Individual Decision-Making and Inflation Persistence

The traditional task of a central bank is to preserve price stability and, in doing so, not to impair the real economy more than necessary. To meet this challenge, it is of great relevance whether inflation is only driven by inflation expectations and the current output gap or whether it is, in addition, influenced by past inflation. In the former case, as described by the New Keynesian Phillips curve, the central bank can immediately and simultaneously achieve price stability and equilibrium output, the so-called ‘divine coincidence’ (Blanchard and Galí 2007). In the latter case, the achievement of price stability is costly in terms of output and will be pursued over several periods. Similarly, it is important to distinguish this latter case, which describes ‘intrinsic’ inflation persistence, from that of ‘extrinsic’ inflation persistence, where the sluggishness of inflation is not a ‘structural’ feature of the economy but merely ‘inherited’ from the sluggishness of the other driving forces, inflation expectations and output. ‘Extrinsic’ inflation persistence is usually considered to be the less challenging case, as policy-makers are supposed to fight against the persistence in the driving forces, especially to reduce the stickiness of inflation expectations by a credible monetary policy, in order to reestablish the ‘divine coincidence’. The scope of this dissertation is to contribute to the vast literature and ongoing discussion on inflation persistence: Chapter 1 describes the policy consequences of inflation persistence and summarizes the empirical and theoretical literature. Chapter 2 compares two models of staggered price setting, one with a fixed two-period duration and the other with a stochastic duration of prices. I show that in an economy with a timeless optimizing central bank the model with the two-period alternating price-setting (for most parameter values) leads to more persistent inflation than the model with stochastic price duration. This result amends earlier work by Kiley (2002) who found that the model with stochastic price duration generates more persistent inflation in response to an exogenous monetary shock. Chapter 3 extends the two-period alternating price-setting model to the case of 3- and 4-period price durations. This results in a more complex Phillips curve with a negative impact of past inflation on current inflation. As simulations show, this multi-period Phillips curve generates a too low degree of autocorrelation and too early turnings points of inflation and is outperformed by a simple Hybrid Phillips curve. Chapter 4 starts from the critique of Driscoll and Holden (2003) on the relative real-wage model of Fuhrer and Moore (1995). While taking the critique seriously that Fuhrer and Moore’s model will collapse to a much simpler one without intrinsic inflation persistence if one takes their arguments literally, I extend the model by a term for inequality aversion. This model extension is not only in line with experimental evidence but results in a Hybrid Phillips curve with inflation persistence that is observably equivalent to that presented by Fuhrer and Moore (1995). In chapter 5, I present a model that especially allows to study the relationship between fairness attitudes and time preference (impatience). In the model, two individuals take decisions in two subsequent periods. In period 1, both individuals are endowed with resources and are able to donate a share of their resources to the other individual. In period 2, the two individuals might join in a common production after having bargained on the split of its output. The size of the production output depends on the relative share of resources at the end of period 1 as the human capital of the individuals, which is built by means of their resources, cannot fully be substituted one against each other. Therefore, it might be rational for a well-endowed individual in period 1 to act in a seemingly ‘fair’ manner and to donate own resources to its poorer counterpart. This decision also depends on the individuals’ impatience which is induced by the small but positive probability that production is not possible in period 2. As a general result, the individuals in the model economy are more likely to behave in a ‘fair’ manner, i.e., to donate resources to the other individual, the lower their own impatience and the higher the productivity of the other individual. As the (seemingly) ‘fair’ behavior is modelled as an endogenous outcome and as it is related to the aspect of time preference, the presented framework might help to further integrate behavioral economics and macroeconomics.

Searching for consensus in ahp-group decision making. A bayesian perspective

This paper sets out to identify the initial positions of the different decision makers who intervene in a group decision making process with a reduced number of actors, and to establish possible consensus paths between these actors. As a methodological support, it employs one of the most widely-known multicriteria decision techniques, namely, the Analytic Hierarchy Process (AHP). Assuming that the judgements elicited by the decision makers follow the so-called multiplicative model (Crawford and Williams, 1985; Altuzarra et al., 1997; Laininen and Hämäläinen, 2003) with log-normal errors and unknown variance, a Bayesian approach is used in the estimation of the relative priorities of the alternatives being compared. These priorities, estimated by way of the median of the posterior distribution and normalised in a distributive manner (priorities add up to one), are a clear example of compositional data that will be used in the search for consensus between the actors involved in the resolution of the problem through the use of Multidimensional Scaling tools

