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.

Applications of plasticity theory to selected problems in soil mechanics

Two topics in plane strain perfect plasticity are studied using the method of characteristics. The first is the steady-state indentation of an infinite medium by either a rigid wedge having a triangular cross section or a smooth plate inclined to the direction of motion. Solutions are exact and results include deformation patterns and forces of resistance; the latter are also applicable for the case of incipient failure. Experiments on sharp wedges in clay, where forces and deformations are recorded, showed a good agreement with the mechanism of cutting assumed by the theory; on the other hand the indentation process for blunt wedges transforms into that of compression with a rigid part of clay moving with the wedge. Finite element solutions, for a bilinear material model, were obtained to establish a correspondence between the response of the plane strain wedge and its axi-symmetric counterpart, the cone. Results of the study afford a better understanding of the process of indentation of soils by penetrometers and piles as well as the mechanism of failure of deep foundations (piles and anchor plates).

The second topic concerns the plane strain steady-state free rolling of a rigid roller on clays. The problem is solved approximately for small loads by getting the exact solution of two problems that encompass the one of interest; the first is a steady-state with a geometry that approximates the one of the roller and the second is an instantaneous solution of the rolling process but is not a steady-state. Deformations and rolling resistance are derived. When compared with existing empirical formulae the latter was found to agree closely.

The frequency response of dynamic friction: Model comparisons

Any linearised theory of the initiation of friction-excited vibration via instability of the state of steady sliding requires information about the dynamic friction force in the form of a frequency response function for sliding friction. Recent measurements of this function for an interface consisting of a nylon pin against a glass disc are used to probe the underlying constitutive law. Results are compared to linearised predictions from the simplest ratestate model of friction, and a ratetemperature model. In both cases the observed variation with frequency is not compatible with the model predictions, although there are some significant points of similarity. The most striking result relates to variation of the normal load: any theory embodying the Coulomb relation F∝N would predict behaviour entirely at variance with the measurements, even though the steady friction force obtained during the same measurements does follow the Coulomb law. © 2011 Elsevier Ltd. All rights reserved.

The computer simulation of primate (Macaca mulatta) spatial visual delayed response and cerebral prefrontal control function

Cerebral prefrontal function is one of the important aspects in neurobiology. Based on the experimental results of neuroanatomy, neurophysiology, behavioral sciences, and the principles of cybernetics and information theory after constructed a simple model simulating prefrontal control function, this paper simulated the behavior of Macaca mulatta completing delayed tasks both before and after its cerebral prefrontal cortex being damaged. The results indicated that there is an obvious difference in the capacity of completing delayed response tasks for the normal monkeys and those of prefrontal cortex cut away. The results are agreement with experiments. The authors suggest that the factors of affecting complete delayed response tasks might be in information keeping and extracting of memory including information storing, keeping and extracting procedures rather than in information storing process.

Analysis of CFRP strap-strengthened reinforced concrete beams using the modified compression field theory (MCFT)

External, prestressed carbon fiber reinforced polymer (CFRP) straps can be used to enhance the shear strength of existing reinforced concrete beams. In order to effectively design a strengthening system, a rational predictive theory is required. The current work investigates the ability of the modified compression field theory (MCFT) to predict the behavior of rectangular strap strengthened beams where the discrete CFRP strap forces are approximated as a uniform vertical stress. An unstrengthened control beam and two strengthened beams were tested to verify the predictions. The experimental results suggest that the MCFT could predict the general response of a strengthened beam with a uniform strap spacing < 0.9d. However, whereas the strengthened beams failed in shear, the MCFT predicted flexural failures. It is proposed that a different compression softening model or the inclusion of a crack width limit is required to reflect the onset of shear failures in the strengthened beams.

Investigation of the poro-elastic response of seabed to solitary

A numerical model is established and validated to study the behavior of porous seabed under solitary wave propagation. Using Biot's poro-elastic theory, the problem is formulated as a two dimensional plane strain problem, and it is modelled using the Finite Element Method. The responses due to the solitary wave are compared with those of linear waves of the same height. It is found that regardless of the wave period, stresses due to solitary waves are generally larger. This indicates a higher potential for shear failure at the seabed under solitary waves. Implications on liquefaction need further investigation. Copyright © 2012 by the International Society of Offshore and Polar Engineers (ISOPE).

Transient response of structures with uncertain properties to nonlinear shock loading

A method is presented to predict the transient response of a structure at the driving point following an impact or a shock loading. The displacement and the contact force are calculated solving the discrete convolution between the impulse response and the contact force itself, expressed in terms of a nonlinear Hertzian contact stiffness. Application of random point process theory allows the calculation of the impulse response function from knowledge of the modal density and the geometric characteristics of the structure only. The theory is applied to a wide range of structures and results are experimentally verified for the case of a rigid object hitting a beam, a plate, a thin and a thick cylinder and for the impact between two cylinders. The modal density of the flexural modes for a thick slender cylinder is derived analytically. Good agreement is found between experimental, simulated and published results, showing the reliability of the method for a wide range of situations including impacts and pyroshock applications. © 2013 Elsevier Ltd. All rights reserved.

Predicting the response of structures to transient shock loading.

