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.

Risk, ambiguity, and diversification

Attitudes toward risk influence the decision to diversify among uncertain options. Yet, because in most situations the options are ambiguous, attitudes toward ambiguity may also play an important role. I conduct a laboratory experiment to investigate the effect of ambiguity on the decision to diversify. I find that diversification is more prevalent and more persistent under ambiguity than under risk. Moreover, excess diversification under ambiguity is driven by participants who stick with a status quo gamble when diversification among gambles is not feasible. This behavioral pattern cannot be accommodated by major theories of choice under ambiguity.

Use of airborne remote sensing to detect riverside Brassica rapa to aid in risk assessment of transgenic crops

High resolution descriptions of plant distribution have utility for many ecological applications but are especially useful for predictive modelling of gene flow from transgenic crops. Difficulty lies in the extrapolation errors that occur when limited ground survey data are scaled up to the landscape or national level. This problem is epitomized by the wide confidence limits generated in a previous attempt to describe the national abundance of riverside Brassica rapa (a wild relative of cultivated rapeseed) across the United Kingdom. Here, we assess the value of airborne remote sensing to locate B. rapa over large areas and so reduce the need for extrapolation. We describe results from flights over the river Nene in England acquired using Airborne Thematic Mapper (ATM) and Compact Airborne Spectrographic Imager (CASI) imagery, together with ground truth data. It proved possible to detect 97% of flowering B. rapa on the basis of spectral profiles. This included all stands of plants that occupied >2m square (>5 plants), which were detected using single-pixel classification. It also included very small populations (<5 flowering plants, 1-2m square) that generated mixed pixels, which were detected using spectral unmixing. The high detection accuracy for flowering B. rapa was coupled with a rather large false positive rate (43%). The latter could be reduced by using the image detections to target fieldwork to confirm species identity, or by acquiring additional remote sensing data such as laser altimetry or multitemporal imagery.

Modelling European winter wind storm losses in current and future climate

Severe wind storms are one of the major natural hazards in the extratropics and inflict substantial economic damages and even casualties. Insured storm-related losses depend on (i) the frequency, nature and dynamics of storms, (ii) the vulnerability of the values at risk, (iii) the geographical distribution of these values, and (iv) the particular conditions of the risk transfer. It is thus of great importance to assess the impact of climate change on future storm losses. To this end, the current study employs—to our knowledge for the first time—a coupled approach, using output from high-resolution regional climate model scenarios for the European sector to drive an operational insurance loss model. An ensemble of coupled climate-damage scenarios is used to provide an estimate of the inherent uncertainties. Output of two state-of-the-art global climate models (HadAM3, ECHAM5) is used for present (1961–1990) and future climates (2071–2100, SRES A2 scenario). These serve as boundary data for two nested regional climate models with a sophisticated gust parametrizations (CLM, CHRM). For validation and calibration purposes, an additional simulation is undertaken with the CHRM driven by the ERA40 reanalysis. The operational insurance model (Swiss Re) uses a European-wide damage function, an average vulnerability curve for all risk types, and contains the actual value distribution of a complete European market portfolio. The coupling between climate and damage models is based on daily maxima of 10 m gust winds, and the strategy adopted consists of three main steps: (i) development and application of a pragmatic selection criterion to retrieve significant storm events, (ii) generation of a probabilistic event set using a Monte-Carlo approach in the hazard module of the insurance model, and (iii) calibration of the simulated annual expected losses with a historic loss data base. The climate models considered agree regarding an increase in the intensity of extreme storms in a band across central Europe (stretching from southern UK and northern France to Denmark, northern Germany into eastern Europe). This effect increases with event strength, and rare storms show the largest climate change sensitivity, but are also beset with the largest uncertainties. Wind gusts decrease over northern Scandinavia and Southern Europe. Highest intra-ensemble variability is simulated for Ireland, the UK, the Mediterranean, and parts of Eastern Europe. The resulting changes on European-wide losses over the 110-year period are positive for all layers and all model runs considered and amount to 44% (annual expected loss), 23% (10 years loss), 50% (30 years loss), and 104% (100 years loss). There is a disproportionate increase in losses for rare high-impact events. The changes result from increases in both severity and frequency of wind gusts. Considerable geographical variability of the expected losses exists, with Denmark and Germany experiencing the largest loss increases (116% and 114%, respectively). All countries considered except for Ireland (−22%) experience some loss increases. Some ramifications of these results for the socio-economic sector are discussed, and future avenues for research are highlighted. The technique introduced in this study and its application to realistic market portfolios offer exciting prospects for future research on the impact of climate change that is relevant for policy makers, scientists and economists.

