Testing reference dependence, loss aversion and diminishing sensitivity in Spanish tourism

Based on Tversky and Kahneman’s Prospect Theory, we test the existence of reference dependence, loss aversion and diminishing sensitivity in Spanish tourism. To do this, we incorporate the reference-dependent model into a Multinomial Logit Model with Random Parameters -which controls for heterogeneity- and apply it to a sample of vacation choices made by Spaniards. We find that the difference between reference price and actual price is considered to make decisions, confirming that reference dependence exists; that people react more strongly to price increases than to price decreases relative to their reference price, which represents evidence in favor of the loss aversion phenomenon; and that there is diminishing sensitivity for losses only, showing convexity for these negative values.

Efficient methods for empirical tests of behavioral economics theories in laboratory and field experiments

In the quest for a descriptive theory of decision-making, the rational actor model in economics imposes rather unrealistic expectations and abilities on human decision makers. The further we move from idealized scenarios, such as perfectly competitive markets, and ambitiously extend the reach of the theory to describe everyday decision making situations, the less sense these assumptions make. Behavioural economics has instead proposed models based on assumptions that are more psychologically realistic, with the aim of gaining more precision and descriptive power. Increased psychological realism, however, comes at the cost of a greater number of parameters and model complexity. Now there are a plethora of models, based on different assumptions, applicable in differing contextual settings, and selecting the right model to use tends to be an ad-hoc process. In this thesis, we develop optimal experimental design methods and evaluate different behavioral theories against evidence from lab and field experiments.

We look at evidence from controlled laboratory experiments. Subjects are presented with choices between monetary gambles or lotteries. Different decision-making theories evaluate the choices differently and would make distinct predictions about the subjects' choices. Theories whose predictions are inconsistent with the actual choices can be systematically eliminated. Behavioural theories can have multiple parameters requiring complex experimental designs with a very large number of possible choice tests. This imposes computational and economic constraints on using classical experimental design methods. We develop a methodology of adaptive tests: Bayesian Rapid Optimal Adaptive Designs (BROAD) that sequentially chooses the "most informative" test at each stage, and based on the response updates its posterior beliefs over the theories, which informs the next most informative test to run. BROAD utilizes the Equivalent Class Edge Cutting (EC²) criteria to select tests. We prove that the EC² criteria is adaptively submodular, which allows us to prove theoretical guarantees against the Bayes-optimal testing sequence even in the presence of noisy responses. In simulated ground-truth experiments, we find that the EC² criteria recovers the true hypotheses with significantly fewer tests than more widely used criteria such as Information Gain and Generalized Binary Search. We show, theoretically as well as experimentally, that surprisingly these popular criteria can perform poorly in the presence of noise, or subject errors. Furthermore, we use the adaptive submodular property of EC² to implement an accelerated greedy version of BROAD which leads to orders of magnitude speedup over other methods.

We use BROAD to perform two experiments. First, we compare the main classes of theories for decision-making under risk, namely: expected value, prospect theory, constant relative risk aversion (CRRA) and moments models. Subjects are given an initial endowment, and sequentially presented choices between two lotteries, with the possibility of losses. The lotteries are selected using BROAD, and 57 subjects from Caltech and UCLA are incentivized by randomly realizing one of the lotteries chosen. Aggregate posterior probabilities over the theories show limited evidence in favour of CRRA and moments' models. Classifying the subjects into types showed that most subjects are described by prospect theory, followed by expected value. Adaptive experimental design raises the possibility that subjects could engage in strategic manipulation, i.e. subjects could mask their true preferences and choose differently in order to obtain more favourable tests in later rounds thereby increasing their payoffs. We pay close attention to this problem; strategic manipulation is ruled out since it is infeasible in practice, and also since we do not find any signatures of it in our data.

In the second experiment, we compare the main theories of time preference: exponential discounting, hyperbolic discounting, "present bias" models: quasi-hyperbolic (α, β) discounting and fixed cost discounting, and generalized-hyperbolic discounting. 40 subjects from UCLA were given choices between 2 options: a smaller but more immediate payoff versus a larger but later payoff. We found very limited evidence for present bias models and hyperbolic discounting, and most subjects were classified as generalized hyperbolic discounting types, followed by exponential discounting.

In these models the passage of time is linear. We instead consider a psychological model where the perception of time is subjective. We prove that when the biological (subjective) time is positively dependent, it gives rise to hyperbolic discounting and temporal choice inconsistency.

