Why (and When) are Preferences Convex? Threshold Effects and Uncertain Quality

It is often assumed (for analytical convenience, but also in accordance with common intuition) that consumer preferences are convex. In this paper, we consider circumstances under which such preferences are (or are not) optimal. In particular, we investigate a setting in which goods possess some hidden quality with known distribution, and the consumer chooses a bundle of goods that maximizes the probability that he receives some threshold level of this quality. We show that if the threshold is small relative to consumption levels, preferences will tend to be convex; whereas the opposite holds if the threshold is large. Our theory helps explain a broad spectrum of economic behavior (including, in particular, certain common commercial advertising strategies), suggesting that sensitivity to information about thresholds is deeply rooted in human psychology

A Theory of Natural Addiction

Economic theories of rational addiction aim to describe consumer behavior in the presence of habit-forming goods. We provide a biological foundation for this body of work by formally specifying conditions under which it is optimal to form a habit. We demonstrate the empirical validity of our thesis with an in-depth review and synthesis of the biomedical literature concerning the action of opiates in the mammalian brain and their e ects on behavior. Our results lend credence to many of the unconventional behavioral assumptions employed by theories of rational addiction, including adjacent complementarity and the importance of cues, attention, and self-control in determining the behavior of addicts. Our approach suggests, however, that addiction is 'harmful' only when the addict fails to implement the optimal solution. We offer evidence for the special case of the opiates that harmful addiction is the manifestation of a mismatch between behavioral algorithms encoded in the human genome and the expanded menu of choices- -generated for example, by advances in drug delivery technology--faced by consumers in the modern world.self-control, endogenous opioids, addiction, behavioral ecology, neuroeconomics, autism

Opportunity Knocks: An Economic Analysis of Television Advertisements

Certain aspects of advertising–especially on television–are not easily explained with conventional economic models. In particular, much of the imagery and repetitive thematic content seen in advertisements suggests it is "psychological" in nature, as opposed to "informative". To understand the economic rationale for incorporating such material, we develop a theory of preferences in which information about threshold payoffs induces sudden shifts in demand. These threshold payoffs are best understood in the context of human evolutionary history. Furthermore, the presence of threshold payoffs in consumer preferences gives firms incentive for providing threshold-type information. To examine the use of threshold-related content in television advertisements, we look for this con- tent in a sample of 370 television advertisements. We find considerable evidence that advertisers make strategic use of threshold-type content in television advertisements. Specifically, threshold-related content occurred in 83% of food and beverage advertisements for children and in 71% of advertisements for general audiences. Furthermore, the threshold-related content in children’s food and beverage advertisements occurred with statistically greater frequency than factual content, which isn’t true for food and beverage advertisements for general audiences

Does timing of decisions in a mixed duopoly matter?

We determine the endogenous order of moves in a mixed pricesetting duopoly. In contrast to the existing literature on mixed oligopolies we establish the payo equivalence of the games with an exogenously given order of moves if the most plausible equilibrium is realized in the market. Hence, in this case it does not matter whether one becomes a leader or a follower. We also establish that replacing a private firm by a public firm in the standard Bertrand-Edgeworth game with capacity constraints increases social welfare and that a pure-strategy equilibrium always exists

Tunable Lyapunov exponent in inverse magnetic billiards

The stability properties of the classical trajectories of charged particles are investigated in a two dimensional stadium-shaped inverse magnetic domain, where the magnetic field is zero inside the stadium domain and constant outside. In the case of infinite magnetic field the dynamics of the system is the same as in the Bunimovich billiard, i.e., ergodic and mixing. However, for weaker magnetic fields the phase space becomes mixed and the chaotic part gradually shrinks. The numerical measurements of the Lyapunov exponent (performed with a novel method) and the integrable/chaotic phase space volume ratio show that both quantities can be smoothly tuned by varying the external magnetic field. A possible experimental realization of the arrangement is also discussed.Comment: 4 pages, 6 figure

Machine-learning potentials for nanoscale simulations of deformation and fracture: example of TiB2_2 ceramic

Machine-learning interatomic potentials (MLIPs) offer a powerful avenue for simulations beyond length and timescales of ab initio methods. Their development for investigation of mechanical properties and fracture, however, is far from trivial since extended defects -- governing plasticity and crack nucleation in most materials -- are too large to be included in the training set. Using TiB$_2$ as a model ceramic material, we propose a strategy for fitting MLIPs suitable to simulate mechanical response of monocrystals until fracture. Our MLIP accurately reproduces ab initio stresses and failure mechanisms during room-temperature uniaxial tensile deformation of TiB$_2$ at the atomic scale ($\approx{10}^3$ atoms). More realistic tensile tests (low strain rate, Poisson's contraction) at the nanoscale ($\approx{10}^4$--10$^6$ atoms) require MLIP up-fitting, i.e. learning from additional ab initio configurations. Consequently, we elucidate trends in theoretical strength, toughness, and crack initiation patterns under different loading directions. To identify useful environments for further up-fitting, i.e., making the MLIP applicable to a wider spectrum of simulations, we asses transferability to other deformation conditions and phases not explicitly trained on

THE WAIT-AND-SEE OPTION IN ASCENDING PRICE AUCTIONS

Cake-cutting protocols aim at dividing a ``cake'' (i.e., a divisible resource) and assigning the resulting portions to several players in a way that each of the players feels to have received a ``fair'' amount of the cake. An important notion of fairness is envy-freeness: No player wishes to switch the portion of the cake received with another player's portion. Despite intense efforts in the past, it is still an open question whether there is a \emph{finite bounded} envy-free cake-cutting protocol for an arbitrary number of players, and even for four players. We introduce the notion of degree of guaranteed envy-freeness (DGEF) as a measure of how good a cake-cutting protocol can approximate the ideal of envy-freeness while keeping the protocol finite bounded (trading being disregarded). We propose a new finite bounded proportional protocol for any number n \geq 3 of players, and show that this protocol has a DGEF of 1 + \lceil (n^2)/2 \rceil. This is the currently best DGEF among known finite bounded cake-cutting protocols for an arbitrary number of players. We will make the case that improving the DGEF even further is a tough challenge, and determine, for comparison, the DGEF of selected known finite bounded cake-cutting protocols.Comment: 37 pages, 4 figure

On the relation of Thomas rotation and angular velocity of reference frames

In the extensive literature dealing with the relativistic phenomenon of Thomas rotation several methods have been developed for calculating the Thomas rotation angle of a gyroscope along a circular world line. One of the most appealing concepts, introduced in \cite{rindler}, is to consider a rotating reference frame co-moving with the gyroscope, and relate the precession of the gyroscope to the angular velocity of the reference frame. A recent paper \cite{herrera}, however, applies this principle to three different co-moving rotating reference frames and arrives at three different Thomas rotation angles. The reason for this apparent paradox is that the principle of \cite{rindler} is used for a situation to which it does not apply. In this paper we rigorously examine the theoretical background and limitations of applicability of the principle of \cite{rindler}. Along the way we also establish some general properties of {\it rotating reference frames}, which may be of independent interest.Comment: 14 pages, 2 figure