Non-Standard Preferences

2017 ◽  
Author(s):  
Tullio Jappelli ◽  
Luigi Pistaferri
Keyword(s):  
Social Preferences ◽  
Empirical Studies ◽  
Equity Premium ◽  
Hyperbolic Discounting ◽  
Substantial Evidence ◽  
Psychology Laboratory ◽  
Rational Agents ◽  
Accounting Model ◽  
Time Inconsistent ◽  
Standard Life

In the real world many facts appear to conflict with the assum ptions of the standard life-cycle model and its main hypotheses. The mental accounting model challenges the assumption that resources are fungible. Substantial evidence produced by psychology, laboratory experiments, and empirical studies points out that people do not make time-consistent decisions, leading to the analysis of time-inconsistent preferences and hyperbolic discounting, a model in which rational agents make time-inconsistent decisions. A third critique is that people are in fact not fully informed about financial opportunities (the equity premium, say, or the virtue of diversification). In this chapter we review the literature on financial sophistication. A final departure from the standard approach explicitly models another important fact of life, namely, that our own choices are affected by the choices of other consumers, owing to social preferences.

scholarly journals Nonparametric Analysis of Time-Inconsistent Preferences

2021 ◽  
Author(s):  
Laura Blow ◽  
Martin Browning ◽  
Ian Crawford
Keyword(s):  
Sufficient Conditions ◽  
Revealed Preference ◽  
Hyperbolic Discounting ◽  
Time Preferences ◽  
Hyperbolic Model ◽  
Nonparametric Analysis ◽  
Time Horizons ◽  
Time Inconsistent ◽  
Using Data ◽  
Necessary And Sufficient

Abstract This paper provides a revealed preference characterisation of quasi-hyperbolic discounting which is designed to be applied to readily-available expenditure surveys. We describe necessary and sufficient conditions for the leading forms of the model and also study the consequences of the restrictions on preferences popularly used in empirical lifecycle consumption models. Using data from a household consumption panel dataset we explore the prevalence of time-inconsistent behaviour. The quasi-hyperbolic model provides a significantly more successful account of behaviour than the alternatives considered. We estimate the joint distribution of time preferences and the distribution of discount functions at various time horizons.

scholarly journals Penalized Averaging of Parametric and Non-Parametric Quantile Forecasts

2019 ◽  
Vol 0 (0) ◽  
Author(s):  
Jan G. De Gooijer ◽  
Dawit Zerom
Keyword(s):  
Risk Premium ◽  
Empirical Studies ◽  
Forecast Accuracy ◽  
Equity Premium ◽  
Adaptive Lasso ◽  
Large Set ◽  
Usual Practice ◽  
Conditional Quantile ◽  
Equity Risk ◽  
Non Parametric

Abstract We propose a hybrid penalized averaging for combining parametric and non-parametric quantile forecasts when faced with a large number of predictors. This approach goes beyond the usual practice of combining conditional mean forecasts from parametric time series models with only a few predictors. The hybrid methodology adopts the adaptive LASSO regularization to simultaneously reduce predictor dimension and obtain quantile forecasts. Several recent empirical studies have considered a large set of macroeconomic predictors and technical indicators with the goal of forecasting the S&P 500 equity risk premium. To illustrate the merit of the proposed approach, we extend the mean-based equity premium forecasting into the conditional quantile context. The application offers three main findings. First, combining parametric and non-parametric approaches adds quantile forecast accuracy over and above the constituent methods. Second, a handful of macroeconomic predictors are found to have systematic forecasting power. Third, different predictors are identified as important when considering lower, central and upper quantiles of the equity premium distribution.

scholarly journals Helping or Harming? The Effect of Trigger Warnings on Individuals with Trauma Histories

2019 ◽  
Author(s):  
Payton J. Jones ◽  
Benjamin W. Bellet ◽  
Richard J. McNally
Keyword(s):  
Side Effects ◽  
World Literature ◽  
Empirical Studies ◽  
Emotional Reactions ◽  
Trauma Survivors ◽  
Evidence Based ◽  
Substantial Evidence ◽  
Adverse Side Effects ◽  
Mixed Samples ◽  
Trigger Warnings

Objective: Trigger warnings alert trauma survivors about potentially disturbing forthcoming content. However, most empirical studies on trigger warnings indicate that they are either functionally inert or cause small adverse side effects. These evaluations have been limited to either trauma-naïve participants or mixed samples. Accordingly, we tested whether trigger warnings would be psychologically beneficial in the most relevant population: survivors of serious trauma. Method: Our experiment was a preregistered replication and extension of a previous one (Bellet, Jones, & McNally, 2018); 451 trauma survivors were randomly assigned to either receive or not receive trigger warnings prior to reading potentially distressing passages from world literature. They provided their emotional reactions to each passage; self-reported anxiety was the primary dependent variable. Results: We found no evidence that trigger warnings were helpful for trauma survivors, for those who self-reported a PTSD diagnosis, or for those who qualified for probable PTSD, even when survivors' trauma matched the passages’ content. We found substantial evidence that trigger warnings countertherapeutically reinforce survivors' view of their trauma as central to their identity. Regarding replication hypotheses, the evidence was either ambiguous or substantially favored the hypothesis that trigger warnings have no effect. Conclusions: Trigger warnings are not helpful for trauma survivors. It is less clear whether trigger warnings are explicitly harmful. However, such knowledge is unnecessary to adjudicate whether to use trigger warnings – because trigger warnings are consistently unhelpful, there is no evidence-based reason to use them.

