Essays in Behavioral Decision Theory

This thesis studies decision making under uncertainty and how economic agents respond to information. The classic model of subjective expected utility and Bayesian updating is often at odds with empirical and experimental results; people exhibit systematic biases in information processing and often exhibit aversion to ambiguity. The aim of this work is to develop simple models that capture observed biases and study their economic implications.

In the first chapter I present an axiomatic model of cognitive dissonance, in which an agent's response to information explicitly depends upon past actions. I introduce novel behavioral axioms and derive a representation in which beliefs are directionally updated. The agent twists the information and overweights states in which his past actions provide a higher payoff. I then characterize two special cases of the representation. In the first case, the agent distorts the likelihood ratio of two states by a function of the utility values of the previous action in those states. In the second case, the agent's posterior beliefs are a convex combination of the Bayesian belief and the one which maximizes the conditional value of the previous action. Within the second case a unique parameter captures the agent's sensitivity to dissonance, and I characterize a way to compare sensitivity to dissonance between individuals. Lastly, I develop several simple applications and show that cognitive dissonance contributes to the equity premium and price volatility, asymmetric reaction to news, and belief polarization.

The second chapter characterizes a decision maker with sticky beliefs. That is, a decision maker who does not update enough in response to information, where enough means as a Bayesian decision maker would. This chapter provides axiomatic foundations for sticky beliefs by weakening the standard axioms of dynamic consistency and consequentialism. I derive a representation in which updated beliefs are a convex combination of the prior and the Bayesian posterior. A unique parameter captures the weight on the prior and is interpreted as the agent's measure of belief stickiness or conservatism bias. This parameter is endogenously identified from preferences and is easily elicited from experimental data.

The third chapter deals with updating in the face of ambiguity, using the framework of Gilboa and Schmeidler. There is no consensus on the correct way way to update a set of priors. Current methods either do not allow a decision maker to make an inference about her priors or require an extreme level of inference. In this chapter I propose and axiomatize a general model of updating a set of priors. A decision maker who updates her beliefs in accordance with the model can be thought of as one that chooses a threshold that is used to determine whether a prior is plausible, given some observation. She retains the plausible priors and applies Bayes' rule. This model includes generalized Bayesian updating and maximum likelihood updating as special cases.

I. Electronic states of heavily-doped molecular crystals--naphthalene. I. Theoretical. II. Experimental. II. Lowest singlet and triplet excited states of pyrazine

PART I

The energy spectrum of heavily-doped molecular crystals was treated in the Green’s function formulation. The mixed crystal Green’s function was obtained by averaging over all possible impurity distributions. The resulting Green’s function, which takes the form of an infinite perturbation expansion, was further approximated by a closed form suitable for numerical calculations. The density-of-states functions and optical spectra for binary mixtures of normal naphthalene and deuterated naphthalene were calculated using the pure crystal density-of-state functions. The results showed that when the trap depth is large, two separate energy bands persist, but when the trap depth is small only a single band exists. Furthermore, in the former case it was found that the intensities of the outer Davydov bands are enhanced whereas the inner bands are weakened. Comparisons with previous theoretical calculations and experimental results are also made.

PART II

The energy states and optical spectra of heavily-doped mixed crystals are investigated. Studies are made for the following binary systems: (1) naphthalene-h₈ and d₈, (2) naphthalene--h₈ and αd₄, and (3) naphthalene--h₈ and βd₁, corresponding to strong, medium and weak perturbations. In addition to ordinary absorption spectra at 4˚K, band-to-band transitions at both 4˚K and 77˚K are also analyzed with emphasis on their relations to cooperative excitation and overall density-of-states functions for mixed crystals. It is found that the theoretical calculations presented in a previous paper agree generally with experiments except for cluster states observed in system (1) at lower guest concentrations. These features are discussed semi-quantitatively. As to the intermolecular interaction parameters, it is found that experimental results compare favorably with calculations based on experimental density-of-states functions but not with those based on octopole interactions or charge-transfer interactions. Previous experimental results of Sheka and the theoretical model of Broude and Rashba are also compared with present investigations.

PART III

The phosphorescence, fluorescence and absorption spectra of pyrazine-h₄ and d₄ have been obtained at 4˚K in a benzene matrix. For comparison, those of the isotopically mixed crystal pyrazine-h₄ in d₄ were also taken. All these spectra show extremely sharp and well-resolved lines and reveal detailed vibronic structure.