We also test the predictions of behavioral theories in the "wild". We pay attention to prospect theory, which emerged as the dominant theory in our lab experiments of risky choice. Loss aversion and reference dependence predicts that consumers will behave in a uniquely distinct way than the standard rational model predicts. Specifically, loss aversion predicts that when an item is being offered at a discount, the demand for it will be greater than that explained by its price elasticity. Even more importantly, when the item is no longer discounted, demand for its close substitute would increase excessively. We tested this prediction using a discrete choice model with loss-averse utility function on data from a large eCommerce retailer. Not only did we identify loss aversion, but we also found that the effect decreased with consumers' experience. We outline the policy implications that consumer loss aversion entails, and strategies for competitive pricing.

In future work, BROAD can be widely applicable for testing different behavioural models, e.g. in social preference and game theory, and in different contextual settings. Additional measurements beyond choice data, including biological measurements such as skin conductance, can be used to more rapidly eliminate hypothesis and speed up model comparison. Discrete choice models also provide a framework for testing behavioural models with field data, and encourage combined lab-field experiments.

Essays in Applied and Labor Economics

This thesis consists of three self-contained papers. In the first paper I analyze the labor supply behavior of Bologna Pizza Delivery Vendors. Recent influential papers analyze labor supply behavior of taxi drivers (Camerer et al., 1997; and Crawford and Meng, 2011) and suggest that reference-dependence preferences have an important influence on drivers’ labor-supply decisions. Unlike previous papers, I am able to identify an exogenous and transitory change in labor demand. Using high frequency data on orders and rainfall as an exogenous demand shifter, I invariably find that reference-dependent preferences play no role in their labor’ supply decisions and the behavior of pizza vendors is perfectly consistent with the predictions of the standard model of labor’ supply. In the second paper, I investigate how the voting behavior of Members of Parliament is influenced by the Members seating nearby. By exploiting the random seating arrangements in the Icelandic Parliament, I show that being seated next to Members of a different party increases the probability of not being aligned with one’s own party. Using the exact spatial orientation of the peers, I provide evidence that supports the hypothesis that interaction is the main channel that explain these results. In the third paper, I provide an estimate of the trade flows that there would have been between the UK and Europe if the UK had joined the Euro. As an alternative approach to the standard log-linear gravity equation I employ the synthetic control method. I show that the aggregate trade flows between Britain and Europe would have been 13% higher if the UK had adopted the Euro.

Quasi-experimental evidence on the drivers of index-based livestock insurance demand in Southern Ethiopia

Microinsurance is widely considered an important tool for sustainable poverty reduction, especially in the face of increasing climate risk. Although index-based microinsurance, which should be free from the classical incentive problems, has attracted considerable attention, uptake rates have generally been weak in low-income rural communities. We explore the purchase patterns of index-based livestock insurance in southern Ethiopia, focusing in particular on the role of accurate product comprehension and price, including the prospective impact of temporary discount coupons on subsequent period demand due to price anchoring effects. We find that randomly distributed learning kits contribute to improving subjects' knowledge of the products; however, we do not find strong evidence that the improved knowledge per se induces greater uptake. We also find that reduced price due to randomly distributed discount coupons has an immediate, positive impact on uptake, without dampening subsequent period demand due to reference-dependence associated with price anchoring effects.

Testing prospect theory in students’ performance

This paper tests the existence of ‘reference dependence’ and ‘loss aversion’ in students’ academic performance. Accordingly, achieving a worse than expected academic performance would have a much stronger effect on students’ (dis)satisfaction than obtaining a better than expected grade. Although loss aversion is a well-established finding, some authors have demonstrated that it can be moderated – diminished, to be precise–. Within this line of research, we also examine whether the students’ emotional response (satisfaction/dissatisfaction) to their performance can be moderated by different musical stimuli. We design an experiment through which we test loss aversion in students’ performance with three conditions: ‘classical music’, ‘heavy music’ and ‘no music’. The empirical application supports the reference-dependence and loss aversion hypotheses (significant at p < 0.05), and the musical stimuli do have an influence on the students’ state of satisfaction with the grades (at p < 0.05). Analyzing students’ perceptions is vital to find the way they process information. Particularly, knowing the elements that can favour not only the academic performance of students but also their attitude towards certain results is fundamental. This study demonstrates that musical stimuli can modify the perceptions of a certain academic result: the effects of ‘positive’ and ‘negative’ surprises are higher or lower, not only in function of the size of these surprises, but also according to the musical stimulus received.