Group preference structures in AHP–group decision making

This paper presents a procedure that allows us to determine the preference structures (PS) associated to each of the different groups of actors that can be identified in a group decision making problem with a large number of individuals. To that end, it makes use of the Analytic Hierarchy Process (AHP) (Saaty, 1980) as the technique to solve discrete multicriteria decision making problems. This technique permits the resolution of multicriteria, multienvironment and multiactor problems in which subjective aspects and uncertainty have been incorporated into the model, constructing ratio scales corresponding to the priorities relative to the elements being compared, normalised in a distributive manner (wi = 1). On the basis of the individuals’ priorities we identify different clusters for the decision makers and, for each of these, the associated preference structure using, to that end, tools analogous to those of Multidimensional Scaling. The resulting PS will be employed to extract knowledge for the subsequent negotiation processes and, should it be necessary, to determine the relative importance of the alternatives being compared using anyone of the existing procedures

Regression-based techniques for statistical decision making in singlecase designs

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Behind the decision making of the KFC coffee campaign, can KFC win the coffee market in UK?�

KFC, the chain fast-food restaurants in UK, planed to launched coffee products through campaigns. There are two main reasons for KFC to make the decision. The first one is KFC tried to promote its coffee products with KFC A.M. breakfast plan and it failed at last. The second reason is that KFC needs extension points of interest. The financial condition of KFC has been steady but no breakthrough growth. It has been showed that there is enormous potential of “fast-drink” market in UK. After the success of KFC “Krushems” series, it is reasonable for the company launched coffee products. However, KFC also faced to many challenges to win the market. Compare to the main competitor of McDonald’s, KFC’s quantity of restaurants is far too less. Moreover, KFC has a brand limitation that focuses more family than single urban. The dominant competitors are another challenge KFC need to manage. To sum up, KFC has to win these challenges to be a bigger player in UK coffee market.

Alps Workshop 3 p19 Steps in decision-making

Stepped Animation

Decision making and planning of children in the reproductive process of males

Reproduction is not restricted to the biological; it is also a complex and dynamic social process. The objective of this paper is to analyze the decision and planning of children as part of the reproductive process in men. Methodologically, a qualitative research was made. The analysis includes in-depth interviews with 30 parents between 20 and 45 years, of medium socio-economic level in México. The results show that the reproductive process incorporates family formation negotiated with their couple the marriage until they had economic potential. In some cases, their decision hastened because the couple was pregnant. The planning was not contemplated but when getting the news, they accept it and get involved in the process, while others see it as a conflict.

Does uncertainty cause inertia in decision making? An experimental study of the role of regret aversion and indecisiveness

Previous research has shown that often there is clear inertia in individual decision making---that is, a tendency for decision makers to choose a status quo option. I conduct a laboratory experiment to investigate two potential determinants of inertia in uncertain environments: (i) regret aversion and (ii) ambiguity-driven indecisiveness. I use a between-subjects design with varying conditions to identify the effects of these two mechanisms on choice behavior. In each condition, participants choose between two simple real gambles, one of which is the status quo option. I find that inertia is quite large and that both mechanisms are equally important.

Ethics and citizenship : tools for moral decision-making.

Cumple con los requisitos exigidos en el curriculo nacional inglés de 2002 para el programa de estudio de educación para la ciudadanía en la etapa de secundaria. De los tres elementos que tiene este programa: la cultura política, la participación comunitaria, y la responsabilidad social y moral, esta guía quiere resaltar este último aspecto. Pues,pretende el desarrollo espiritual, moral, social y cultural en los alumnos y, también, el desarrollo de habilidades tanto, para la comunicación, la utilización de las nuevas tecnologías, el trabajo en equipo y la resolución de problemas, como para saber desenvolverse en la vida.

Autoconcepto académico y toma de decisiones en el alumnado de bachillerato. 'Academic self-concept and decision making of secondary school students'.

Resumen tomado de la publicación. Con el apoyo económico del departamento MIDE de la UNED. Contiene anexo de preguntas

Programa de autoayuda para la toma de decisiones al finalizar la educación secundaria obligatoria (ESO) : CESOF-06 = Self-applied decision making program at the end of the compulsory secondary education (ESO) : CESOF-06.

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Enhancing emotion-based learning in decision-making under uncertainty

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Research-based decision making : a comparison of final results of history teaching in two predefined groups of trainee teachers

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