The analysis of the weak fluorescence spectrum resolves the long-disputed question of whether one or two transitions are involved in the near-ultraviolet absorption of pyrazine. The “mirror-image relationship” between absorption and emission shows that the lowest singlet state is an allowed transition, properly designated as ¹B_3u ← ¹A_1g. The forbidden component ¹B_2g, predicted by both “exciton” and MO theories to be below the allowed component, must lie higher. Its exact location still remains uncertain.

The phosphorescence spectrum when compared with the excitation phosphorescence spectra, indicates that the lowest triplet state is also symmetry allowed, showing a strong 0-0 band and a “mirror-image relationship” between absorption and emission. In accordance with previous work, the triplet state is designated as ³B_3u.

The vibronic structure of the phosphorescence spectrum is very complicated. Previous work on the analysis of this spectrum all concluded that a long progression of v_6a exists. Under the high resolution attainable in our work, the supposed v_6a progression proves to have a composite triplet structure, starting from the second member of the progression. Not only is the v_9a hydrogen-bending mode present as shown by the appearance of the C-D bending mode in the d₄ spectrum, but a band of 1207 cm^-1 in the pyrazine in benzene system and 1231 cm^-1 in the mixed crystal system is also observed. This band is assigned as 2v_6b and of a_1g symmetry. Its anonymously strong intensity in the phosphorescence spectrum is interpreted as due to the Fermi resonance with the 2v_6a and v_9a band.

To help resolve the present controversy over the crystal phosphorescence spectrum of pyrazine, detailed vibrational analyses of the emission spectra were made. The fluorescence spectrum has essentially the same vibronic structure as the phosphorescence spectrum.

Range of validity of the method of averaging

Sufficient conditions are derived for the validity of approximate periodic solutions of a class of second order ordinary nonlinear differential equations. An approximate solution is defined to be valid if an exact solution exists in a neighborhood of the approximation.

Two classes of validity criteria are developed. Existence is obtained using the contraction mapping principle in one case, and the Schauder-Leray fixed point theorem in the other. Both classes of validity criteria make use of symmetry properties of periodic functions, and both classes yield an upper bound on a norm of the difference between the approximate and exact solution. This bound is used in a procedure which establishes sufficient stability conditions for the approximated solution.

Application to a system with piecewise linear restoring force (bilinear system) reveals that the approximate solution obtained by the method of averaging is valid away from regions where the response exhibits vertical tangents. A narrow instability region is obtained near one-half the natural frequency of the equivalent linear system. Sufficient conditions for the validity of resonant solutions are also derived, and two term harmonic balance approximate solutions which exhibit ultraharmonic and subharmonic resonances are studied.

Force chains, friction, and flow: Behavior of granular media across length scales

We study the behavior of granular materials at three length scales. At the smallest length scale, the grain-scale, we study inter-particle forces and "force chains". Inter-particle forces are the natural building blocks of constitutive laws for granular materials. Force chains are a key signature of the heterogeneity of granular systems. Despite their fundamental importance for calibrating grain-scale numerical models and elucidating constitutive laws, inter-particle forces have not been fully quantified in natural granular materials. We present a numerical force inference technique for determining inter-particle forces from experimental data and apply the technique to two-dimensional and three-dimensional systems under quasi-static and dynamic load. These experiments validate the technique and provide insight into the quasi-static and dynamic behavior of granular materials.

At a larger length scale, the mesoscale, we study the emergent frictional behavior of a collection of grains. Properties of granular materials at this intermediate scale are crucial inputs for macro-scale continuum models. We derive friction laws for granular materials at the mesoscale by applying averaging techniques to grain-scale quantities. These laws portray the nature of steady-state frictional strength as a competition between steady-state dilation and grain-scale dissipation rates. The laws also directly link the rate of dilation to the non-steady-state frictional strength.

At the macro-scale, we investigate continuum modeling techniques capable of simulating the distinct solid-like, liquid-like, and gas-like behaviors exhibited by granular materials in a single computational domain. We propose a Smoothed Particle Hydrodynamics (SPH) approach for granular materials with a viscoplastic constitutive law. The constitutive law uses a rate-dependent and dilation-dependent friction law. We provide a theoretical basis for a dilation-dependent friction law using similar analysis to that performed at the mesoscale. We provide several qualitative and quantitative validations of the technique and discuss ongoing work aiming to couple the granular flow with gas and fluid flows.