Production risk, pesticide use and GM crop technology in South Africa

Technology involving genetic modification of crops has the potential to make a contribution to rural poverty reduction in many developing countries. Thus far, pesticide-producing Bacillus thuringensis (Bt) varieties of cotton have been the main GM crops under cultivation in developing nations. Several studies have evaluated the farm-level performance of Bt varieties in comparison to conventional ones by estimating production technology, and have mostly found Bt technology to be very successful in raising output and/or reducing pesticide input. However, the production risk properties of this technology have not been studied, although they are likely to be important to risk-averse smallholders. This study investigates the output risk aspects of Bt technology by estimating two 'flexible risk' production function models allowing technology to independently affect the mean and higher moments of output. The first is the popular Just-Pope model and the second is a more general 'damage control' flexible risk model. The models are applied to cross-sectional data on South African smallholders, some of whom used Bt varieties. The results show no evidence that a 'risk-reduction' claim can be made for Bt technology. Indeed, there is some evidence to support the notion that the technology increases output risk, implying that simple (expected) profit computations used in past evaluations may overstate true benefits.

The role of animal nutrition in improving the nutritive value of animal-derived foods in relation to chronic disease

Foods derived from animals are an important source of nutrients in the diet; for example, milk and meat together provide about 60 and 55% of the dietary intake of Ca and protein respectively in the UK. However, certain aspects of some animal-derived foods, particularly their fat and saturated fatty acid (SFA) contents, have led to concerns that these foods substantially contribute to the risk of CVD, the metabolic syndrome and other chronic diseases. In most parts of Europe dairy products are the greatest single dietary source of SFA. The fatty acid composition of various animal-derived foods is, however, not constant and can, in many cases, be enhanced by animal nutrition. In particular, milk fat with reduced concentrations of the C12-16 SFA and an increased concentration of 18:1 MUFA is achievable, although enrichment with very-long-chain n-3 PUFA is much less efficient. However, there is now evidence that some animal-derived foods (notably milk products) contain compounds that may actively promote long-term health, and research is urgently required to fully characterise the benefits associated with the consumption of these compounds and to understand how the levels in natural foods can be enhanced. It is also vital that the beneficial effects are not inadvertently destroyed in the process of reducing the concentrations of SFA. In the future the role of animal nutrition in creating foods closer to the optimum composition for long-term human health is likely to become increasingly important, but production of such foods on a scale that will substantially affect national diets will require political and financial incentives and great changes in the animal production industry.

Foods derived from animals: the impact of animal nutrition on their nutritive value and ability to sustain long-term health

Foods derived from domestic animals are a significant source of nutrients in the UK diet. However, certain aspects of some animal-derived foods, notably levels of saturated fatty acids, have given rise to concerns that these foods may contribute to the risk of cardiovascular disease, the metabolic syndrome and other conditions. However, the composition of the many animal-derived foods is not constant and can often be enhanced by manipulating the nutrition of the animal. This paper reviews these possibilities with particular attention to lipids, and draws attention to the fact that milk in particular, contains a number of compounds which may, for example, exert anti-carcinogenic effects. It is clear that the role of animal nutrition in creating foods closer to the optimum composition for long-term human health will not only be more relevant in the future, but will be vital in attempts to improve the health of the human population.

