Asymmetries in Business Cycles

Esta disertación busca estudiar los mecanismos de transmisión que vinculan el comportamiento de agentes y firmas con las asimetrías presentes en los ciclos económicos. Para lograr esto, se construyeron tres modelos DSGE. El en primer capítulo, el supuesto de función cuadrática simétrica de ajuste de la inversión fue removido, y el modelo canónico RBC fue reformulado suponiendo que des-invertir es más costoso que invertir una unidad de capital físico. En el segundo capítulo, la contribución más importante de esta disertación es presentada: la construcción de una función de utilidad general que anida aversión a la pérdida, aversión al riesgo y formación de hábitos, por medio de una función de transición suave. La razón para hacerlo así es el hecho de que los individuos son aversos a la pérdidad en recesiones, y son aversos al riesgo en auges. En el tercer capítulo, las asimetrías en los ciclos económicos son analizadas junto con ajuste asimétrico en precios y salarios en un contexto neokeynesiano, con el fin de encontrar una explicación teórica de la bien documentada asimetría presente en la Curva de Phillips.

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.

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.

Essays in behavioral and neuro-economics

This thesis examines foundational questions in behavioral economics—also called psychology and economics—and the neural foundations of varied sources of utility. We have three primary aims: First, to provide the field of behavioral economics with psychological theories of behavior that are derived from neuroscience and to use those theories to identify novel evidence for behavioral biases. Second, we provide neural and micro foundations of behavioral preferences that give rise to well-documented empirical phenomena in behavioral economics. Finally, we show how a deep understanding of the neural foundations of these behavioral preferences can feed back into our theories of social preferences and reference-dependent utility.

The first chapter focuses on classical conditioning and its application in identifying the psychological underpinnings of a pricing phenomenon. We return to classical conditioning again in the third chapter where we use fMRI to identify varied sources of utility—here, reference dependent versus direct utility—and cross-validate our interpretation with a conditioning experiment. The second chapter engages social preferences and, more broadly, causative utility (wherein the decision-maker derives utility from making or avoiding particular choices).

Exploring users inter-temporal preferences for measuring transport social equity effects

There exist different ways for defining a welfare function. Traditionally, welfare economic theory foundation is based on the Net Present Value (NPV) calculation where the time dependent preferences of considered agents are taken into account. However, the time preferences, remains a controversial subject. Currently, the traditional approach employs a unique discount rate for various agents. Nevertheless, this way of discounting appears inconsistent with sustainable development. New research work suggests that the discount rate may not be a homogeneous value. The discount rates may change following the individual’s preferences. A significant body of evidence suggests that people do not behave following a constant discount rate. In fact, UK Government has quickly recognized the power of the arguments for time-varying rates, as it has done in its official guidance to Ministries on the appraisal of investments and policies. Other authors deal with not just time preference but with uncertainty about future income (precautionary saving). In a situation in which economic growth rates are similar across time periods, the rationale for declining social optimal discount rates is driven by the preferences of the individuals in the economy, rather than expectations of growth. However, these approaches have been mainly focused on long-term policies where intergenerational risks may appear. The traditional cost-benefit analysis (CBA) uses a unique discount rate derived from market interest rates or investment rates of return for discounting the costs and benefits of all social agents included in the CBA. However, recent literature showed that a more adequate measure of social benefit is possible by using different discount rates including inter-temporal preferences rate of users, private investment discount rate and intertemporal preferences rate of government. Actually, the costs of opportunity may differ amongst individuals, firms, governments, or society in general, as do the returns on savings. In general, the firms or operators require an investment rate linked to the current return on savings, while the discount rate of consumers-users depends on their time preferences with respect of the current and the future consumption, as well as society can take into account the intergenerational well-being, adopting a lower discount rate for today’s generation. Time discount rate of social actors (users, operators, government and society) places a lower value in a future gain, but the uncertainty about future income strongly determines the individual preferences. These time and uncertainty depends on preferences and should be integrated into a transport policy formulation that may have significant social impacts. The discount rate of a user cannot be the same than the operator’s discount rate. The preferences of both are different. In addition, another school of thought suggests that people, such as a social group, may have different attitudes towards future costs and benefits. Particularly, the users have different discount rates related to their income. Some research work tried to modify user discount rates using a compensating weight which represents the inverse of household income level. The inter-temporal preferences are a proxy of the willingness to pay during the time. Its consideration is important in order to make acceptable or not a policy or investment

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.

Non-Deteriorating Choice without Full Transitivity

Although the theory of greatest-element rationalizability and maximal-element rationalizability under general domains and without full transitivity of rationalizing relations is well-developed in the literature, these standard notions of rational choice are often considered to be too demanding. An alternative definition of rationality of choice is that of non-deteriorating choice, which requires that the chosen alternatives must be judged at least as good as a reference alternative. In game theory, this definition is well-known under the name of individual rationality when the reference alternative is construed to be the status quo. This alternative form of rationality of individual and social choice is characterized in this paper on general domains and without full transitivity of rationalizing relations.

