Framing and stakes: A survey study of decisions under uncertainty

Using a survey study of 261 decisions under uncertainty, we explore the factors that explain risk taking behavior and those that predict the importance of a decision. We also examine the relationship between framing and status quo, the similarity between monetary and non-monetary decisions, as well as the similarities and differences among our three subject groups (Undergraduates, MBAs and Executives). We find that framing, domain, and probability of success have a strong influence on the probability of taking risks. Other factors, such as group, importance of a decision, and whether the consequences are monetary or not, do not seem to influence risk attitudes. Our analysis of importance of a decision highlights the frequency with which a decision is taken as a key variable. Our results suggest that the cumulative effects of unimportant and frequent decisions are greater than the cumulative effects of very important and infrequent decisions.Decision making under uncertainty; Framing; Importance and frequency of decisions;

Multiperson Utility

We approach the problem of preference aggregation by endowing both individuals and coalitions with partially-ordered or incomplete cardinal preferences. Consistency across preferences for coalitions comes in the form of the Extended Pareto Rule: if two disjoint coalitions A and B prefer x to y, then so does the coalition A*B. The Extended Pareto Rule has important consequences for the social aggregation of individual preferences. Restricting attention to the case of complete individual preferences, and assuming complete preferences for some pairs of agents (interpersonal comparisons of utility units), we discover that the Extended Pareto Rule imposes a "no arbitrage" condition in the terms of utility comparison between agents. Furthermore, if all the individuals and pairs have complete preferences and certain non-degeneracy conditions are met, then we witness the emergence of a complete preference ordering for coalitions of all sizes. The corresponding utilities are a weighted sum of individual utilities, with the n-1 independent weights obtained from the preferences of n-1 pairs forming a spanning tree in the group. Keywords: Preference aggregation, Incomplete preferences, Extended Pareto Rule.

Predicting utility under satiation and habituation

We introduce a modification of the discounted utility model that accounts for both habituation and satiation in intertemporal choice. Habituation level and satiation level are state variables that induce changes in preferences as those states vary. We examine several properties of our model, discuss willingness to pay for an additional unit of consumption, and characterize the optimal consumption path. Predicted utility under projection bias and narrow bracketing is compared to actual realized utility. We argue that projection bias and narrow bracketing successfully explain the hedonic treadmill in the research area of happiness and life satisfaction.Time preference; discounted utility; habituation; satiation; local substitution; well-being; life satisfaction;

Does more money buy you more happiness?

Why do we believe that more money will buy us more happiness (when in fact it does not)? In this paper, we propose a model to explain this puzzle. The model incorporates both adaptation and social comparison. A rational person who fully accounts for the dynamics of these factors would indeed buy more happiness with money. We argue that projection bias, that is, the tendency to project into the future our current reference levels, precludes subjects from correctly calculating the utility obtained from consumption. Projection bias has two effects. First, it makes people overrate the happiness that they will obtain from money. Second, it makes people misallocate the consumption budget by consuming too much at the beginning of the planning horizon, or consuming too much of adaptive goods.Happiness; Life Satisfaction; Social Comparison; Consumer Life-Cycle Planning; Projection Bias;

Reference Point Formation Over Time: A Weighting Function Approach

Although the concept of reference point dependent preferences has been adopted to almost all fields of behavioral economics, especially marketing and behavioral finance, we still know very little about how decision makers form their reference points given a sequence of prices. Our paper provides both a theoretical framework on reference point formation over time, based on cumulative prospect theory’s s-shaped weighting function, and a new experimental method for eliciting subjects’ individual reference points in a finance context. Consistent with our model, we document our subjects’ reference points to be best described by the first and the last price of the time series, with the equally weighted average and the highest price receiving smaller weights.. Results, however, vary strongly on the individual level and are also affected by the elicitation question applied.

Cumulative dominance and heuristic performance in binary multi-attribute choice

Several studies have reported high performance of simple decision heuristics multi-attribute decision making. In this paper, we focus on situations where attributes are binary and analyze the performance of Deterministic-Elimination-By-Aspects (DEBA) and similar decision heuristics. We consider non-increasing weights and two probabilistic models for the attribute values: one where attribute values are independent Bernoulli randomvariables; the other one where they are binary random variables with inter-attribute positive correlations. Using these models, we show that good performance of DEBA is explained by the presence of cumulative as opposed to simple dominance. We therefore introduce the concepts of cumulative dominance compliance and fully cumulative dominance compliance and show that DEBA satisfies those properties. We derive a lower bound with which cumulative dominance compliant heuristics will choose a best alternative and show that, even with many attributes, this is not small. We also derive an upper bound for the expected loss of fully cumulative compliance heuristics and show that this is moderate even when the number of attributes is large. Both bounds are independent of the values of the weights.Multi-attribute decision making, binary attributes, DEBA, cumulative dominance, performance bounds, Leex

Reference Point Formation Over Time: A Weighting Function Approach

Although the concept of reference point dependent preferences has been adapted to almost all fields of behavioral economics (especially marketing and behavioral finance), we still know very little about how decision makers form their reference points given a sequence of prices. Our paper provides both a theoretical framework on reference point formation over time, based on cumulative prospect theory's inverse s-shaped weighting function, and a new experimental method for eliciting subjects' individual reference points in a finance context. Consistent with our model, we document our student subjects' reference points to be best described by the first and the last price of the time series, with intermediate prices receiving smaller weights

Happiness and time allocation

We consider a resource allocation problem in which time is the principal resource. Utility is derived from time-consuming leisure activities, as well as from consumption. To acquire consumption, time needs to be allocated to income generating activities (i.e., work). Leisure (e.g., social relationships, family and rest) is considered a basic good, and its utility is evaluated using the Discounted Utility Model. Consumption is adaptive and its utility is evaluated using a reference-dependent model. Key empirical findings in the happiness literature can be explained by our time allocation model. Further, we examine the impact of projection bias on time allocation between work and leisure. Projection bias causes individuals to overrate the utility derived from income; consequently, individuals may allocate more than the optimal time to work. This misallocation may produce a scenario in which a higher wage rate results in a lower total utility.Life satisfaction; Work; Leisure; Social comparison; Adaptation;

Reappraising the use of forearm rings for bat species

Altres ajuts: acords transformatius de la UABLong-term mark-recapture studies are essential for bat conservation. Over the last decades, millions of bats across Europe and America have been marked with forearm rings for this purpose. Although it is considered a cost-effective method compared to Passive Integrated Transponders (PIT) tags, direct injuries from using forearm rings have been reported since their very first use. Yet, their impact on bats' welfare has not been systematically evaluated and remains a highly controversial issue among the scientific community and policymakers. Here we assess the impact of forearm rings and PIT tags on the health of different bat species. We reviewed 12 years of the existing recapture data of free-ranging bats from NE Spain and evaluated the impact of both marking tools in a captive colony of Carollia perspicillata, by assessing the development of skin lesions and levels of cortisol metabolites in guano (CG) after marking. We report that 55.1 % (435/790) of the recaptured free-ranging bats with forearm rings presented skin lesions. All banded C. perspicillata (n = 22, 100 %) developed skin lesions, whereas none of the PIT-tagged (n = 21) presented lesions. Levels of CG were significantly higher after marking with forearm rings only for one group. Banded C. perspicillata exhibited discomfort-associated behaviours due to forearm rings. Under the "precautionary principle", we recommend the ban of forearm rings for all bat species until species-specific studies under controlled conditions are performed and approved by a legally constituted ethics committee. Consideration of other long-term marking tools is mandatory to align with global bat conservation strategies