Production risk, pesticide use and GM crop technology in South Africa

Technology involving genetic modification of crops has the potential to make a contribution to rural poverty reduction in many developing countries. Thus far, pesticide-producing Bacillus thuringensis (Bt) varieties of cotton have been the main GM crops under cultivation in developing nations. Several studies have evaluated the farm-level performance of Bt varieties in comparison to conventional ones by estimating production technology, and have mostly found Bt technology to be very successful in raising output and/or reducing pesticide input. However, the production risk properties of this technology have not been studied, although they are likely to be important to risk-averse smallholders. This study investigates the output risk aspects of Bt technology by estimating two 'flexible risk' production function models allowing technology to independently affect the mean and higher moments of output. The first is the popular Just-Pope model and the second is a more general 'damage control' flexible risk model. The models are applied to cross-sectional data on South African smallholders, some of whom used Bt varieties. The results show no evidence that a 'risk-reduction' claim can be made for Bt technology. Indeed, there is some evidence to support the notion that the technology increases output risk, implying that simple (expected) profit computations used in past evaluations may overstate true benefits.

Factors affecting biomass production and nutritive value of Calliandra calothyrsus leaf as fodder for ruminants

Calliandra calothyrsus is a tree legume native to Mexico and Central America. The species has attracted considerable attention for its capacity to produce both fuelwood and foliage for either green manure or fodder. Its high content of proanthocyanidins (condensed tannins) and associated low digestibility has, however, limited its use as a feed for ruminants, and there is also a widespread perception that wilting the leaves further reduces their nutritive value. Nevertheless, there has been increasing uptake of calliandra as fodder in certain regions, notably the Central Highlands of Kenya. The present study, conducted in Embu, Kenya, investigated effects of provenance, wilting, cutting frequency and seasonal variation both in the laboratory (in vitro digestibility, crude protein, neutral detergent fibre, extractable and bound proanthocyanidins) and in on-station animal production trials with growing lambs and lactating goats. The local Kenyan landrace of calliandra (Embu) and a closely-related Guatemalan provenance (Patulul) were found to be significantly different, and superior, to a provenance from Nicaragua (San Ramon) in most of the laboratory traits measured, as well as in animal production and feed efficiency. Cutting frequency had no important effect on quality; and although all quality traits displayed seasonal variation there was little discernible pattern to this variation. Wilting had a much less negative effect than expected, and for lambs fed calliandra as a supplement to a low quality basal feed (maize stover), wilting was actually found to give higher live-weight gain and feed efficiency. Conversely, with a high quality basal diet (Napier grass) wilting enhanced intake but not live-weight gain, so feed efficiency was greater for fresh material. The difference between fresh and wilted leaves was not great enough to justify the current widespread recommendation that calliandra should always be fed fresh.

Use of airborne remote sensing to detect riverside Brassica rapa to aid in risk assessment of transgenic crops

High resolution descriptions of plant distribution have utility for many ecological applications but are especially useful for predictive modeling of gene flow from transgenic crops. Difficulty lies in the extrapolation errors that occur when limited ground survey data are scaled up to the landscape or national level. This problem is epitomized by the wide confidence limits generated in a previous attempt to describe the national abundance of riverside Brassica rapa (a wild relative of cultivated rapeseed) across the United Kingdom. Here, we assess the value of airborne remote sensing to locate B. rapa over large areas and so reduce the need for extrapolation. We describe results from flights over the river Nene in England acquired using Airborne Thematic Mapper (ATM) and Compact Airborne Spectrographic Imager (CASI) imagery, together with ground truth data. It proved possible to detect 97% of flowering B. rapa on the basis of spectral profiles. This included all stands of plants that occupied >2m square (>5 plants), which were detected using single-pixel classification. It also included very small populations (<5 flowering plants, 1-2m square) that generated mixed pixels, which were detected using spectral unmixing. The high detection accuracy for flowering B. rapa was coupled with a rather large false positive rate (43%). The latter could be reduced by using the image detections to target fieldwork to confirm species identity, or by acquiring additional remote sensing data such as laser altimetry or multitemporal imagery.

Activity patterns of urban red foxes (Vulpes vulpes) reduce the risk of traffic-induced mortality

Traffic collisions can be a major source of mortality in wild populations, and animals may be expected to exhibit behavioral mechanisms that reduce the risk associated with crossing roads. Animals living in urban areas in particular have to negotiate very dense road networks, often with high levels of traffic flow. We examined traffic-related mortality of red foxes (Vulpes vulpes) in the city of Bristol, UK, and the extent to which roads affected fox activity by comparing real and randomly generated patterns of movement. There were significant seasonal differences in the number of traffic-related fox deaths for different age and sex classes; peaks were associated with periods when individuals were likely to be moving through unfamiliar terrain and would have had to cross major roads. Mortality rates per unit road length increased with road magnitude. The number of roads crossed by foxes and the rate at which roads were crossed per hour of activity increased after midnight when traffic flow was lower. Adults and juveniles crossed 17% and 30% fewer roads, respectively, than expected from randomly generated movement. This highly mobile species appeared to reduce the mortality risk of minor category roads by changing its activity patterns, but it remained vulnerable to the effects of larger roads with higher traffic flows during periods associated with extraterritorial movements.