I. Electronic processes in α-sulfur. II. Polaron motion in a D.C. electric field

Part I: The mobilities of photo-generated electrons and holes in orthorhombic sulfur are determined by drift mobility techniques. At room temperature electron mobilities between 0.4 cm²/V-sec and 4.8 cm²/V-sec and hole mobilities of about 5.0 cm²/V-sec are reported. The temperature dependence of the electron mobility is attributed to a level of traps whose effective depth is about 0.12 eV. This value is further supported by both the voltage dependence of the space-charge-limited, D.C. photocurrents and the photocurrent versus photon energy measurements.

As the field is increased from 10 kV/cm to 30 kV/cm a second mechanism for electron transport becomes appreciable and eventually dominates. Evidence that this is due to impurity band conduction at an appreciably lower mobility (4.10^-4 cm²/V-sec) is presented. No low mobility hole current could be detected. When fields exceeding 30 kV/cm for electron transport and 35 kV/cm for hole transport are applied, avalanche phenomena are observed. The results obtained are consistent with recent energy gap studies in sulfur.

The theory of the transport of photo-generated carriers is modified to include the case of appreciable thermos-regeneration from the traps in one transit time.

Part II: An explicit formula for the electric field E necessary to accelerate an electron to a steady-state velocity v in a polarizable crystal at arbitrary temperature is determined via two methods utilizing Feynman Path Integrals. No approximation is made regarding the magnitude of the velocity or the strength of the field. However, the actual electron-lattice Coulombic interaction is approximated by a distribution of harmonic oscillator potentials. One may be able to find the “best possible” distribution of oscillators using a variational principle, but we have not been able to find the expected criterion. However, our result is relatively insensitive to the actual distribution of oscillators used, and our E-v relationship exhibits the physical behavior expected for the polaron. Threshold fields for ejecting the electron for the polaron state are calculated for several substances using numerical results for a simple oscillator distribution.

Turbulent buoyant jets into stratified or flowing ambient fluids

Theoretical and experimental studies were made on two classes of buoyant jet problems, namely:

1) an inclined, round buoyant yet in a stagnant environment with linear density-stratification;

2) a round buoyant jet in a uniform cross stream of homogenous density.

Using the integral technique of analysis, assuming similarity, predictions can be made for jet trajectory, widths, and dilution ratios, in a density-stratified or flowing environment. Such information is of great importance in the design of disposal systems for sewage effluent into the ocean or waste gases into the atmosphere.

The present study of a buoyant jet in a stagnant environment has extended the Morton type of analysis to cover the effect of the initial angle of discharge. Numerical solutions have been presented for a range of initial conditions. Laboratory experiments were conducted for photographic observations of the trajectories of dyed jets. In general the observed jet forms agreed well with the calculated trajectories and nominal half widths when the value of the entrainment coefficient was taken to be α = 0.082, as previously suggested by Morton.

The problem of a buoyant jet in a uniform cross stream was analyzed by assuming an entrainment mechanism based upon the vector difference between the characteristic jet velocity and the ambient velocity. The effect of the unbalanced pressure field on the sides of the jet flow was approximated by a gross drag term. Laboratory flume experiments with sinking jets which are directly analogous to buoyant jets were performed. Salt solutions were injected into fresh water at the free surface in a flume. The jet trajectories, dilution ratios and jet half widths were determined by conductivity measurements. The entrainment coefficient, α, and drag coefficient, C_d, were found from the observed jet trajectories and dilution ratios. In the ten cases studied where jet Froude number ranged from 10 to 80 and velocity ratio (jet: current) K from 4 to 16, α varied from 0.4 to 0.5 and C_d from 1.7 to 0.1. The jet mixing motion for distance within 250D was found to be dominated by the self-generated turbulence, rather than the free-stream turbulence. Similarity of concentration profiles has also been discussed.

Nature of the radical intermediates in a substituted cyclopropylcarbiny-allylcarbinyl system

We have sought to determine the nature of the free-radical precursors to ring-opened hydrocarbon 5 and ring-closed hydrocarbon 6. Reasonable alternative formulations involve the postulation of hydrogen abstraction (a) by a pair of rapidly equilibrating classical radicals (the ring-opened allylcarbinyl-type radical 3 and the ring-closed cyclopropylcarbinyl-type 4), or (b) by a nonclassical radical such as homoallylic radical 7.

[Figure not reproduced.]

Entry to the radical system is gained via degassed thermal decomposition of peresters having the ring-opened and the ring-closed structures. The ratio of 6:5 is essentially independent of the hydrogen donor concentration for decomposition of the former at 125° in the presence of triethyltin hydrdride. A deuterium labeling study showed that the α and β methylene groups in 3 (or the equivalent) are rapidly interchanged under these conditions.

