Interpreting Stochastic Frontier Model as Random Coefficient Model and Vice Versa

This note explores the relationship between the stochastic frontier model and the random coefficient regression model. It shows how to interpret the former as a special case of the latter and vice versa. JEL classification numbers: C13, C51, D24. Keywords: Stochastic production frontier, Random coefficient regression, Composite error, Technical inefficiency.

A robust random coefficient regression representation of the chain-ladder method

It is well known that the presence of outliers can mis-estimate (underestimate or overestimate) the overall reserve in the chain-ladder method, when we consider a linear regression model, based on the assumption that the coefficients are fixed and identical from one observation to another. By relaxing the usual regression assumptions and applying a regression with randomly varying coefficients, we have a similar phenomenon, i.e., mis-estimation of the overall reserves. The lack of robustness of loss reserving regression with random coefficients on incremental payment estimators leads to the development of this paper, aiming to apply robust statistical procedures to the loss reserving estimation when regression coefficients are random. Numerical results of the proposed method are illustrated and compared with the results that were obtained by linear regression with fixed coefficients.

Motor outcome measures in patients with FKRP mutations

ObjectiveTo test the hypothesis that we will be able to detect change in motor outcome measures over time in a cohort with mutations in FKRP.MethodsIndividuals with documented FKRP mutations were evaluated annually with a battery of established motor outcome measures including limited quantitative myometry and timed function measures. Results were analyzed using random coefficient regression to determine annual change in each measure. Due to the nonlinear progression through the lifespan of the study participants, pediatric (<19 years) and adult (≥19 years) cohorts were analyzed separately. Effect of genotype was evaluated in each cohort.ResultsSixty-nine participants (30 pediatric, 44 adult) with at least 2 evaluations were included. There was a small but statistically significant decline in timed motor function measures in both pediatric and adult cohorts. Genotype significantly affected rate of decline in the pediatric but not the adult cohort. Some pediatric patients who are homozygous for the c.826C>A mutation showed improving motor performance in adolescence. Performance on the 10-meter walk/run was highly correlated with other timed function tests.ConclusionsThere is a slow annual decline in motor function in adults with FKRP mutations that can be detected with standard motor outcome measures, while the results in the pediatric population were more variable and affected by genotype. Overall, these analyses provide a framework for development of future clinical trials. The dystroglycanopathies natural history study (Clinical Trial Readiness for the Dystroglycanopathies) may be found on clinicaltrials.gov (NCT00313677).

Early Caregiving Adversity Differentially Shapes Behavioral Sensitivity to Reward and Risk during Decision-Making

Cognitive systems that track, update, and utilize information about reward (consequences) and risk (uncertainty) are critical for adaptive decision-making as well as everyday functioning and wellbeing. However, little is known about what shapes individual differences in reward and risk sensitivity, independent of each other, during decision-making. Here, we investigate the impact of early life experience—a potent sculptor of development—on behavioral sensitivity to reward and risk. We administered a widely used decision-making paradigm to 62 adolescents and young adults exposed to early life adversity in the form of institutional orphanage care and 81 comparison individuals. Leveraging random coefficient regression and computational modeling, we observed that previously institutionalized individuals displayed general reward hyposensitivity, contributing to a decreased propensity for adaptive decision-making relative to comparison individuals (e.g., when prospective rewards are high). By contrast, group differences in risk sensitivity were selectively observed on loss, but not gain, trials. These results are the first to independently and explicitly link early experiences to reward and risk sensitivity during decision-making. As such, they lay the groundwork for therapeutic efforts to identify and treat adversity-exposed individuals at risk for psychiatric disorders characterized by aberrant decision-making processes.

Computational and Motivational Mechanisms of Human Social Decision Making Involving Close Others

Every day, human beings make decisions with social consequences. These social consequences matter most when they impact those closest to us. Recent research has shown that humans exhibit reliable preferences when deciding between conflicting outcomes involving close others – for example, prioritizing the interests of one’s family member over one’s friend. However, virtually nothing is known about the mechanisms that drive these preferences. We conducted a pre-registered study in a large (N = 375) sample to quantify the computational and motivational mechanisms of human social decision making preferences involving close others. By pairing assessment techniques from behavioral economics and psychological science with computational modeling and random coefficient regression, we show that value-based cognitive computations (e.g., risk and loss aversion) drive social decision making preferences involving financial outcomes, whereas socioemotional motivations (e.g., relationship quality) underlie preferences involving social outcomes. These results imply mechanistic heterogeneity, underscoring a need for greater attention to contextual specificity in social decision making.