scholarly journals Resolving Time Inconsistency of Decision Problem with Non-expectation Operator: From Internal Conflict to Internal Harmony by Strategy of Self-Coordination

2020 ◽  
Author(s):  
Xiangyu Cui ◽  
Duan Li ◽  
Yun Shi
Keyword(s):  
Decision Maker ◽  
Decision Problem ◽  
Hyperbolic Discounting ◽  
Time Inconsistency ◽  
Internal Conflict ◽  
Equilibrium Strategy ◽  
Game Model ◽  
Long Run ◽  
Short Run ◽  
Time Inconsistent

When a stochastic decision problem is time inconsistent, the decision maker would be puzzled by his conflicting decisions optimally derived from his time-varying preferences at different time instants (with different time horizons). While the long-run self (LR) of the decision maker pursues the long-term optimality, the short-run selves (SRs) of the decision maker at different time instants bow to short-term temptations. While the literature began to recognize the importance to strike a balance between LR's and SRs' interests, the existing results are not applicable to situations where the decision maker's preferences involve non-expectation operators. We propose an operable unified two-tier dual-self game model with commitment by punishment, which can cope with general time inconsistent stochastic decision problems with both expectation and non-expectation operators in the objective function. By attaching punishment terms to both the preferences of LR and SRs which quantitatively evaluate the internal conflict among different selves, our game model aligns the interests of the LR and SRs to a certain degree. The equilibrium strategy, termed strategy of self-coordination, achieves some degree of internal harmony among various selves. We successfully apply the model to the investment and consumption problem with quasi-hyperbolic discounting and the dynamic mean-variance portfolio selection problem.

scholarly journals Solution to the Equity Premium Puzzle

2021 ◽  
Author(s):  
Atilla Aras
Keyword(s):  
Relative Risk ◽  
Risk Aversion ◽  
Risk Behavior ◽  
Empirical Studies ◽  
Equity Premium ◽  
Subjective Time ◽  
Relative Risk Aversion ◽  
Equity Premium Puzzle ◽  
Time Discount ◽  
Premium Puzzle

This study provides a solution of the equity premium puzzle. Questioning the validity of the Arrow-Pratt measure of relative risk aversion for detecting the risk behavior of investors, a new tool in the form of the sufficiency factor of the model was developed to analyze the risk behavior of investors. The calculations of this newly tested model show that the value of the coefficient of relative risk aversion is 1.033526 by assuming the value of the subjective time discount factor as 0.99. Since these values are compatible with the existing empirical studies, they confirm the validity of the newly derived model that provides a solution to the equity premium puzzle.

scholarly journals Markov decision processes with quasi-hyperbolic discounting

2020 ◽  
Author(s):  
Anna Jaśkiewicz ◽  
Andrzej S. Nowak
Keyword(s):  
Markov Decision Processes ◽  
Dynamic Game ◽  
Hyperbolic Discounting ◽  
Decision Processes ◽  
State Spaces ◽  
Long Run ◽  
Markov Perfect ◽  
Markov Decision ◽  
Time Inconsistent ◽  
Perfect Equilibria

AbstractWe study Markov decision processes with Borel state spaces under quasi-hyperbolic discounting. This type of discounting nicely models human behaviour, which is time-inconsistent in the long run. The decision maker has preferences changing in time. Therefore, the standard approach based on the Bellman optimality principle fails. Within a dynamic game-theoretic framework, we prove the existence of randomised stationary Markov perfect equilibria for a large class of Markov decision processes with transitions having a density function. We also show that randomisation can be restricted to two actions in every state of the process. Moreover, we prove that under some conditions, this equilibrium can be replaced by a deterministic one. For models with countable state spaces, we establish the existence of deterministic Markov perfect equilibria. Many examples are given to illustrate our results, including a portfolio selection model with quasi-hyperbolic discounting.

scholarly journals Labor waste in housing construction projects: an empirical study

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Soraya Nassri ◽  
Saeed Talebi ◽  
Faris Elghaish ◽  
Kayvan Koohestani ◽  
Stephen McIlwaine ◽  
...  
Keyword(s):  
Construction Projects ◽  
Empirical Studies ◽  
Housing Construction ◽  
Structured Interviews ◽  
Substantial Evidence ◽  
Content Type ◽  
Study Approach ◽  
Direct Observations ◽  
High Level

