encore d’une lecture partielle de la réalité économique elle-même) afin de montrer que leur validité est au mieux locale et partielle. Nous en profitons pour rappeler les finalités de la méthode expérimentale, circonscrire son domaine d’application (c.-à-d. ses potentialités et limites) et indiquer quelques précautions d’utilisation.Despite its increasing use and legitimacy, experimental methodology in economics has been subject to some criticism, an extreme version of which concludes to its irrelevance to its object. With no claim to exhaustiveness, the paper presents and discusses some arguments that we consider to be questionable – because they are suspected to hide either a strategic temptation when facing unpleasant experimental results or a fallacious view of experimental goals and potentialities, or even an inadequate approach of economic reality itself – and shows that they are at best locally or partially valid. This allows us to remind the reader of the purposes of the experimental method, of its potentialities and limits as well as of some basic precautions to adopt

Cooperation, the power of a single word. Some experimental evidence on wording and gender effects in a Game of Chicken

Wording has been widely shown to affect decision making. In this paper, we investigate experimentally whether and to what extent, cooperative behaviour in a Game of Chicken may be impated by a very basic change in the labelling of the strategies. Our within-subject experimental design involves two treatments. The only difference between them is that we introduce either a socially-oriented wording (‘I cooperate'/‘I do not cooperate') or colours (red/blue) to designate strategies. The level of cooperation appears to be higher in the socially-oriented context, but only when the uncertainty as regards the type of the partner is manipulated, and especially among females.Social dilemma, Game of Chicken, cooperation, wording effects, gender effects.

Expérimentation de laboratoire et économie :Contre quelques idées reçues et faux problèmes

En dépit de son utilisation et de sa légitimité croissantes, l'expérimentation de laboratoire en économie fait parfois l'objet de critiques qui peuvent aller jusqu'à remettre en cause la pertinence de l'outil. Sans prétendre à l'exhaustivité, nous revenons sur ceux de ces arguments qui revêtent selon nous un caractère discutable (parce qu'ils nous semblent selon les cas témoigner soit d'une tentation stratégique face à des résultats expérimentaux considérés comme gênants, soit d'une vision erronée des finalités et potentialités de la démarche, soit encore d'une lecture partielle de la réalité économique elle-même) afin de montrer que leur validité est au mieux locale et partielle. Nous en profitons pour rappeler les finalités de la méthode expérimentale, circonscrire son domaine d'application (i.e. ses potentialités et limites) et indiquer quelques précautions d'utilisation.expérimentation de laboratoire en économie, anomalies, réalisme, contrôle, marché, apprentissage, incitations monétaires

Monetary incentives in the loss domain and behavior toward risk: An experimental comparison of three reward schemes including real losses

International audienceIn the loss domain, both practical and ethical considerations rule out the systematic use of an incentive-compatible procedure involving real losses. The experimental study presented here aims at investigating whether some easier-to-implement procedure could be adequately used. For that purpose, the subjects' degree of risk aversion is compared across three payment conditions: a real-losses condition based on a random-lottery (incentive-compatible) system, which serves as a benchmark, and two challengers, namely a "losses-from-an-initial-endowment" procedure and a hypothetical-losses condition. As a by-product, our experimental design also allows us to investigate the impact of monetary incentives in the gain domain. The main result is twofold: no significant difference arises between the three payment conditions in the loss domain, while real and hypothetical choices significantly differ in the gain domain. Our results suggest that the use of monetary incentives may be more crucial in the gain domain than in the loss domain

Cooperation in a Game of Chicken with Heterogeneous Agents: An Experimental Study

Using a two-stage Game of Chicken, Cabon-Dhersin and Ramani (2007) examine the impact of population heterogeneity on cooperative behaviour. For that purpose, they introduce two different types of agents, namely those who always cooperate and those who strategically cooperate. The aim of the present experimental study is to investigate the descriptive accuracy of the one-stage version of this model. Even though the level of cooperation appears to be much higher than predicted, our data bring strong support to the main predictions that the structure of the population as well as the structure of the payoffs affect cooperative behaviour