The Regulatory Choice between a Label and a Minimum-Quality Standard, 2005

This paper revisits the issue of the regulatory choice between a mandatory label and a minimum-quality standard. When the cost of regulation is relatively low, we show that the socially optimal choice depends on the producers’ cost structure for complying with regulation and improving quality. Under a marginal cost for improving quality, the mandatory labeling is sufficient for reaching the socially optimal level of quality. Under a fixed cost for improving quality, we show that each instrument or the combination of both instruments may emerge at the equilibrium.

Health Information and the Choice of Fish Species: An Experiment Measuring the Impact of Risk and Benefit Information, April 2006

An experiment was conducted in France to evaluate the impact of health information on consumers’ choice between two different types of fish. Successive messages revealing risks (methylmercury) and benefits (omega-3s) of consuming the fish, along with consumption recommendations, were delivered. Results show a significant difference of reaction according to the order and type of information. The information about risks had a larger marginal impact on change in willingness to pay (WTP) than did the information about benefits. While the results show that detailed messages on risks/benefits, including recommendations for nutrition behavior, matter in the modification of WTP, 40% of respondents did not change their initial choices after the revelation of health information.

A note on schooling in development accounting

How much would output increase if underdeveloped economies were to increase their levels of schooling? We contribute to the development accounting literature by describing a non-parametric upper bound on the increase in output that can be generated by more schooling. The advantage of our approach is that the upper bound is valid for any number of schooling levels with arbitrary patterns of substitution/complementarity. Another advantage is that the upper bound is robust to certain forms of endogenous technology response to changes in schooling. We also quantify the upper bound for all economies with the necessary data, compare our results with the standard development accounting approach, and provide an update on the results using the standard approach for a large sample of countries.

Book vs. Fair Value Accounting in Banking, and Intertemporal Smoothing

The aim of this paper is to examine the pros and cons of book and fair value accounting from the perspective of the theory of banking. We consider the implications of the two accounting methods in an overlapping generations environment. As observed by Allen and Gale(1997), in an overlapping generation model, banks have a role as intergenerational connectors as they allow for intertemporal smoothing. Our main result is that when dividends depend on profits, book value ex ante dominates fair value, as it provides better intertemporal smoothing. This is in contrast with the standard view that states that, fair value yields a better allocation as it reflects the real opportunity cost of assets. Banking regulation play an important role by providing the right incentives for banks to smooth intertemporal consumption whereas market discipline improves intratemporal efficiency.

Organizational Choice and Environmental Change

We explain the choice between franchising and vertical integration by estimating a model of relative performance in a sample of 250 Spanish car distributors, controlling for self-selection and including environmental factors. The method allows us to estimate performance counterfactuals. Organizational choice seemingly aims to contain moral hazard for both distributors and manufacturers but it is subject to start-up constraints and switching costs. While the market for franchises remained underdeveloped, information asymmetries led to the opening of integrated outlets. Their subsequent conversion into franchised outlets probably involved prohibitive transaction costs. Consequently, they performed worse than would have been expected had they been independent, as confirmed by the systematic improvement observed when they were in fact converted. The timing of such conversions suggests that switching costs were prohibitive until firms developed a substantial cushion of temporary contracts, previously forbidden by regulation.

Salience theory of choice under risk

We present a theory of choice among lotteries in which the decision maker's attention is drawn to (precisely defined) salient payoffs. This leads the decision maker to a context-dependent representation of lotteries in which true probabilities are replaced by decision weights distorted in favor of salient payoffs. By endogenizing decision weights as a function of payoffs, our model provides a novel and unified account of many empirical phenomena, including frequent risk-seeking behavior, invariance failures such as the Allais paradox, and preference reversals. It also yields new predictions, including some that distinguish it from Prospect Theory, which we test.

Effect of an ectoparasite on lay date, nest-site choice, desertion, and hatching success in the great tit (Parus major)

Ectoparasites are common in most bird species, but experimental evidence of their effects on life-history traits is scarce. We investigated experimentally the effects of the hematophagous hen flea (Ceratophyllus gallinae) on timing of reproduction, nest-site choice, nest desertion, clutch size, and hatching success in the great tit (Parus major). When great tits were offered a choice on their territory between an infested and a parasite-free nest-box, they chose the one without parasites. When there was no choice, the great tits in a territory containing an infested nest-box delayed laying the clutch by 11 days as compared with the birds that were offered a parasite-free nesting opportunity. The finding that there was no difference in phenotypic traits related to dominance between the birds nesting in infested boxes and birds nesting in parasite-free boxes suggests that the delay is not imposed by social dominance. Nest desertion between laying and shortly after hatching was significandy higher in infested nests. There was no difference between infested and parasite-free nests in clutch size, but hatching success and hence brood size at hatching were significantly smaller in infested nests. Nest-box studies of great tits have been seminal in the development of evolutionary, ecological, and behavioral theory, but recently a polemic has arisen in the literature about the validity of the conclusions drawn from nest-box studies where the naturally occurring, detrimental ectoparasites are eliminated by the routine removal of old nests between breeding seasons. Our study suggests that this criticism is valid and that the evaluation of the effects of ectoparasites may improve our understanding of behavioral traits, life-history traits, or population dynamics

L'enseignement du patient diabétique et son évaluation par un questionnaire à choix multiple. [Education of the diabetic patient and its evaluation by a multiple-choice questionnaire].

