Eliciting Gul’s Theory of Disappointment Aversion by the Tradeoff Method

Gul’s (1991) theory of disappointment aversion (DA) has several attractive features, being intuitive, analytically tractable, and parsimonious. In spite of this, the DA model has received little attention in practical applications, which may be partly due to the absence of a procedure to elicit the model. We show how the trade-off method, developed by Wakker and Deneffe (1996), can be used to elicit DA. Our elicitation method is parameter-free: it requires no assumption about utility and/or disappointment aversion. Quantitative tests of DA in three outcome domains, monetary gains, monetary losses, and life-years, suggest that the DA model is too parsimonious. Of the other models of disappointment aversion that have been proposed in the literature, our data are most consistent with the model of Loomes and Sugden (1986)

Do financial professionals behave according to prospect theory? An experimental study

Prospect theory is increasingly used to explain deviations from the traditional paradigm of rational agents. Empirical support for prospect theory comes mainly from laboratory experiments using student samples. It is obviously important to know whether and to what extent this support generalizes to more naturally occurring circumstances. This article explores this question and measures prospect theory for a sample of private bankers and fund managers. We obtained clear support for prospect theory. Our financial professionals behaved according to prospect theory and violated expected utility maximization. They were risk averse for gains and risk seeking for losses and their utility was concave for gains and (slightly) convex for losses. They were also averse to losses, but less so than commonly observed in laboratory studies and assumed in behavioral finance. A substantial minority focused on gains and largely ignored losses, behavior reminiscent of what caused the current financial crisis

Reconciling Introspective Utility with Revealed Preference: Experimental Arguments Based on Prospect Theory

In an experiment, choice-based utilities are derived from choices under risk, and choiceless utilities from introspective strength-of-preference judgments. The well-known inconsistencies of risky utility, when analyzed through expected utility, are resolved by means of prospect theory. A consistent cardinal utility index for risky choice results. Remarkably, however, this cardinal index agrees well with the choiceless utilities. This finding suggests a relation between a choice-based and a choiceless concept. Such a relation would imply that direct judgments can provide useful data for economics, and can reinforce the revealed-preference approach. Implications for the classical debate on ordinal versus cardinal utility are discussed.This is a preprint of an article to be published in Journal of Econometric

Loss aversion under prospect theory: A parameter-free measurement

A growing body of qualitative evidence shows that loss aversion, a phenomenon formalized in prospect theory, can explain a variety of field and experimental data. Quantifications of loss aversion are, however, hindered by the absence of a general preference-based method to elicit the utility for gains and losses simultaneously. This paper proposes such a method and uses it to measure loss aversion in an experimental study without making any parametric assumptions. Thus, it is the first to obtain a parameter-free elicitation of prospect theory's utility function on the whole domain. Our method also provides an efficient way to elicit utility midpoints, which are important in axiomatizations of utility. Several definitions of loss aversion have been put forward in the literature. According to most definitions we find strong evidence of loss aversion, at both the aggregate and the individual level. The degree of loss aversion varies with the definition used, which underlines the need for a commonly accepted definition of loss aversion

A Tractable Method to Measure Utility and Loss Aversion under Prospect Theory

This paper provides an efficient method to measure utility under prospect theory, the most important descriptive theory of decision under uncertainty today. Our method is based on the elicitation of certainty equivalents for two-outcome prospects, a common way to measure utility. We applied our method in an experiment and found that most subjects were risk averse for gains and risk seeking for losses but had concave utility both for gains and for losses. This finding illustrates empirically that risk seeking and concave utility can coincide under prospect theory, a result that was derived theoretically by Chateauneuf and Cohen (1994). Utility was steeper for losses than for gains, which is consistent with loss aversion. Utility did not depend on the probability used in the elicitation, which offers support for prospect theory

Intertemporal Tradeoffs for Gains and Losses: An Experimental Measurement of Discounted Utility

This paper is the first to measure utility in intertemporal choice and presents new and more robust evidence on the discounting of money outcomes. Our measurement method is parameterfree in the sense that it requires no assumptions about utility or discounting. We found that intertemporal utility was concave for gains and convex for losses, consistent with a hypothesis put forward by Loewenstein and Prelec (1992). Utility in intertemporal choice was close to utility in decision under risk and uncertainty, suggesting that there may be one unifying concept of utility that applies to all of economics. The existence of one concept of utility is important for applied economics, because it largely reduces data requirements. Discount rates declined over time, but less so than has been observed in previous studies that assumed linear utility. Of the main discounted utility models, Loewenstein and Prelec’s (1992) generalized hyperbolic discounting model best fitted our data. The widely-used quasi-hyperbolic model fitted the data only slightly better than constant discounting. Finally, we obtained evidence of an asymmetry in discounting between gains and losses, which, in contrast with earlier findings, cannot be explained by a framing effect

Web-Appendix of: The Rich Domain of Uncertainty: Source Functions and Their Experimental Implementation.