Existence of two (or more) product-forming intermediates is indicated (a) by dependence of the ratio 6:5 on the tin hydride concentration for decomposition of the ring-closed perester at 10 and 35°, and (b) by formation of cage products having largely or wholly the structure (ring-opened or ring-closed) of the starting perester.

Relative rates of hydrogen abstraction by 3 could be inferred by comparison of ratios of rate constants for hydrogen abstraction and ortho-ring cyclization:

[Figure not reproduced.]

At 100° values of k_a/k_r are 0.14 for hydrogen abstraction from 1,4-cyclohexadiene and 7 for abstraction from triethyltin hydride. The ratio 6:5 at the same temperature is ~0.0035 for hydrogen abstraction from 1,4-cyclohexadiene, ~0.078 for abstraction from the tin hydride, and ≥ 5 for abstraction from cyclohexadienyl radicals. These data indicate that abstraction of hydrogen from triethyltin hydride is more rapid than from 1,4-cyclohexadiene by a factor of ~1000 for 4, but only ~50 for 3.

Measurements of product ratios at several temperatures allowed the construction of an approximate energy-level scheme. A major inference is that isomerization of 3 to 4 is exothermic by 8 ± 3 kcal/mole, in good agreement with expectations based on bond dissociation energies. Absolute rate-constant estimates are also given.

The results are nicely compatible with a classical-radical mechanism, but attempted interpretation in terms of a nonclassical radical precursor of product ratios formed even from equilibrated radical intermediates leads, it is argued, to serious difficulties.

The roles played by hydrogen abstraction from 1,4,-cyclohexadiene and from the derived cyclohexadienyl radicals were probed by fitting observed ratios of 6:5 and 5:10 in the sense of least-squares to expressions derived for a complex mechanistic scheme. Some 30 to 40 measurements on each product ratio, obtained under a variety of experimental conditions, could be fit with an average deviation of ~6%. Significant systematic deviations were found, but these could largely be redressed by assuming (a) that the rate constant for reaction of 4 with cyclohexadienyl radical is inversely proportional to the viscosity of the medium (i.e., is diffusion-controlled), and (b) that k_a/k_r for hydrogen abstraction from 1,4-cyclohexadiene depends slightly on the composition of the medium. An average deviation of 4.4% was thereby attained.

Degassed thermal decomposition of the ring-opened perester in the presence of the triethyltin hydride occurs primarily by attack on perester of triethyltin radicals, presumably at the –O-O- bond, even at 0.01 M tin hydride at 100 and 125°. Tin ester and tin ether are apparently formed in closely similar amounts under these conditions, but the tin ester predominates at room temperature in the companion air-induced decomposition, indicating that attack on perester to give the tin ether requires an activation energy approximately 5 kcal/mole in excess of that for the formation of tin ester.

I. Phosphorescence and the true lifetime of triplet states in fluid solutions. II. Why is condensed oxygen blue?

I. PHOSPHORESCENCE AND THE TRUE LIFETIME OF TRIPLET STATES IN FLUID SOLUTIONS

Phosphorescence has been observed in a highly purified fluid solution of naphthalene in 3-methylpentane (3-MP). The phosphorescence lifetime of C₁₀H₈ in 3-MP at -45 °C was found to be 0.49 ± 0.07 sec, while that of C₁₀D₈ under identical conditions is 0.64 ± 0.07 sec. At this temperature 3-MP has the same viscosity (0.65 centipoise) as that of benzene at room temperature. It is believed that even these long lifetimes are dominated by impurity quenching mechanisms. Therefore it seems that the radiationless decay times of the lowest triplet states of simple aromatic hydrocarbons in liquid solutions are sensibly the same as those in the solid phase. A slight dependence of the phosphorescence lifetime on solvent viscosity was observed in the temperature region, -60° to -18°C. This has been attributed to the diffusion-controlled quenching of the triplet state by residual impurity, perhaps oxygen. Bimolecular depopulation of the triplet state was found to be of major importance over a large part of the triplet decay.

The lifetime of triplet C₁₀H₈ at room temperature was also measured in highly purified benzene by means of both phosphorescence and triplet-triplet absorption. The lifetime was estimated to be at least ten times shorter than that in 3-MP. This is believed to be due not only to residual impurities in the solvent but also to small amounts of impurities produced through unavoidable irradiation by the excitation source. In agreement with this idea, lifetime shortening caused by intense flashes of light is readily observed. This latter result suggests that experiments employing flash lamp techniques are not suitable for these kinds of studies.

