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.

Three essays on economics and information shocks

A person living in an industrialized society has almost no choice but to receive information daily with negative implications for himself or others. His attention will often be drawn to the ups and downs of economic indicators or the alleged misdeeds of leaders and organizations. Reacting to new information is central to economics, but economics typically ignores the affective aspect of the response, for example, of stress or anger. These essays present the results of considering how the affective aspect of the response can influence economic outcomes.

The first chapter presents an experiment in which individuals were presented with information about various non-profit organizations and allowed to take actions that rewarded or punished those organizations. When social interaction was introduced into this environment an asymmetry between rewarding and punishing appeared. The net effects of punishment became greater and more variable, whereas the effects of reward were unchanged. The individuals were more strongly influenced by negative social information and used that information to target unpopular organizations. These behaviors contributed to an increase in inequality among the outcomes of the organizations.

The second and third chapters present empirical studies of reactions to negative information about local economic conditions. Economic factors are among the most prevalent stressors, and stress is known to have numerous negative effects on health. These chapters document localized, transient effects of the announcement of information about large-scale job losses. News of mass layoffs and shut downs of large military bases are found to decrease birth weights and gestational ages among babies born in the affected regions. The effect magnitudes are close to those estimated in similar studies of disasters.

The phytoplankton of an enriched, soft-water lakel subject to intermittent hydraulic flushing (Grasmere, English Lake District)

This paper describes some characteristic features of the phytoplankton of Grasmere, one of the smaller of the principal lakes of the English Lake District, and attempts to relate these to distinctive physical and chemical properties of the lake. Quantitative data presented herein are derived from 5-m vertical column samples, collected with a flexible polyethylene hose close to the deepest point of Grasmere, generally at intervals of 14 days ( 7 days from 1972 to 1978, inclusive). The study concludes that although Grasmere has been subject to increased phosphorus-loading and has quickly developed many features associated with eutrophication, the composition of its plankton has retained the characteristics of a mesotrophic, soft-water lake: a vernal diatom maximum, generally dominated by Asterionella, is followed by summer growths of nanoplanktonic species, of various colonial Chlorophyceae, before a substantial return to Asterionella-dominance in the autumn.

Acid precipitation and its effects on aquatic systems in the English Lake District

There is no evidence of an increase in the acidity (lower pH or alkalinity) of water-bodies in the Lake District over the last 50 years. Brown trout occur in acid streams and upland tarns where pH is 4.5-5.2 throughout the year. Their occurrence in such waters in Britain and Ireland has been known for most of this century and there is no previous evidence of harmful effects on salmonid fisheries, though numbers of fish are naturally low. However, many benthic invertebrates that are common in hill-streams where pH is above 5.7 do not occur in more acid streams. This phenomenon occurs in the headwaters of several western rivers in Cumbria. It is not a recent response to "acid rain". Harmful effects of pH are undoubtedly more pronounced in waters that are poor in other dissolved ions. Low concentrations of sodium, potassium, calcium and chloride are especially important and may limit the distributions of some aquatic animals even where pH is above 5.7. The concentration of sulphate ions is usually relatively high but this is not important to the fauna; concentrations are at least two times higher in productive alkaline water-bodies than they are in unproductive acid waters.

Essays in revealed preference theory and behavioral economics

Time, risk, and attention are all integral to economic decision making. The aim of this work is to understand those key components of decision making using a variety of approaches: providing axiomatic characterizations to investigate time discounting, generating measures of visual attention to infer consumers' intentions, and examining data from unique field settings.

Chapter 2, co-authored with Federico Echenique and Kota Saito, presents the first revealed-preference characterizations of exponentially-discounted utility model and its generalizations. My characterizations provide non-parametric revealed-preference tests. I apply the tests to data from a recent experiment, and find that the axiomatization delivers new insights on a dataset that had been analyzed by traditional parametric methods.

Chapter 3, co-authored with Min Jeong Kang and Colin Camerer, investigates whether "pre-choice" measures of visual attention improve in prediction of consumers' purchase intentions. We measure participants' visual attention using eyetracking or mousetracking while they make hypothetical as well as real purchase decisions. I find that different patterns of visual attention are associated with hypothetical and real decisions. I then demonstrate that including information on visual attention improves prediction of purchase decisions when attention is measured with mousetracking.

Chapter 4 investigates individuals' attitudes towards risk in a high-stakes environment using data from a TV game show, Jeopardy!. I first quantify players' subjective beliefs about answering questions correctly. Using those beliefs in estimation, I find that the representative player is risk averse. I then find that trailing players tend to wager more than "folk" strategies that are known among the community of contestants and fans, and this tendency is related to their confidence. I also find gender differences: male players take more risk than female players, and even more so when they are competing against two other male players.

Chapter 5, co-authored with Colin Camerer, investigates the dynamics of the favorite-longshot bias (FLB) using data on horse race betting from an online exchange that allows bettors to trade "in-play." I find that probabilistic forecasts implied by market prices before start of the races are well-calibrated, but the degree of FLB increases significantly as the events approach toward the end.