Time dependence of effective slip on textured hydrophobic surfaces

In this paper, we present results on water flow past randomly textured hydrophobic surfaces with relatively large surface features of the order of 50 µm. Direct shear stress measurements are made on these surfaces in a channel configuration. The measurements indicate that the flow rates required to maintain a shear stress value vary substantially with water immersion time. At small times after filling the channel with water, the flow rates are up to 30% higher compared with the reference hydrophilic surface. With time, the flow rate gradually decreases and in a few hours reaches a value that is nearly the same as the hydrophilic case. Calculations of the effective slip lengths indicate that it varies from about 50 µm at small times to nearly zero or “no slip” after a few hours. Large effective slip lengths on such hydrophobic surfaces are known to be caused by trapped air pockets in the crevices of the surface. In order to understand the time dependent effective slip length, direct visualization of trapped air pockets is made in stationary water using the principle of total internal reflection of light at the water-air interface of the air pockets. These visualizations indicate that the number of bright spots corresponding to the air pockets decreases with time. This type of gradual disappearance of the trapped air pockets is possibly the reason for the decrease in effective slip length with time in the flow experiments. From the practical point of usage of such surfaces to reduce pressure drop, say, in microchannels, this time scale of the order of 1 h for the reduction in slip length would be very crucial. It would ultimately decide the time over which the surface can usefully provide pressure drop reductions. ©2009 American Institute of Physics

Anomalous behaviour in the composition dependence of the photoacoustic properties of Si---As---Te glasses

The optical bandgap and thermal diffusivity of Si10AsxTe90−x (10 ≤ x ≤ 50) and Si15AsxTe85−x (5 ≤ x ≤ 40) glasses have been measured using the photoacoustic technique. The anomalous behaviour observed in these properties at the mean coordination number left angle bracketrright-pointing angle bracket = 2.60 is interpreted by reference to the formation and development of a layered structure in these glasses.

Dependence of Protein Adsorption on Wetting Behavior of UHMWPE-HA-Al2O3-CNT Hybrid Biocomposites

Ultrahigh-molecular-weight polyethylene (UHMWPE) is used as an articulating surface in total hip and knee joint replacement. In order to enhance long-term durability/wear resistance properties, UHMWPE-based polymer-ceramic hybrid composites are being developed. Surface properties such as wettability and protein adsorption alter with reinforcement or with change in surface chemistry. From this perspective, the wettability and protein adsorption behavior of compression-molded UHMWPE-hydroxyapatite (HA)-aluminum oxide (Al2O3)-carbon nanotube (CNT) composites were analyzed in conjunction with surface roughness. The combined effect of Al2O3 and CNT shows enhancement of the contact angle by similar to 37A degrees compared with the surface of the UHMWPE matrix reinforced with HA. In reference to unreinforced UHMWPE, protein adsorption density also increased by similar to 230% for 2 wt.%HA-5 wt.%Al2O3-2 wt.%CNT addition to UHMWPE. An important conclusion is that the polar and dispersion components of the surface free energy play a significant role in wetting and protein adsorption than do the total free energy or chemistry of the surface. The results of this study have major implications for the biocompatibility of these newly developed biocomposites.

Dependence of collision frequency on distance between two hard-sphere particles estimated by computer simulation

A Monte Carlo simulation is performed to study the dependence of collision frequency on interparticle distance for a system composed of two hard-sphere particles. The simulation quantitatively shows that the collision frequency drops down sharply as the distance between two particles increases. This characteristic provides a useful evidence for the collision-reaction dynamics of aggregation process for the two-particle system described in the other reference.

Some aspects of the ecology of the limnoplankton, with special reference to the phytoplankton. [Translation from: Svensk Botanisk Tidskrift 13(2) 129-163, 1919.]

This paper tries to develop more generally some fundamental bases for the ecological study of freshwater plankton. A special attention is given to the phytoplankton associations which can be separated out and made into groups according to their dependence upon changing environments. Plankton formations in different types of water bodies (ponds, lakes and rivers) are studied.

Review of size- and age-dependence in batch spawning: implications for stock assessment of fish species exhibiting indeterminate fecundity

Most assessments of fish stocks use some measure of the reproductive potential of a population, such as spawning biomass. However, the correlation between spawning biomass and reproductive potential is not always strong, and it likely is weakest in the tropics and subtropics, where species tend to exhibit indeterminate fecundity and release eggs in batches over a protracted spawning season. In such cases, computing annual reproductive output requires estimates of batch fecundity and the annual number of batches—the latter subject to spawning frequency and duration of spawning season. Batch fecundity is commonly measured by age (or size), but these other variables are not. Without the relevant data, the annual number of batches is assumed to be invariant across age. We reviewed the literature and found that this default assumption lacks empirical support because both spawning duration and spawning frequency generally increase with age or size. We demonstrate effects of this assumption on measures of reproductive value and spawning potential ratio, a metric commonly used to gauge stock status. Model applications showed substantial sensitivity to age dependence in the annual number of batches. If the annual number of batches increases with age but is incorrectly assumed to be constant, stock assessment models would tend to overestimate the biological reference points used for setting harvest rates. This study underscores the need to better understand the age- or size-dependent contrast in the annual number of batches, and we conclude that, for species without evidence to support invariance, the default assumption should be replaced with one that accounts for age- or size-dependence.

