Is it Possible to Define Subjective Probabilities in Purely Behavioral Terms? A Comment on Epstein-Zhang (2001)

It is shown that well-behaved preference orderings may exhibit the Ellsberg paradox on the set of unambiguous events as defined by Epstein and Zhang (2001). Moreover, since such counterexamples can be constructed even when the set of unambiguous events is rich, EZ’s main representation result does not clarify satisfactorily when the proposed definition delivers probabilistic sophistication on unambiguous events. We conclude by conjecturing that these problems indicate the existence of inherent limitations of a strictly behavioral approach to identifying probabilistic beliefs in the presence of ambiguity, rather than deficiencies in EZ’s implementation of that approach.

Building in web application security at the requirements stage : a tool for visualizing and evaluating security trade-offs : a thesis presented in partial fulfilment of the requirements for the degree of Master of Information Science in Information Systems at Massey University, Albany, New Zealand

One dimension of Internet security is web application security. The purpose of this Design-science study was to design, build and evaluate a computer-based tool to support security vulnerability and risk assessment in the early stages of web application design. The tool facilitates risk assessment by managers and helps developers to model security requirements using an interactive tree diagram. The tool calculates residual risk for each component of a web application and for the application overall so developers are provided with better information for making decisions about which countermeasures to implement given limited resources tor doing so. The tool supports taking a proactive approach to building in web application security at the requirements stage as opposed to the more common reactive approach of putting countermeasures in place after an attack and loss have been incurred. The primary contribution of the proposed tool is its ability to make known security-related information (e.g. known vulnerabilities, attacks and countermeasures) more accessible to developers who are not security experts and to translate lack of security measures into an understandable measure of relative residual risk. The latter is useful for managers who need to prioritize security spending. Keywords: web application security, security requirements modelling, attack trees, threat trees, risk assessment

EPISTEMIC FOUNDATIONS OF SOLUTION CONCEPTS IN GAME THEORY: AN INTRODUCTION

We give an introduction to the literature on the epistemic foundations of solution concepts in game theory. Only normal-form games are considered. The solution concepts analyzed are rationalizability, strong rationalizability, correlated equilibrium and Nash equilibrium. The analysis is carried out locally in terms of properties of the belief hierarchies. Several examples are used throughout to illustrate definitions and concepts.

Global Identifiability Under Uncorrelated Residuals

Suppose in each equation, not counting covariance restrictions, we need one more restriction to meet the order condition. If we now add to each equation a restriction that its structural residual is uncorrelated with the residual of some other equation, is the parameter of the new model identifiable globally? That is the question. In general the answer is no. The parameter could remain either not identifiable or is locally identifiable, possibly globally under additional inequality restrictions. In this paper we find families of models for which the answer to the question is yes without the help of inequalities. The families share common characteristics. First, the sufficient condition for local identifiability must hold. Secondly, the string of zero correlations between residuals contains a closed cycle of length at least four. Thirdly, with the variables, equations and residuals all numbered as they are in the cycle, the odd numbered variables must satisfy a kinship relationship and lastly, the structural residuals can not all be uncorrelated. There are also differences in families, but these come from the difference in the required kinship relationship. When there are four or more equations containing external variables, the variety of models with uniquely identifiable parameter under a string of uncorrelated residuals is considerable. In particular, when correlated inverse demand shocks are uncorrelated with correlated supply shocks, our results show that many flexible inverse demand and supply equations reproducing exactly the observed price and quantity moments are members of the above families.

A THEORY OF RATIONAL CHOICE UNDER COMPLETE IGNORANCE

This paper contributes to a theory of rational choice under uncertainty for decision-makers whose preferences are exhaustively described by partial orders representing ""limited information."" Specifically, we consider the limiting case of ""Complete Ignorance"" decision problems characterized by maximally incomplete preferences and important primarily as reduced forms of general decision problems under uncertainty. ""Rationality"" is conceptualized in terms of a ""Principle of Preference-Basedness,"" according to which rational choice should be isomorphic to asserted preference. The main result characterizes axiomatically a new choice-rule called ""Simultaneous Expected Utility Maximization"" which in particular satisfies a choice-functional independence and a context-dependent choice-consistency condition; it can be interpreted as the fair agreement in a bargaining game (Kalai-Smorodinsky solution) whose players correspond to the different possible states (respectively extermal priors in the general case).

AGREEING TO DISAGREE: A SURVEY

Aumann (1976) put forward a formal definition of common knowledge and used it to prove that two ""like minded"" individuals cannot ""agree to disagree"" in the following sense. If they start from a common prior and update the probability of an event E (using Bayes'' rule) on the basis of private information, then it cannot be common knowledge between them that individual 1 assigns probability p to E and individual 2 assigns probability q to E with p ¹ q. In other words, if their posteriors of event E are common knowledge then they must coincide. Aumann''s Agreement Theorem has given rise to a large literature which we review in this paper. The results are classified according to whether they are probabilistic (Bayesian) or qualitative. Particular attention is paid to the issue of how to interpret the notion of Harsanyi consistency as a (local) property of belief hierarchies.

Decision-Making in the Context of Imprecise Probabilistic Beliefs

Coherent imprecise probabilistic beliefs are modelled as incomplete comparative likelihood relations admitting a multiple-prior representation. Under a structural assumption of Equidivisibility, we provide an axiomatization of such relations and show uniqueness of the representation. In the second part of the paper, we formulate a behaviorally general axiom relating preferences and probabilistic beliefs which implies that preferences over unambiguous acts are probabilistically sophisticated and which entails representability of preferences over Savage acts in an Anscombe-Aumann-style framework. The motivation for an explicit and separate axiomatization of beliefs for the study of decision-making under ambiguity is discussed in some detail.

The Impacts of Off-Farm Income on Farm Efficiency, Scale, and Profitability for Corn Farms

This paper estimates returns to scale and technical efficiency of corn farms following an input distance function approach and compares the relative performance of farm operator households with and without off-farm wages and salaries. We use 1995-2003 USDA data. The input distance function results suggest that off-farm outputs and inputs can be modeled in a multi-activity framework, which materially alter performance measures in the Corn Belt. We find that off-farm income boosts scale and technical efficiency of smaller operations. We also find that the number of hours worked off-farm by the spouse contributes to a higher technical efficiency.Farm Management,

The Economics of Organic Versus Conventional Cow-calf Production

Costs, returns, and profitability of cow-calf farms that are organic or transitioning to organic are compared with those of cow-calf farms that are non-organic. A method of matching samples is used for the comparison. Results suggest higher cost of organic production due to higher unpaid labor, taxes and insurance, and overhead costs.Matching Samples, Profit, Costs, Farm Management, Production Economics,