'The highly nervous system of the English Lakes': aquatic ecosystem sensitivity to external changes, as demonstrated by diatoms.

The author reviews the stratigraphic diatom profile of Cumbrian lakes since the last glaciation. Knowledge of both present and previous interglacials suggests that a natural cycle of change is imposed on all lakes. The nature of inwashed material is dependant on climatic and natural soilcycles and this affects the water quality and sensitive aquatic biota. Anthropogenic effects are superimposed upon this with forest clearance and pollution. Whilst some Cumbrian diatom profiles extend over the entire post glacial, others cover only detailed sections relating to particular problems. Causes and effect of recent changes in lakes can be studied using indicator species but palaeocology contributes greatly to understanding of long term changes.

The role of specially designated wildlife sites in freshwater conservation - an English perspective

The value of specially designated sites in conserving biodiversity has been a hotly debated issue for many years. The debate has recently been given fresh impetus by the creation of Natural England, the new Government Agency responsible for the protection and enhancement of the natural environment in England, and the challenges facing the management of designated sites resulting from the increasingly tangible effects of climate change. In the freshwater environment, the role of designated sites is very much under the spotlight because of the implementation of the European 'Water Framework' Directive, which aspires to holistic, ecologically-based management of aquatic habitats.This paper explores the underlying premises of, and rationale for, special site designations for wildlife, and provides a frank account of the inevitable clash of management philosophies that designated sites create in the freshwater environment, drawing on experiences of managing designated freshwater sites in England over the past decade. A positive role is outlined for designated sites in freshwater conservation, which addresses these management conflicts in a way that not only meets Government obligations towards these sites but also paves the way for enlightened, progressive management of the wider freshwater resource. As part of this account, attempts are made to clarify the relationship between key biodiversity-related policy drivers in the freshwater environment, and to explain how the spectre of climate change can be addressed within designated site management. The importance of strategic freshwater science, collaboratively designed and funded, in maximising the value of the designated freshwater site network to the wider freshwater habitat resource, is stressed.

Major ions in 25 frequently sampled tarns in the English Lake District (1954-56, 1974-1976) [Dataset]

This dataset provides raw data of chemical analyses made during studies on seasonal variations of 25 frequently sampled tarns in Cumbria. Measurements of sodium, calcium, potassium, magnesium, pH, chloride ions, alkalinity, sulphite, strong acids and nitrate were taken between 1954 and 1956 and between 1974-1976.

Concentrations of major ions in 182 tarns in the English Lake District (1953-1978) [Dataset]

This dataset provides raw data of chemical analyses made during studies on seasonal variations of 182 tarns in the English Lake District, Cumbria. Measurements of sodium, calcium, potassium, magnesium, pH, chloride ions, alkalinity, sulphite, strong acids and nitrate were taken between 1953 and 1978.

Front pages of No. 49, 1990, English version

Special issue entitled: A Brief History of the Charles Darwin Foundation for the Galapagos Islands 1959-1988

Ebaluatoia: crowd evaluation of English-Basque machine translation

[EU]Lan honetan Ebaluatoia aurkezten da, eskala handiko ingelesa-euskara itzulpen automatikoko ebaluazio kanpaina, komunitate-elkarlanean oinarritua. Bost sistemaren itzulpen kalitatea konparatzea izan da kanpainaren helburua, zehazki, bi sistema estatistiko, erregeletan oinarritutako bat eta sistema hibrido bat (IXA taldean garatuak) eta Google Translate. Emaitzetan oinarrituta, sistemen sailkapen bat egin dugu, baita etorkizuneko ikerkuntza bideratuko duten zenbait analisi kualitatibo ere, hain zuzen, ebaluazio-bildumako azpi-multzoen analisia, iturburuko esaldien analisi estrukturala eta itzulpenen errore-analisia. Lanak analisi hauen hastapenak aurkezten ditu, etorkizunean zein motatako analisietan sakondu erakutsiko digutenak.

Elebitasunetik eleaniztasunera. Ikastolen “Eleanitz-English” hezkuntza berrikuntza proiektua: oinarriak, bilakaera eta ekarpenak (1991-2010)

437 p.

Defining plausible migration rates based on historical tagging data: a Bayesian mark-recapture model applied to English sole (Parophrys vetulus)

A generalized Bayesian population dynamics model was developed for analysis of historical mark-recapture studies. The Bayesian approach builds upon existing maximum likelihood methods and is useful when substantial uncertainties exist in the data or little information is available about auxiliary parameters such as tag loss and reporting rates. Movement rates are obtained through Markov-chain Monte-Carlo (MCMC) simulation, which are suitable for use as input in subsequent stock assessment analysis. The mark-recapture model was applied to English sole (Parophrys vetulus) off the west coast of the United States and Canada and migration rates were estimated to be 2% per month to the north and 4% per month to the south. These posterior parameter distributions and the Bayesian framework for comparing hypotheses can guide fishery scientists in structuring the spatial and temporal complexity of future analyses of this kind. This approach could be easily generalized for application to other species and more data-rich fishery analyses.