Repeated challenge with prion disease: The risk of infection and impact on incubation period

Natural exposure to prion disease is likely to occur throughout successive challenges, yet most experiments focus on single large doses of infectious material. We analyze the results from an experiment in which rodents were exposed to multiple doses of feed contaminated with the scrapie agent. We formally define hypotheses for how the doses combine in terms of statistical models. The competing hypotheses are that only the total dose of infectivity is important (cumulative model), doses act independently, or a general alternative that interaction between successive doses occurs (to raise or lower the risk of infection). We provide sample size calculations to distinguish these hypotheses. In the experiment, a fixed total dose has a significantly reduced probability of causing infection if the material is presented as multiple challenges, and as the time between challenges lengthens. Incubation periods are shorter and less variable if all material is consumed on one occasion. We show that the probability of infection is inconsistent with the hypothesis that each dose acts as a cumulative or independent challenge. The incubation periods are inconsistent with the independence hypothesis. Thus, although a trend exists for the risk of infection with prion disease to increase with repeated doses, it does so to a lesser degree than is expected if challenges combine independently or in a cumulative manner.

The tendering process and performance analysis of a public building project in Ghana

A case study on the tendering process and cost/time performance of a public building project in Ghana is conducted. Competitive bids submitted by five contractors for the project, in which contractors were required to prepare their own quantities, were analyzed to compare differences in their pricing levels and risk/requirement perceptions. Queries sent to the consultants at the tender stage were also analyzed to identify the significant areas of concern to contractors in relation to the tender documentation. The five bidding prices were significantly different. The queries submitted for clarifications were significantly different, although a few were similar. Using a before-and-after experiment, the expected cost/time estimate at the start of the project was compared to the actual cost/time values, i.e. what happened in the actual construction phase. The analysis showed that the project exceeded its expected cost by 18% and its planned time by 210%. Variations and inadequate design were the major reasons. Following an exploration of these issues, an alternative tendering mechanism is recommended to clients. A shift away from the conventional approach of awarding work based on price, and serious consideration of alternative procurement routes can help clients in Ghana obtain better value for money on their projects.

An experimental approach to project risk identification and prioritization

One of the aims of a broad ethnographic study into how the apportionment of risk influences pricing levels of contactors was to ascertain the significant risks affecting contractors in Ghana, and their impact on prices. To do this, in the context of contractors, the difference between expected and realized return on a project is the key dependent variable examined using documentary analyses and semi-structured interviews. Most work in this has focused on identifying and prioritising risks using relative importance indices generated from the analysis of questionnaire survey responses. However, this approach may be argued to constitute perceptions rather than direct measures of the project risk. Here, instead, project risk is investigated by examining two measures of the same quantity; one ‘before’ and one ‘after’ construction of a project has taken place. Risks events are identified by ascertaining the independent variables causing deviations between expected and actual rates of return. Risk impact is then measured by ascertaining additions or reductions to expected costs due to the occurrence of risk events. So far, data from eight substantially complete building projects indicates that consultants’ inefficiency, payment delays, subcontractor-related problems and changes in macroeconomic factors are significant risks affecting contractors in Ghana.

Green noise or green value? Measuring the effects of environmental certification on office values

This study investigates the price effects of environmental certification on commercial real estate assets. It is argued that there are likely to be three main drivers of price differences between certified and noncertified buildings. These are additional occupier benefits, lower holding costs for investors and a lower risk premium. Drawing upon the CoStar database of U.S. commercial real estate assets, hedonic regression analysis is used to measure the effect of certification on both rent and price. The results suggest that, compared to buildings in the same submarkets, eco-certified buildings have both a rental and sale price premium.