Evidence for surprise minimization over value maximization in choice behavior

Classical economic models are predicated on the idea that the ultimate aim of choice is to maximize utility or reward. In contrast, an alternative perspective highlights the fact that adaptive behavior requires agents' to model their environment and minimize surprise about the states they frequent. We propose that choice behavior can be more accurately accounted for by surprise minimization compared to reward or utility maximization alone. Minimizing surprise makes a prediction at variance with expected utility models; namely, that in addition to attaining valuable states, agents attempt to maximize the entropy over outcomes and thus 'keep their options open'. We tested this prediction using a simple binary choice paradigm and show that human decision-making is better explained by surprise minimization compared to utility maximization. Furthermore, we replicated this entropy-seeking behavior in a control task with no explicit utilities. These findings highlight a limitation of purely economic motivations in explaining choice behavior and instead emphasize the importance of belief-based motivations

Monitoring international migration flows in Europe. Towards a statistical data base combining data from different sources

The paper reviews techniques developed in demography, geography and statistics that are useful for bridging the gap between available data on international migration flows and the information required for policy making and research. The basic idea of the paper is as follows: to establish a coherent and consistent data base that contains sufficiently detailed, up-to-date and accurate information, data from several sources should be combined. That raises issues of definition and measurement, and of how to combine data from different origins properly. The issues may be tackled more easily if the statistics that are being compiled are viewed as different outcomes or manifestations of underlying stochastic processes governing migration. The link between the processes and their outcomes is described by models, the parameters of which must be estimated from the available data. That may be done within the context of socio-demographic accounting. The paper discusses the experience of the U.S. Bureau of the Census in combining migration data from several sources. It also summarizes the many efforts in Europe to establish a coherent and consistent data base on international migration. The paper was written at IIASA. It is part of the Migration Estimation Study, which is a collaborative IIASA-University of Groningen project, funded by the Netherlands Organization for Scientific Research (NWO). The project aims at developing techniques to obtain improved estimates of international migration flows by country of origin and country of destination

Rationale Marktübertreibungen im Zusammenhang der aktuellen Finanzmarktkrise

Der Untersuchungsgegenstand der Arbeit ist die Darstellung der wichtigsten Anlegermotive bei Marktübertreibungen. Es wird dabei auf Konzepte der verhaltensorientierten Kapitalmarktforschung zurückgegriffen. Basierend auf den gewonnenen Erkenntnissen werden Lösungsansätze zur Vermeidung von Marktübertreibungen abgeleitet. Untersuchungen, beispielsweise durch Bikhchandani und Sharma (2000), haben gezeigt, dass Herdenverhalten eine wichtige Rolle bei der Erklärung von Preisübertreibungen spielt. Dabei kann es rational sein, sich konform zur Masse der Marktteilnehmer zu verhalten. Neben dem Konzept des Herdenverhaltens kann Konservatismus unter Marktteilnehmern zur Bestätigung vorherrschender Trends beitragen. Heuristiken werden angewandt, um komplexe Sachverhalte zu vereinfachen. Insbesondere die Repräsentativitätsheuristik kann zu einer Verstärkung bestehender Preisübertreibungen führen. Die Autoren sind der Ansicht, dass vor allem eine Verbesserung der Informationsbasis zur Reduzierung von Fehleinschätzungen durch Marktteilnehmer beitragen kann. Sowohl die Verfügbarkeit als auch die Qualität der Informationen spielen dabei eine Rolle. Ein weiterer Lösungsansatz betrifft die Risikoeinstellung und Kreditvergabe der Banken. In Boomphasen sollte das Risiko eines Crashs berücksichtigt werden.The paper deals with the motives of people to invest in overvalued markets. We resort to the concepts of behavioural finance to describe the most important factors. Based on these findings we deduct measures to avoid misjudgement of markets participants. As Bikhchandani and Sharma (2000) show, the concept of herd behaviour plays a decisive role in explaining exuberance in markets. There are incentives for investors, money managers and analysts to imitate other's actions. Furthermore, conservatism as well as heuristics like representativeness may also lead to a confirmation of prevailing trends. Another driver of misjudgement is the usage of heuristics like representativeness. The authors consider that the provision of information may substantially contribute to the reduction of misjudgement and exuberance in markets. Both availability and quality of information are important. Another approach aims at the regulation of bank lending, which should be limited particularly during a booming economy

