Quantum phenomenology of conjunction fallacy

A quantum-like description of human decision process is developed, and a heuristic argument supporting the theory as sound phenomenology is given. It is shown to be capable of quantitatively explaining the conjunction fallacy in the same footing as the violation of sure-thing principle.Comment: LaTeX 8 pages, 2 figure

Incentive-Compatible Surveys via Posterior Probabilities

We consider the problem of eliciting truthful responses to a survey question when the respondents share a common prior that the survey planner is agnostic about. The planner would therefore like to have a "universal” mechanism, which would induce honest answers for all possible priors. If the planner also requires a locality condition that ensures that the mechanism payoffs are determined by the respondents' posterior probabilities of the true state of nature, we prove that, under additional smoothness and sensitivity conditions, the payoff in the truth-telling equilibrium must be a logarithmic function of those posterior probabilities. Moreover, the respondents are necessarily ranked according to those probabilities. Finally, we discuss implementation issues

Prospect theory and tax evasion: a reconsideration of the Yitzhaki puzzle

The standard expected utility (EUT) model of tax evasion predicts that evasion is decreasing in the marginal tax rate (the Yitzhaki puzzle). Recent literature shows cases in which incorporating prospect theory (PT) does and does not overturn the Puzzle. In a general environment that nests both PT and EUT preferences, we provide a detailed study of how the elements of PT affect the Puzzle. PT does not always reverse the Puzzle, hence we give and interpret conditions for when it does and does not. When allowing for stigma and/or variable audit probability, PT reverses the Puzzle in the same way and with the same limitations as does EUT, if equally augmented

Collisional kinetics of non-uniform electric field, low-pressure, direct-current discharges in H2_{2}

A model of the collisional kinetics of energetic hydrogen atoms, molecules, and ions in pure H$_2$ discharges is used to predict H$_\alpha$ emission profiles and spatial distributions of emission from the cathode regions of low-pressure, weakly-ionized discharges for comparison with a wide variety of experiments. Positive and negative ion energy distributions are also predicted. The model developed for spatially uniform electric fields and current densities less than $10^{-3}$ A/m$^2$ is extended to non-uniform electric fields, current densities of $10^{3}$ A/m$^2$, and electric field to gas density ratios $E/N = 1.3$ MTd at 0.002 to 5 Torr pressure. (1 Td = $10^{-21}$ V m$^2$ and 1 Torr = 133 Pa) The observed far-wing Doppler broadening and spatial distribution of the H$_\alpha$ emission is consistent with reactions among H$^+$, H$_2^+$, H$_3^+$, and H$^-H$ ions, fast H atoms, and fast H$_2$ molecules, and with reflection, excitation, and attachment to fast H atoms at surfaces. The H$_\alpha$ excitation and H$^-$ formation occur principally by collisions of fast H, fast H$_2$, and H$^+$ with H$_2$. Simplifications include using a one-dimensional geometry, a multi-beam transport model, and the average cathode-fall electric field. The H$_\alpha$ emission is linear with current density over eight orders of magnitude. The calculated ion energy distributions agree satisfactorily with experiment for H$_2^+$ and H$_3^+$, but are only in qualitative agreement for H$^+$ and H$^-$. The experiments successfully modeled range from short-gap, parallel-plane glow discharges to beam-like, electrostatic-confinement discharges.Comment: Submitted to Plasmas Sources Science and Technology 8/18/201

Accommodating stake effects under prospect theory

One of the stylized facts underlying prospect theory is a four-fold pattern of risk preferences. People have been shown to be risk seeking for small probability gains and large probability losses, while being risk averse for large probability gains and small probability losses. Another fourfold pattern of risk preferences over outcomes, postulated by Harry Markowitz in 1952, has received much less attention and is currently not integrated into prospect theory. In two experiments, we show that risk preferences may change over outcomes. While we find people to be risk seeking for small outcomes, this turns to risk neutrality and later risk aversion as stakes increase. We then show how a one-parameter logarithmic utility function fits such stake effects significantly better under prospect theory than the power or exponential functions mostly used when fitting prospect theory models. We further investigate the extent to which the use of ill-suited functional forms to represent utility may result in violations of prospect theory, and whether such violations disappear when using logarithmic utility

Neural processes mediating contextual influences on human choice behaviour

Contextual influences on choice are ubiquitous in ecological settings. Current evidence suggests that subjective values are normalized with respect to the distribution of potentially available rewards. However, how this context-sensitivity is realised in the brain remains unknown. To address this, here we examine functional magnetic resonance imaging (fMRI) data during performance of a gambling task where blocks comprise values drawn from one of two different, but partially overlapping, reward distributions or contexts. At the beginning of each block (when information about context is provided), hippocampus is activated and this response is enhanced when contextual influence on choice increases. In addition, response to value in ventral tegmental area/substantia nigra (VTA/SN) shows context-sensitivity, an effect enhanced with an increased contextual influence on choice. Finally, greater response in hippocampus at block start is associated with enhanced context sensitivity in VTA/SN. These findings suggest that context-sensitive choice is driven by a brain circuit involving hippocampus and dopaminergic midbrain

Risk-taking in disorders of natural and drug rewards: neural correlates and effects of probability, valence, and magnitude.

Pathological behaviors toward drugs and food rewards have underlying commonalities. Risk-taking has a fourfold pattern varying as a function of probability and valence leading to the nonlinearity of probability weighting with overweighting of small probabilities and underweighting of large probabilities. Here we assess these influences on risk-taking in patients with pathological behaviors toward drug and food rewards and examine structural neural correlates of nonlinearity of probability weighting in healthy volunteers. In the anticipation of rewards, subjects with binge eating disorder show greater risk-taking, similar to substance-use disorders. Methamphetamine-dependent subjects had greater nonlinearity of probability weighting along with impaired subjective discrimination of probability and reward magnitude. Ex-smokers also had lower risk-taking to rewards compared with non-smokers. In the anticipation of losses, obesity without binge eating had a similar pattern to other substance-use disorders. Obese subjects with binge eating also have impaired discrimination of subjective value similar to that of the methamphetamine-dependent subjects. Nonlinearity of probability weighting was associated with lower gray matter volume in dorsolateral and ventromedial prefrontal cortex and orbitofrontal cortex in healthy volunteers. Our findings support a distinct subtype of binge eating disorder in obesity with similarities in risk-taking in the reward domain to substance use disorders. The results dovetail with the current approach of defining mechanistically based dimensional approaches rather than categorical approaches to psychiatric disorders. The relationship to risk probability and valence may underlie the propensity toward pathological behaviors toward different types of rewards.This is the final version. It was first published by NPG at http://www.nature.com/npp/journal/v40/n4/full/npp2014242a.htm

A Note on the Shape of the Probability Weighting Function

The focus of this contribution is on the transformation of objective probability, which in Prospect Theory is commonly referred as probability weighting. Empirical evidence suggests a typical inverse-S shaped function: decision makers tend to overweight small probabilities, and underweight medium and high probabilities; moreover, the probability weighting function is initially concave and then convex. We apply different parametric weighting functions proposed in the literature to the evaluation of derivative contracts and to insurance premium principles