This work concerns the prediction of the response of an uncertain structure to a load of short duration. Assuming an ensemble of structures with small random variations about a nominal form, a mean impulse response can be found using only the modal density of the structure. The mean impulse response turns out to be the same as the response of an infinite structure: the response is calculated by taking into account the direct field only, without reflections. Considering the short duration of an impulsive loading, the approach is reasonable before the effect of the reverberant field becomes important. The convolution between the mean impulse response and the shock loading is solved in discrete time to calculate the response at the driving point and at remote points. Experimental and numerical examples are presented to validate the theory presented for simple structures such as beams, plates, and cylinders.

Abnormal ferroelectric response and enhancement of piezoelectricity of PbTiO3 under uniaxial compression

The ferroelectricity of rhombohedral PbTiO3 under uniaxial compression is investigated from first-principles study. Upon compression, the ferroelectricity decreases until a critical stress of -29 GPa and then increases with a further increase of the magnitude of the uniaxial compressive stress. We also find that uniaxial compression could enhance piezoelectricity and that the maximum piezoelectric coefficient d(33) occurs at sigma(33)=-49 GPa, which supports the experimentally observed piezoelectric behavior in rhombohedral Pb(Mg1/3Nb2/3O3)-0.32PbTiO(3) [Q. Wan, C. Chen, and Y. P. Shen, J. Appl. Phys. 98, 024103 (2005)]. Our calculated results show that the Pb, Ti, and O atoms have different contributions to the total polarization with increasing the magnitude of uniaxial compressive stress, and that when -sigma(33)>55 GPa, the Ti atoms no longer have contributions to the polarization, which leads to the changes of ferroelectricity and piezoelectricity. (C) 2008 American Institute of Physics.

Lowered laser threshold in photonic crystals investigated by semiclassical theory

Using the response formula of the photonic crystals and the Bloch equations, the lasing threshold in arbitrary 2D photonic crystals was obtained by an investigation of steady-state laser behavior. The lasing threshold is expressed by the population inversion. It shows that the population inversion threshold is proportional to the second order of the group velocity, and to the relaxation coefficient. (c) 2004 Elsevier B.V. All rights reserved.

Investigation on acceleration response of fiber optic mandrel hydrophone

The acceleration response of fiber optic mandrel hydrophone is studied based on the theory of elastic dynamics in this paper. For the first time the influence of the optical fiber on the acceleration response is taken into consideration. And the derivation of the radial deformation of the mandrel is presented in details. The acceleration response is evaluated both theoretically and experimentally and the results are in good agreement.

Response amplitude and hydrodynamic force for a buoy over a convex

A buoy as an offshore structure is often placed over a convex such as a caisson or a submerged island. The hydrodynamic fluid/solid interaction becomes more complex due to the convex compared with that on the flat. Both the buoy and the convex are idealized as vertical cylinders. Linear potential theory is used to investigate the response amplitude and the hydrodynamic force for a buoy over a convex due to diffraction and radiation in water of finite depth. These are derived from the total velocity potential. A set of theoretical added mass, damping coefficient, and exciting force expressions have been proposed. Analytical results of the response amplitude and hydrodynamic force are given. Finally, the numerical results show that the effect of the convex on the response amplitude and hydrodynamic force for the buoy is ignored if the size of the convex is relatively smaller.

Multi-exponentially photoelectric response of bacteriorhodopsin

A thin oriented bacteriorhodopsin (bR) him is deposited on a stainless steel slide by use of the electrophoretic sedimentation method. A junction is made with electrolyte gels having a counterelectrode to construct a bR-based photoelectric detector;. The photoelectric response signal to a 10 ns laser pulse is measured. A theory on the photoelectric kinetics of bR is developed based on the concept of the charge displacement current and the bR photocycle rate equations. Comparison between the theoretical and experimental results proves that the bR photoelectric response to a short laser pulse is a multi-exponential process. The decay time constants and amplitudes of each, exponential component are obtained by data fitting.

Relationship between load/unload response ratio and damage variable and its application

The physics-based parameter: load/unload response ratio (LURR) was proposed to measure the proximity of a strong earthquake, which achieved good results in earthquake prediction. As LURR can be used to describe the damage degree of the focal media qualitatively, there must be a relationship between LURR and damage variable (D) which describes damaged materials quantitatively in damage mechanics. Hence, based on damage mechanics and LURR theory, taking Weibull distribution as the probability distribution function, the relationship between LURR and D is set up and analyzed. This relationship directs LURR applied in damage analysis of materials quantitatively from being qualitative earlier, which not only provides the LURR method with a more solid basis in physics, but may also give a new approach to the damage evaluation of big scale structures and prediction of engineering catastrophic failure. Copyright (c) 2009 John Wiley & Sons, Ltd.

Relationship between load/unload response ratio and damage variable and its application

The physics-based parameter: load/unload response ratio (LURR) was proposed to measure the proximity of a strong earthquake, which achieved good results in earthquake prediction. As LURR can be used to describe the damage degree of the focal media qualitatively, there must be a relationship between LURR and damage variable (D) which describes damaged materials quantitatively in damage mechanics. Hence, based on damage mechanics and LURR theory, taking Weibull distribution as the probability distribution function, the relationship between LURR and D is set up and analyzed. This relationship directs LURR applied in damage analysis of materials quantitatively from being qualitative earlier, which not only provides the LURR method with a more solid basis in physics, but may also give a new approach to the damage evaluation of big scale structures and prediction of engineering catastrophic failure. Copyright (c) 2009 John Wiley & Sons, Ltd.