ABSTRACT. In economic decisions we often have to deal with uncertain events for which no probabilities are known. Several normative models have been proposed for such decisions. Empirical studies have usually been qualitative, or they estimated ambiguity aversion through one single number. This paper introduces the source method, a tractable method for quantitatively analyzing uncertainty empirically that can capture the richness of ambiguity attitudes. The theoretical key in our method is the distinction between different sources of uncertainty, within which subjective (choice-based) probabilities can still be defined. Source functions convert those subjective probabilities into willingness to bet. We apply our method in an experiment, where we do not commit to particular ambiguity attitudes but let the data speak

Effet de la digitalisation de fiscalité sur les contribuables : Etude qualitative

Résumé: Cet article explore la conformité fiscale des micro-multinationales marocaines face à la digitalisation de l'administration fiscale, en s'appuyant sur le modèle UTAUT (Unified Theory of Acceptance and Use of Technology). La recherche examine comment des facteurs tels que l’attente de performance, l’attente d’effort, l’influence sociale et la perception du risque influencent les comportements de conformité fiscale. La méthodologie repose sur une approche phénoménologique herméneutique, permettant de comprendre les perceptions et comportements des contribuables à travers leur propre expérience. Un échantillon pratique de huit micro-multinationales a été interrogé par le biais d’entretiens approfondis semi-structurés. Les données qualitatives recueillies ont été transcrites via le logiciel Trint, puis analysées thématiquement à l’aide d’Atlas.ti, suivant les recommandations de Boyatzis (1998) pour une analyse fondée sur la théorie. Cette approche permet de dégager les éléments psychologiques, sociaux et technologiques qui influencent l’adoption des technologies dans la conformité fiscale, contribuant ainsi à une meilleure compréhension de la dynamique de confiance, d’efficience et de sécurité perçue dans le contexte marocain.   Mots Clés : Digitalisation, Conformite Fiscale, Contribuables, Administration Fiscale, Technologie.Résumé: Cet article explore la conformité fiscale des micro-multinationales marocaines face à la digitalisation de l'administration fiscale, en s'appuyant sur le modèle UTAUT (Unified Theory of Acceptance and Use of Technology). La recherche examine comment des facteurs tels que l’attente de performance, l’attente d’effort, l’influence sociale et la perception du risque influencent les comportements de conformité fiscale. La méthodologie repose sur une approche phénoménologique herméneutique, permettant de comprendre les perceptions et comportements des contribuables à travers leur propre expérience. Un échantillon pratique de huit micro-multinationales a été interrogé par le biais d’entretiens approfondis semi-structurés. Les données qualitatives recueillies ont été transcrites via le logiciel Trint, puis analysées thématiquement à l’aide d’Atlas.ti, suivant les recommandations de Boyatzis (1998) pour une analyse fondée sur la théorie. Cette approche permet de dégager les éléments psychologiques, sociaux et technologiques qui influencent l’adoption des technologies dans la conformité fiscale, contribuant ainsi à une meilleure compréhension de la dynamique de confiance, d’efficience et de sécurité perçue dans le contexte marocain.   Mots Clés : Digitalisation, Conformite Fiscale, Contribuables, Administration Fiscale, Technologie

Asymptotic behavior of solutions for parabolic problems of fractional type and sign-changing measure data

We prove a new asymptotic behavior result (with respect to the time variable t) of entropy solutions for fractional parabolic problems, with Dirichlet boundary at infinity, whose model is where (−∆)spu is the fractional (s, p)-Laplace operator (with ps < N, 0<s<1 and p>2− s), u0 ∈L1 (RN) and μ is a bounded, compactly supported Radon measure whose support is compactly contained in Q := (0, ∞) × RN , N ≥ 2 (not depending on time) which does not charge the sets of the fractional (s, p)-capacity