Age-dependence of urinary normal and modified nucleosides in childhood as determined by reversed-phase high-performance liquid chromatography

Modified nucleosides have been characterized as tumor markers for a number of malignant diseases. In order to use these markers in children, the age-dependence of the nucleoside levels in healthy children has to be established and taken into account in diagnostic decisions. In this study, the levels of 12 normal and modified nucleosides in urine of 166 healthy children and adolescents with an age between 1 day and 19 years are determined by reversed-phase HPLC, and age-dependent reference ranges are defined. The urinary nucleoside concentrations are related to the creatinine concentrations, which allows the use of randomly collected urine samples. All nucleoside levels in urine of children decrease with age, most pronounced during the first 4 years of life, and the age-dependence of the reference values of the individual nucleosides can be approximated by a mathematical function y = b(0) + b(1) (1/x) with the regression coefficients b(0) and b(1), the nucleoside levels y and the age x between 1 year and 19 years. In the very young children, the shifts in the nucleoside concentrations are more differentiated. Starting with low levels on the first day of life, the concentrations of all studied nucleosides rise up to an age of 1-2 months, when they reach their absolute maximum for all age periods, and then decrease. (C) 2004 Elsevier B.V. All rights reserved.

Characterizing Reference Locality in the WWW

As the World Wide Web (Web) is increasingly adopted as the infrastructure for large-scale distributed information systems, issues of performance modeling become ever more critical. In particular, locality of reference is an important property in the performance modeling of distributed information systems. In the case of the Web, understanding the nature of reference locality will help improve the design of middleware, such as caching, prefetching, and document dissemination systems. For example, good measurements of reference locality would allow us to generate synthetic reference streams with accurate performance characteristics, would allow us to compare empirically measured streams to explain differences, and would allow us to predict expected performance for system design and capacity planning. In this paper we propose models for both temporal and spatial locality of reference in streams of requests arriving at Web servers. We show that simple models based only on document popularity (likelihood of reference) are insufficient for capturing either temporal or spatial locality. Instead, we rely on an equivalent, but numerical, representation of a reference stream: a stack distance trace. We show that temporal locality can be characterized by the marginal distribution of the stack distance trace, and we propose models for typical distributions and compare their cache performance to our traces. We also show that spatial locality in a reference stream can be characterized using the notion of self-similarity. Self-similarity describes long-range correlations in the dataset, which is a property that previous researchers have found hard to incorporate into synthetic reference strings. We show that stack distance strings appear to be strongly self-similar, and we provide measurements of the degree of self-similarity in our traces. Finally, we discuss methods for generating synthetic Web traces that exhibit the properties of temporal and spatial locality that we measured in our data.

Setilement of motor accidents claims with special reference to Kerala

The accident toll on our road traffic is staggering. Obviously this appalling toll of life and.health represents heavy economic loss in addition to human tragedy. the enormous increase in the number of motor vehicles with its rash, negligent and reckless use by unscrupulous, inexperienced and dangerous drivers in the most miserably managed roads coupled with concomitant hazards would draw our attention that Accident Prevention, and Accident compensation are thoroughly two compatiable aims. Proposed solutions to the traffic Problems abound. Preventive efforts concentrated on each of the variables the driver, the road and the vehicle are all being initiated. Still it is a Will the .Motor Vehicles are not considered as dangerous machines. Motoring activity is found useful.A competent and specially trained police force has to be created to deal with the traffic offences in a more scientific ways.The term ‘legal representative needs to be defined on the constructive aspects of relation and dependence.Services of legal aid and public counsels shall necessarily be extended to the poor Motor Accident victims.Timely reporting and timely investigation of Motor Accidents cases will reduce the number of fraudulent claims. There are instances where cases are taken in to investigation after several months of occurrence.It is hoped that the suggestions made above as a result of the present study, if pwgninto practice, may make a humble contribution to the prevention sssof motor accidents and to a faster and speedier settlement of motor accident compensation claims.

Monte Carlo thermodynamic and structural properties of the TIP4P water model: dependence on the computational conditions

Classical Monte Carlo simulations were carried out on the NPT ensemble at 25°C and 1 atm, aiming to investigate the ability of the TIP4P water model [Jorgensen, Chandrasekhar, Madura, Impey and Klein; J. Chem. Phys., 79 (1983) 926] to reproduce the newest structural picture of liquid water. The results were compared with recent neutron diffraction data [Soper; Bruni and Ricci; J. Chem. Phys., 106 (1997) 247]. The influence of the computational conditions on the thermodynamic and structural results obtained with this model was also analyzed. The findings were compared with the original ones from Jorgensen et al [above-cited reference plus Mol. Phys., 56 (1985) 1381]. It is notice that the thermodynamic results are dependent on the boundary conditions used, whereas the usual radial distribution functions g(O/O(r)) and g(O/H(r)) do not depend on them.