Influence of the claimant’s behavioural features on motor compensation outcomes

The decision to settle a motor insurance claim by either negotiation or trial is analysed. This decision may depend on how risk and confrontation adverse or pessimistic the claimant is. The extent to which these behavioural features of the claimant might influence the final compensation amount are examined. An empirical analysis, fitting a switching regression model to a Spanish database, is conducted in order to analyze whether the choice of the conflict resolution procedure is endogenous to the compensation outcomes. The results show that compensations awarded by courts are always higher, although 95% of cases are settled by negotiation. We show that this is because claimants are adverse to risk and confrontation, and are pessimistic about their chances at trial. By contrast, insurers are risk - confrontation neutral and more objective in relation to the expected trial compensation. During the negotiation insurers accept to pay the subjective compensation values of claimants, since these values are lower than their estimates of compensations at trial.

Environmental management problems, future generations and social decisions

The decisions of many individuals and social groups, taking according to well-defined objectives, are causing serious social and environmental problems, in spite of following the dictates of economic rationality. There are many examples of serious problems for which there are not yet appropriate solutions, such as management of scarce natural resources including aquifer water or the distribution of space among incompatible uses. In order to solve these problems, the paper first characterizes the resources and goods involved from an economic perspective. Then, for each case, the paper notes that there is a serious divergence between individual and collective interests and, where possible, it designs the procedure for solving the conflict of interests. With this procedure, the real opportunities for the application of economic theory are shown, and especially the theory on collective goods and externalities. The limitations of conventional economic analysis are shown and the opportunity to correct the shortfalls is examined. Many environmental problems, such as climate change, have an impact on different generations that do not participate in present decisions. The paper shows that for these cases, the solutions suggested by economic theory are not valid. Furthermore, conventional methods of economic valuation (which usually help decision-makers) are unable to account for the existence of different generations and tend to obviate long-term impacts. The paper analyzes how economic valuation methods could account for the costs and benefits enjoyed by present and future generations. The paper studies an appropriate consideration of preferences for future consumption and the incorporation of sustainability as a requirement in social decisions, which implies not only more efficiency but also a fairer distribution between generations than the one implied by conventional economic analysis.

In Search of a theory of debt management

A growing literature integrates theories of debt management into models of optimal fiscal policy. One promising theory argues that the composition of government debt should be chosen so that fluctuations in the market value of debt offset changes in expected future deficits. This complete market approach to debt management is valid even when the government only issues non-contingent bonds. A number of authors conclude from this approach that governments should issue long term debt and invest in short term assets. We argue that the conclusions of this approach are too fragile to serve as a basis for policy recommendations. This is because bonds at different maturities have highly correlated returns, causing the determination of the optimal portfolio to be ill-conditioned. To make this point concrete we examine the implications of this approach to debt management in various models, both analytically and using numerical methods calibrated to the US economy. We find the complete market approach recommends asset positions which are huge multiples of GDP. Introducing persistent shocks or capital accumulation only worsens this problem. Increasing the volatility of interest rates through habits partly reduces the size of these simulations we find no presumption that governments should issue long term debt ? policy recommendations can be easily reversed through small perturbations in the specification of shocks or small variations in the maturity of bonds issued. We further extend the literature by removing the assumption that governments every period costlessly repurchase all outstanding debt. This exacerbates the size of the required positions, worsens their volatility and in some cases produces instability in debt holdings. We conclude that it is very difficult to insulate fiscal policy from shocks by using the complete markets approach to debt management. Given the limited variability of the yield curve using maturities is a poor way to substitute for state contingent debt. The result is the positions recommended by this approach conflict with a number of features that we believe are important in making bond markets incomplete e.g allowing for transaction costs, liquidity effects, etc.. Until these features are all fully incorporated we remain in search of a theory of debt management capable of providing robust policy insights.

Behavioral Assumptions and Management Ability: A Tentative Test

The paper explores the consequences that relying on different behavioral assumptions in training managers may have on their future performance. We argue that training with an emphasis on the standard assumptions used in economics (rationality and self-interest) leads future managers to rely excessively on rational and explicit safeguarding, crowding out instinctive contractual heuristics and signaling a 'bad' type to potential partners. In contrast, human assumptions used in management theories, because of their diverse, implicit and even contradictory nature, do not conflict with the innate set of cooperative tools and may provide a good training ground for such tools. We present tentative confirmatory evidence by examining how the weight given to behavioral assumptions in the core courses of the top 100 business schools influences the average salaries of their MBA graduates. Controlling for the average quality of their students and some other schools' characteristics, average salaries are significantly greater for those schools whose core MBA courses contain a higher proportion of management courses as opposed to courses based on economics or technical disciplines.

Behavioral assumptions and management ability

The paper explores the consequences that relying on different behavioral assumptions intraining managers may have on their future performance. We argue that training with anemphasis on the standard assumptions used in economics (rationality and self-interest) is goodfor technical posts but may also lead future managers to rely excessively on rational and explicitsafeguarding, crowding out instinctive relational heuristics and signaling a bad human type topotential partners. In contrast, human assumptions used in management theories, because oftheir diverse, implicit and even contradictory nature, do not conflict with the innate set ofcooperative tools and may provide a good training ground for such tools. We present tentativeconfirmatory evidence by examining how the weight given to behavioral assumptions in the corecourses of the top 100 business schools influences the average salaries of their MBA graduates.Controlling for the self-selected average quality of their students and some other schools characteristics, average salaries are seen to be significantly greater for schools whose core MBAcourses contain a higher proportion of management courses as opposed to courses based oneconomics or technical disciplines.