Property rights and loss aversion in contests

We analyze the effects of property rights and the resulting loss aversion on contest outcomes. We study three situations: in “gain” two players start with no prize and make sunk bids to win a prize; in “loss” both the players start with prizes and whoever loses the contest loses their prize; and in “mixed” only one player starts with a prize that stays with him if he wins, but is transferred to the rival otherwise. Since the differences among the treatments arise only from framing, the expected utility and the standard loss aversion models predict no difference in bids across treatments. We introduce a loss aversion model in which the property rights are made salient, and as a result the reference point varies across treatments. This model predicts average bids in descending order in the loss, the mixed, and the gain treatment; and higher bids by the player with property rights in the mixed treatment. The results from a laboratory experiment broadly support these predictions. There is no significant difference in bids in the loss (gain) treatment and bids by property rights holder (nonholder) in the mixed treatment. A model incorporating both loss aversion and social preferences explains this result

Subjective expectations in the context of HIV/AIDS in Malawi

In this paper we present a newly developed interactive elicitation methodology for collecting probalistic in expectations in a developing country context with low levels of literacy and numeracy, and we evaluate the feasibility and success of this method for a wide range of outcomes in rural Malawi. We find that respondents' answers about their subjective expectations take into account basic properties of probabilities, and vary meaningfully with observable characteristics and past experience. From a substantive point of view, the elicited expectation's indicate that individuals are generally aware of differential risks. For example, individuals with lower incomes and less land rightly feel at greater risk of financial distress than people with higher socioeconomic status (SES), and people who are divorced or widowed rightly feel at greater risk of being infected with HIV than currently married individuals. Meanwhile many expectations - including the probability of being currently infected with HIV - are well-calibrated compared to actual probabilities, but mortality expectations are substantially overestimated compared to life table estimates. This overestimation maylead individuals to underestimate the benefits of adopting HIV risk-reduction strategies. The skewed distribution, of expectations about condom use also suggests that a small group of innovators are the forerunners in the adoption of condoms within marriage for HIV prevention. © 2009 Adeline Delavande & Hans-Peter Kohler

Risky Business: Rhesus Monkeys Exhibit Persistent Preferences for Risky Options

Rhesus monkeys have been shown to prefer risky over safe options in experiential decision-making tasks. These findings might be due, however, to specific contextual factors, such as small amounts of fluid reward and minimal costs for risk-taking. To better understand the factors affecting decision-making under risk in rhesus monkeys, we tested multiple factors designed to increase the stakes including larger reward amounts, distinct food items rather than fluid reward, a smaller number of trials per session, and risky options with greater variation that also included non-rewarded outcomes. We found a consistent preference for risky options, except when the expected value of the safe option was greater than the risky option. Thus, with equivalent mean utilities between the safe and risky options, rhesus monkeys appear to have a robust preference for the risky options in a broad range of circumstances, akin to the preferences found in human children and some adults in similar tasks. One account for this result is that monkeys make their choices based on the salience of the largest payoff, without integrating likelihood and value across trials. A related idea is that they fail to override an impulsive tendency to select the option with the potential to obtain the highest possible outcome. Our results rule out strict versions of both accounts and contribute to an understanding of the diversity of risky decision-making among primates

Assessing Punitive Damages...

This essay reports and discusses the implications of an experimental study involving punitive damage awards. The study finds that in products liability cases, people's normative judgments (about outrageousness and appropriate punishment) are relatively uniform, at least when measured on a bounded numerical scale (0 to 6). With the unbounded dollar scale, however, outcomes become extremely erratic and unpredictable. Various reform proposals, designed to overcome erratic awards, are discussed, including damage caps, compensatory judgment "multipliers," and conversion formulas based on jury judgments on a bounded numerical scale. Implications are also discussed for many other issues of law and economic valuation, including compensatory damages in such areas as pain and suffering, libel, sexual harassment and other civil rights violations, contingent valuation, and intentional infliction of emtional distress

Supplementing factual information with patient narratives in the cancer screening context: a qualitative study of acceptability and preferences

Objective To explore people's responses to narrative information in the context of colorectal cancer screening. Design nineteen in-depth interviews were conducted with men and women (aged 45–59). Participants were given two types of colorectal screening information to read: factual and narrative. Participants gave their views on both types of information. Data were analysed using Framework Analysis. Results The most frequent responses to the narrative information were that they were reassuring, made colorectal screening more vivid, participants could relate to the people in the stories and they liked the range of narratives presented. Despite the narrative information being seen as more persuasive by some, this was not regarded as manipulative or negative. Both types of information were seen as equally credible. Participants felt a combination of facts and narratives would be useful when considering an offer of colorectal cancer screening. Conclusion Overall, participants were positive about the addition of narrative information to the currently provided factual information about colorectal cancer screening. Supplementing existing factual information with narrative information may provide participants with a more complete understanding of participation in colorectal cancer screening when considering an offer to be screened