Market Work, Home Production, Consumer Demand and Unemployment among the Unskilled

We develop a general equilibrium model in which longer working time and higher labor force participation lead to a fall in unemployment. Longer working hours and higher labor force participation have two direct effects: People have higher incomes and less (leisure) time. This has implications for the composition of consumer demand, since people spend less time on home production. Instead, they outsource more domestic tasks to the market. Consumer demand shifts toward unskill-intensive goods. The relative demand for unskilled labor rises and unemployment falls. We provide empirical evidence for our theoretical predictions in several ways: We study the link between labor market participation, home production and the demand for household and similar services using the German time use survey conducted in 1991/92. In addition, we use panel data for 23 OECD countries between 1980 and 2003 to directly examine the link between labor force participation and the unemployment rate. The empirical results corroborate the predictions from the theoretical model

Cognitive heuristics in borderline personality disorder across treatment: A longitudinal non-parametric analysis.

The development of a constructive therapeutic alliance may represent an important feature of interpersonal adaptation in clients with Borderline Personality Disorder (BPD). The present study explores cognitive heuristics as dynamic features of change in relationship with the therapeutic alliance in the treatment of BPD. In total, N = 60 clients with BPD, are included in the present study. In the context of brief therapy, the therapeutic alliance (WAI) is assessed from the client and the therapist perspectives after each therapy session; cognitive heuristics are assessed three times (CERS). The data analyses are on the basis of non-parametric clusters (kml3d) linked with the therapeutic alliance. The results showed that clusters of cognitive heuristics trajectories are linked with the client's therapeutic alliance (t(55) = 2.30, p = .03), but they remained unrelated with the evolution of the therapist's alliance. These results are discussed with regard to the interpersonal adaptiveness of cognitive heuristics in the context of BPD undergoing treatment

Resources, Capabilities, and Routines in Public Organizations

States, state agencies, multilateral agencies, and other non-market actors are relatively under-studied in strategic management and organization science. While important contributions to the study of public actors have been made within the agency-theoretic and transaction-cost traditions, there is little research in political economy that builds on resource-based, dynamic capabilities, and behavioral approaches to the firm. Yet public organizations can be characterized as stocks of human and non-human resources, including routines and capabilities; they can possess excess capacity in these resources; and they may grow and diversify in predictable patterns according to behavioral and Penrosean logic. This paper shows how resource-based, dynamic capabilities, and behavioral approaches to understanding public agencies and organizations shed light on their nature and governance

Laypersons' understanding of relative risk reductions: Randomised cross-sectional study

<p>Abstract</p> <p>Background</p> <p>Despite increasing recognition of the importance of involving patients in decisions on preventive healthcare interventions, little is known about how well patients understand and utilise information provided on the relative benefits from these interventions. The aim of this study was to explore whether lay people can discriminate between preventive interventions when effectiveness is presented in terms of relative risk reduction (RRR), and whether such discrimination is influenced by presentation of baseline risk.</p> <p>Methods</p> <p>The study was a randomised cross-sectional interview survey of a representative sample (n = 1,519) of lay people with mean age 59 (range 40–98) years in Denmark. In addition to demographic information, respondents were asked to consider a hypothetical drug treatment to prevent heart attack. Its effectiveness was randomly presented as RRR of 10, 20, 30, 40, 50 or 60 percent, and half of the respondents were presented with quantitative information on the baseline risk of heart attack. The respondents had also been asked whether they were diagnosed with hypercholesterolemia or had experienced a heart attack.</p> <p>Results</p> <p>In total, 873 (58%) of the respondents consented to the hypothetical treatment. While 49% accepted the treatment when RRR = 10%, the acceptance rate was 58–60% for RRR>10. There was no significant difference in acceptance rates across respondents irrespective of whether they had been presented with quantitative information on baseline risk or not.</p> <p>Conclusion</p> <p>In this study, lay people's decisions about therapy were only slightly influenced by the magnitude of the effect when it was presented in terms of RRR. The results may indicate that lay people have difficulties in discriminating between levels of effectiveness when they are presented in terms of RRR.</p