Housing Market Search Behavior and Expected Utility Theory: 1. Measuring Preferences for Housing

1982 ◽  
Vol 14 (5) ◽  
pp. 681-698 ◽  
Author(s):  
T R Smith ◽  
W A V Clark
Keyword(s):  
Los Angeles ◽  
Housing Market ◽  
Expected Utility ◽  
Utility Theory ◽  
House Price ◽  
Expected Utility Theory ◽  
Utility Functions ◽  
Future Search ◽  
Space Construction ◽  
Market Search

This is the first of two papers examining housing market search in a Los Angeles market. In this paper, we derive and analyze utility functions for housing for each individual in two groups of subjects. The utility functions are derived from an experimental setting, in which house price, floor space, construction quality, and neighborhood quality are varied. The functions are found to be essentially compatible with a linear model. They are used to predict the ratings of real houses and the ratings of the expected value of future search. These ratings are compared with actual ratings obtained from subjects during search. The results suggest that the actual or predicted ratings may be employed in a direct test of a simple expected utility theory of search, and further research along these lines appears justified.

Housing Market Search Behavior and Expected Utility Theory: 2. The Process of Search

1982 ◽  
Vol 14 (6) ◽  
pp. 717-737 ◽  
Author(s):  
W A V Clark ◽  
T R Smith
Keyword(s):  
Housing Market ◽  
Expected Utility ◽  
Utility Theory ◽  
Expected Utility Theory ◽  
Direct Estimate ◽  
Market Search ◽  
Temporal And Spatial ◽  
Housing Attributes ◽  
Household Life Cycle ◽  
Disequilibrium Theory

This paper presents the second part of a study of an expected utility theory of housing market search. The basic disequilibrium theory of search is recapitulated, and a direct estimate of the stress function ψit is calculated from individual data on households during the process of search (the longitudinal sample) and households who had already bought a house (the retrospective sample). Although the tests are simple and approximate and are not without problems, we conclude that the direct test yields results which are in accordance with the theory. Additional explanatory analyses of the process of search focused on the interrelationship of household characteristics, housing attributes, search effort, and search strategy. The descriptive data on temporal and spatial search emphasize the importance of realtor involvement in search, the constraints (on search) of stage in the household life cycle, and the differences in search activities for new and ‘used’ housing.

The Use of Utility Functions for Investment Channel Choice in Defined Contribution Retirement Funds. I: Defence

2003 ◽  
Vol 9 (3) ◽  
pp. 653-709 ◽  
Author(s):  
R.J. Thomson
Keyword(s):  
Empirical Evidence ◽  
Expected Utility ◽  
Utility Theory ◽  
Expected Utility Theory ◽  
Utility Functions ◽  
Defined Contribution ◽  
Channel Choice ◽  
Retirement Fund ◽  
Retirement Funds

ABSTRACTThis paper addresses the use of expected utility theory for the recommendation of an apportionment between investment channels of a member's interest in a defined contribution retirement fund. Such usage is defended against arguments that have been levelled against expected utility theory and empirical evidence is discussed.

scholarly journals On the futility of estimating utility functions: Why the parameters we measure are wrong, and why they do not generalize

2019 ◽  
Author(s):  
Neil Stewart ◽  
Emina Canic ◽  
Timothy L Mullett
Keyword(s):  
Parameter Estimation ◽  
Risk Aversion ◽  
Prospect Theory ◽  
Expected Utility ◽  
Utility Theory ◽  
Expected Utility Theory ◽  
Utility Functions ◽  
Parameter Estimates ◽  
Risky Choices ◽  
Long Time

We have known for a long time that people’s risky choices depart systematically from expected utility theory,and also from related models like prospect theory. But it is still common to use expected utility theory orprospect theory to estimate parameters like risk aversion from sets of risky choices. We have also known fora long time that when parameters are estimated, a systematic departure between the model and the datacauses biased parameter estimates. Here we show how the bias in parameter estimation interacts with the setof choices presented to participants. We find that estimates of risk aversion vary greatly between choice setseven though no real differences in risk aversion exist. We find parameters do not generalise at all betweenchoice sets, even when the sets are random draws from a master choice set.

scholarly journals Can Expected Utility Theory Explain Gambling?

2002 ◽  
Vol 92 (3) ◽  
pp. 613-624 ◽  
Author(s):  
Roger Hartley ◽  
Lisa Farrell
Keyword(s):  
Expected Utility ◽  
Capital Markets ◽  
Utility Theory ◽  
Time Preference ◽  
Expected Utility Theory ◽  
Utility Functions ◽  
Finite Set ◽  
Lending Rates ◽  
Previous Claim

We investigate the ability of expected utility theory to account for simultaneous gambling and insurance. Contrary to a previous claim that borrowing and lending in perfect capital markets removes the demand for gambles, we show expected utility theory with nonconcave utility functions can explain gambling. When the rates of interest and time preference are equal, agents seek to gamble unless income falls in a finite set of values. When they differ, there is a range of incomes where gambles are desired. Different borrowing and lending rates can account for persistent gambling provided the rates span the rate of time preference.

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