The theory of radiationless transitions, based on Robinson's theory, is briefly outlined. A simple theoretical model which is derived from Fano's autoionization gives identical result.

Il. WHY IS CONDENSED OXYGEN BLUE?

The blue color of oxygen is mostly derived from double transitions. This paper presents a theoretical calculation of the intensity of the double transition (a ¹Δ_g) (a ¹Δ_g)←(X ³Σ_g^-) (X ³Σ_g^-), using a model based on a pair of oxygen molecules at a fixed separation of 3.81 Å. The intensity enhancement is assumed to be derived from the mixing (a ¹Δ_g) (a ¹Δ_g) _~~~ (X ³Σ_g^-) (X ³Σ_u^-) and (a ¹Δ_g) (¹Δ_u) _~~~ (X ³Σ_g^-) (X ³Σ_g^-). Matrix elements for these interactions are calculated using a π-electron approximation for the pair system. Good molecular wavefunctions are used for all but the perturbing (B ³Σ_u^-) state, which is approximated in terms of ground state orbitals. The largest contribution to the matrix elements arises from large intramolecular terms multiplied by intermolecular overlap integrals. The strength of interaction depends not only on the intermolecular separation of the two oxygen molecules, but also as expected on the relative orientation. Matrix elements are calculated for different orientations, and the angular dependence is fit to an analytical expression. The theory therefore not only predicts an intensity dependence on density but also one on phase at constant density. Agreement between theory and available experimental results is satisfactory considering the nature of the approximation, and indicates the essential validity of the overall approach to this interesting intensity enhancement problem.

The ionic basis of frequency selectivity in hair cells of the bullfrog's sacculus

Hair cells from the bull frog's sacculus, a vestibular organ responding to substrate-borne vibration, possess electrically resonant membrane properties which maximize the sensitivity of each cell to a particular frequency of mechanical input. The electrical resonance of these cells and its underlying ionic basis were studied by applying gigohm-seal recording techniques to solitary hair cells enzymatically dissociated from the sacculus. The contribution of electrical resonance to frequency selectivity was assessed from microelectrode recordings from hair cells in an excised preparation of the sacculus.

Electrical resonance in the hair cell is demonstrated by damped membrane-potential oscillations in response to extrinsic current pulses applied through the recording pipette. This response is analyzed as that of a damped harmonic oscillator. Oscillation frequency rises with membrane depolarization, from 80-160 Hz at resting potential to asymptotic values of 200-250 Hz. The sharpness of electrical tuning, denoted by the electrical quality factor, Q_e, is a bell-shaped function of membrane voltage, reaching a maximum value around eight at a membrane potential slightly positive to the resting potential.

In whole cells, three time-variant ionic currents are activated at voltages more positive than -60 to -50 mV; these are identified as a voltage-dependent, non-inactivating Ca current (I_ca), a voltage-dependent, transient K current (I_a), and a Ca-dependent K current (I_c). The C channel is identified in excised, inside-out membrane patches on the basis of its large conductance (130-200 pS), its selective permeability to Kover Na or Cl, and its activation by internal Ca ions and membrane depolarization. Analysis of open- and closed-lifetime distributions suggests that the C channel can assume at least two open and three closed kinetic states.

Exposing hair cells to external solutions that inhibit the Ca or C conductances degrades the electrical resonance properties measured under current-clamp conditions, while blocking the A conductance has no significant effect, providing evidence that only the Ca and C conductances participate in the resonance mechanism. To test the sufficiency of these two conductances to account for electrical resonance, a mathematical model is developed that describes I_ca, I_c, and intracellular Ca concentration during voltage-clamp steps. I_ca activation is approximated by a third-order Hodgkin-Huxley kinetic scheme. Ca entering the cell is assumed to be confined to a small submembrane compartment which contains an excess of Ca buffer; Ca leaves this space with first-order kinetics. The Ca- and voltage-dependent activation of C channels is described by a five-state kinetic scheme suggested by the results of single-channel observations. Parameter values in the model are adjusted to fit the waveforms of I_ca and I_c evoked by a series of voltage-clamp steps in a single cell. Having been thus constrained, the model correctly predicts the character of voltage oscillations produced by current-clamp steps, including the dependencies of oscillation frequency and Q_e on membrane voltage. The model shows quantitatively how the Ca and C conductances interact, via changes in intracellular Ca concentration, to produce electrical resonance in a vertebrate hair cell.