PurposeHigh-level labor waste is a major challenge in construction projects. This paper aims to identify, quantify and categorize labor waste in the context of Iranian housing construction projects.Design/methodology/approachThis research uses a case study approach, with empirical data collected through direct observations and semi-structured interviews.FindingsHaving triangulated the findings from the literature review and empirical studies, a list of eight types of waste was derived for the thirteen observed laborers in ten case study projects. The empirical studies allowed the labor waste identified from the literature to be verified and refined by considering it in the context of the observed activities, and led to two new types of waste being identified which were not considered in the literature. Findings indicate that nearly 62% of laborers' time is spent on non-value-adding activities. It appeared that “unnecessary movement,” “waiting” and “indirect work” make up the highest labor waste.Research limitations/implicationsThis research focuses only on onsite resource flows in a housing construction site. It does not include offsite flows such as material delivery to site.Originality/valueThe findings have provided substantial evidence on type and amount of labor waste and provide a solid basis to stimulate construction actors to participate in reducing labor waste and improving productivity.

Individual time preferences and obesity

2019 ◽  
Vol 47 (1) ◽  
pp. 16-26 ◽  
Author(s):  
Moslem Soofi ◽  
Ali Akbari Sari ◽  
Satar Rezaei ◽  
Mohammad Hajizadeh ◽  
Farid Najafi
Keyword(s):  
Adult Population ◽  
Hyperbolic Discounting ◽  
Time Preferences ◽  
Probit Regression ◽  
Content Type ◽  
Percentage Points ◽  
Long Run ◽  
Health Related ◽  
Time Inconsistent ◽  
High Level

Purpose Behavioral economic analysis of health-related behavior is a potentially useful approach to study and control non-communicable diseases. The purpose of this paper is to explore the time preferences of individuals and its impact on obesity in an adult population of Iran. Design/methodology/approach A structured questionnaire was completed by 792 individuals who were randomly selected from the participants of an ongoing national Prospective Epidemiological Research Studies in IrAN cohort study in West of Iran. The quasi-hyperbolic discounting model was used to estimate the parameters of time preferences and a probit regression model was used to explore the correlation between obesity and time preferences. Findings There was a statistically significant correlation between obesity and both the long-run patience and present-biased preferences of participants. Individuals with a low level of long-run patience were 10.2 percentage points more likely to be obese compared to individuals with a high level of long-run patience. The probability of being obese increased by 11 percentage points in present-biased individuals compared to future biased individuals. Originality/value The long-run patience and time inconsistent preferences were significant determinants of obesity. Considering the time-inconsistent preferences in the development of policies to change obesity-related behavior among adults might increase the success rate of the interventions.

scholarly journals Behavioral Economics and Obesity: An Analysis of Fitness-Based Tax Incentives

2016 ◽  
Vol 23 ◽  
pp. 76
Author(s):  
Nicholas Wallace
Keyword(s):  
Physical Activity ◽  
Government Intervention ◽  
Hyperbolic Discounting ◽  
Tax Incentives ◽  
The United States ◽  
Tax Credits ◽  
State Governments ◽  
Time Inconsistent ◽  
The Impact

B oth federal and state governments have experimented with policy proposals aimed at decreasing obesity rates, mostly through the regulation of unhealthy foods. There has been little research, however, on the impact of fitness-based policy initiatives on obesity rates. To address these issues, this paper first outlines previous policies aimed at preventing obesity and provides justification in favor of government intervention. In particular, this paper argues that hyperbolic discounting, a specific type of time-inconsistent preference where individuals make decisions that favor instant gratification rather than long-term benefits, provides economic justification for government intervention to combat obesity. It then uses Canada as a case study to demonstrate the effect that fitness-based tax credits have on physical activity, obesity, and long-term healthcare costs, and highlights a current pending piece of legislation in the 114th US Congress that would bring a similar program to the United States. More research is needed to confirm the effectiveness of fitness tax incentives on increasing physical activity among currently sedentary individuals. Nonetheless, this paper concludes by suggesting that fitness-based tax incentives are more politically viable than food regulations.

scholarly journals Heterogeneity in Intra-Monthly Consumption Patterns, Self-Control, and Savings at Retirement

2009 ◽  
Vol 1 (2) ◽  
pp. 163-189 ◽  
Author(s):  
Giovanni Mastrobuoni ◽  
Matthew Weinberg
Keyword(s):  
Life Cycle ◽  
Food Intake ◽  
Social Security ◽  
Hyperbolic Discounting ◽  
Self Control ◽  
Consumption Patterns ◽  
Social Security Benefit ◽  
Permanent Income Hypothesis ◽  
Using Data ◽  
Standard Life

Using data from the Continuing Survey of Food Intake by Individuals, this paper describes the shape of consumption profiles over the month for Social Security benefit recipients that have saved different amounts for retirement. Individuals with income mostly made up of Social Security and savings smooth consumption over the pay period, while individuals without savings consume 25 percent fewer calories the week before they receive checks relative to the week afterwards. The findings for individuals without savings, who comprise about a fourth of our sample, are inconsistent with the standard Life Cycle-Permanent Income Hypothesis but are consistent with hyperbolic discounting. (JEL D14, E21, J26)

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