37 insulin-dependent and non-insulin-dependent diabetics answered a multiple-choice questionnaire during inpatient educational sessions. 12 dietetic and 12 pathophysiologic questions had to be answered. Statistical analysis of factors influencing the number of errors can be summed up as follows: there is a direct correlation between age of the patient and number of errors; the older the patient, the greater the number of errors. However, insulin-dependent diabetics committed fewer errors than non-insulin-dependent subjects of the same age, which suggests greater motivation in the first group due to their treatment. The test likewise affords the patients an opportunity of reviewing unclear topics and enables the educational team to adapt their teaching to the patients.

Portfolio choice and the effects of liquidity

This paper shows how to introduce liquidity into the well known mean-variance framework of portfolio selection. Either by estimating mean-variance liquidity constrained frontiers or directly estimating optimal portfolios for alternative levels of risk aversion and preference for liquidity, we obtain strong effects of liquidity on optimal portfolio selection. In particular, portfolio performance, measured by the Sharpe ratio relative to the tangency portfolio, varies significantly with liquidity. Moreover, although mean-variance performance becomes clearly worse, the levels of liquidity onoptimal portfolios obtained when there is a positive preference for liquidity are much lower than on those optimal portfolios where investors show no sign of preference for liquidity.

A randomized concave programming method for choice network revenue management

Models incorporating more realistic models of customer behavior, as customers choosing froman offer set, have recently become popular in assortment optimization and revenue management.The dynamic program for these models is intractable and approximated by a deterministiclinear program called the CDLP which has an exponential number of columns. However, whenthe segment consideration sets overlap, the CDLP is difficult to solve. Column generationhas been proposed but finding an entering column has been shown to be NP-hard. In thispaper we propose a new approach called SDCP to solving CDLP based on segments and theirconsideration sets. SDCP is a relaxation of CDLP and hence forms a looser upper bound onthe dynamic program but coincides with CDLP for the case of non-overlapping segments. Ifthe number of elements in a consideration set for a segment is not very large (SDCP) can beapplied to any discrete-choice model of consumer behavior. We tighten the SDCP bound by(i) simulations, called the randomized concave programming (RCP) method, and (ii) by addingcuts to a recent compact formulation of the problem for a latent multinomial-choice model ofdemand (SBLP+). This latter approach turns out to be very effective, essentially obtainingCDLP value, and excellent revenue performance in simulations, even for overlapping segments.By formulating the problem as a separation problem, we give insight into why CDLP is easyfor the MNL with non-overlapping considerations sets and why generalizations of MNL posedifficulties. We perform numerical simulations to determine the revenue performance of all themethods on reference data sets in the literature.

The contribution of schooling in development accounting: Results from a nonparametric upper bound

How much would output increase if underdeveloped economies were toincrease their levels of schooling? We contribute to the development accounting literature by describing a non-parametric upper bound on theincrease in output that can be generated by more schooling. The advantage of our approach is that the upper bound is valid for any number ofschooling levels with arbitrary patterns of substitution/complementarity.Another advantage is that the upper bound is robust to certain forms ofendogenous technology response to changes in schooling. We also quantify the upper bound for all economies with the necessary data, compareour results with the standard development accounting approach, andprovide an update on the results using the standard approach for a largesample of countries.

Welfare of naive and sophisticated players in school choice

Two main school choice mechanisms have attracted the attention in the literature: Boston and deferred acceptance (DA). The question arises on the ex-ante welfareimplications when the game is played by participants that vary in terms of their strategicsophistication. Abdulkadiroglu, Che and Yasuda (2011) have shown that the chances ofnaive participants getting into a good school are higher under the Boston mechanism thanunder DA, and some naive participants are actually better off. In this note we show thatthese results can be extended to show that, under the veil of ignorance, i.e. students not yetknowing their utility values, all naive students may prefer to adopt the Boston mechanism.

The role of awareness, information gathering and processing in school choice

This paper studies the determinants of school choice, focusing on the role of information. Weconsider how parents' search efforts and their capacity to process information (i.e., tocorrectly assess schools) affect the quality of the schools they choose for their children. Usinga novel dataset, we are able to identify parents' awareness of schools in their neighborhoodand measure their capacity to rank the quality of the school with respect to the officialrankings. We find that parents education and wealth are important factors in determiningtheir level of school awareness and information gathering. Moreover, these search effortshave important consequences in terms of the quality of school choice.

Choice by sequential procedures

We propose a rule of decision-making, the sequential procedure guided byroutes, and show that three influential boundedly rational choice models can be equivalentlyunderstood as special cases of this rule. In addition, the sequential procedure guidedby routes is instrumental in showing that the three models are intimately related. We showthat choice with a status-quo bias is a refinement of rationalizability by game trees, which, inturn, is also a refinement of sequential rationalizability. Thus, we provide a sharp taxonomyof these choice models, and show that they all can be understood as choice by sequentialprocedures.