Choix de portefeuille de grande taille et mesures de risque pour preneurs de décision pessimistes

Cette thèse de doctorat consiste en trois chapitres qui traitent des sujets de choix de portefeuilles de grande taille, et de mesure de risque. Le premier chapitre traite du problème d’erreur d’estimation dans les portefeuilles de grande taille, et utilise le cadre d'analyse moyenne-variance. Le second chapitre explore l'importance du risque de devise pour les portefeuilles d'actifs domestiques, et étudie les liens entre la stabilité des poids de portefeuille de grande taille et le risque de devise. Pour finir, sous l'hypothèse que le preneur de décision est pessimiste, le troisième chapitre dérive la prime de risque, une mesure du pessimisme, et propose une méthodologie pour estimer les mesures dérivées. Le premier chapitre améliore le choix optimal de portefeuille dans le cadre du principe moyenne-variance de Markowitz (1952). Ceci est motivé par les résultats très décevants obtenus, lorsque la moyenne et la variance sont remplacées par leurs estimations empiriques. Ce problème est amplifié lorsque le nombre d’actifs est grand et que la matrice de covariance empirique est singulière ou presque singulière. Dans ce chapitre, nous examinons quatre techniques de régularisation pour stabiliser l’inverse de la matrice de covariance: le ridge, spectral cut-off, Landweber-Fridman et LARS Lasso. Ces méthodes font chacune intervenir un paramètre d’ajustement, qui doit être sélectionné. La contribution principale de cette partie, est de dériver une méthode basée uniquement sur les données pour sélectionner le paramètre de régularisation de manière optimale, i.e. pour minimiser la perte espérée d’utilité. Précisément, un critère de validation croisée qui prend une même forme pour les quatre méthodes de régularisation est dérivé. Les règles régularisées obtenues sont alors comparées à la règle utilisant directement les données et à la stratégie naïve 1/N, selon leur perte espérée d’utilité et leur ratio de Sharpe. Ces performances sont mesurée dans l’échantillon (in-sample) et hors-échantillon (out-of-sample) en considérant différentes tailles d’échantillon et nombre d’actifs. Des simulations et de l’illustration empirique menées, il ressort principalement que la régularisation de la matrice de covariance améliore de manière significative la règle de Markowitz basée sur les données, et donne de meilleurs résultats que le portefeuille naïf, surtout dans les cas le problème d’erreur d’estimation est très sévère. Dans le second chapitre, nous investiguons dans quelle mesure, les portefeuilles optimaux et stables d'actifs domestiques, peuvent réduire ou éliminer le risque de devise. Pour cela nous utilisons des rendements mensuelles de 48 industries américaines, au cours de la période 1976-2008. Pour résoudre les problèmes d'instabilité inhérents aux portefeuilles de grandes tailles, nous adoptons la méthode de régularisation spectral cut-off. Ceci aboutit à une famille de portefeuilles optimaux et stables, en permettant aux investisseurs de choisir différents pourcentages des composantes principales (ou dégrées de stabilité). Nos tests empiriques sont basés sur un modèle International d'évaluation d'actifs financiers (IAPM). Dans ce modèle, le risque de devise est décomposé en deux facteurs représentant les devises des pays industrialisés d'une part, et celles des pays émergents d'autres part. Nos résultats indiquent que le risque de devise est primé et varie à travers le temps pour les portefeuilles stables de risque minimum. De plus ces stratégies conduisent à une réduction significative de l'exposition au risque de change, tandis que la contribution de la prime risque de change reste en moyenne inchangée. Les poids de portefeuille optimaux sont une alternative aux poids de capitalisation boursière. Par conséquent ce chapitre complète la littérature selon laquelle la prime de risque est importante au niveau de l'industrie et au niveau national dans la plupart des pays. Dans le dernier chapitre, nous dérivons une mesure de la prime de risque pour des préférences dépendent du rang et proposons une mesure du degré de pessimisme, étant donné une fonction de distorsion. Les mesures introduites généralisent la mesure de prime de risque dérivée dans le cadre de la théorie de l'utilité espérée, qui est fréquemment violée aussi bien dans des situations expérimentales que dans des situations réelles. Dans la grande famille des préférences considérées, une attention particulière est accordée à la CVaR (valeur à risque conditionnelle). Cette dernière mesure de risque est de plus en plus utilisée pour la construction de portefeuilles et est préconisée pour compléter la VaR (valeur à risque) utilisée depuis 1996 par le comité de Bâle. De plus, nous fournissons le cadre statistique nécessaire pour faire de l’inférence sur les mesures proposées. Pour finir, les propriétés des estimateurs proposés sont évaluées à travers une étude Monte-Carlo, et une illustration empirique en utilisant les rendements journaliers du marché boursier américain sur de la période 2000-2011.

Libertades individuales y acción colectiva

Este libro resulta de una lectura crítica de la historia y la evolución que han tenido importantes discusiones teoricas acerca del liberalismo y la acción colectiva. Se destacan algunas relaciones entre los aportes de diversos autores de la economía, la sociología, la filosofía, la ciencia política y la psicología. En especial se ofrece una presentación analítica de algunas de las relaciones más relevantes entre las libertades individuales y las oportunidades factibles en procesos de escogencia y de acción individual y colectiva. La propia cosecha del autor permite seguir tres hallazgos, los cuales pueden generar nuevas perspectivas para investigadores interesados en estos temas, estos son: una propuesta conceptual sobre las características y los requerimientos de la libertad individual.

Ensaios sobre o fator estocástico de descontos

Este trabalho propõe maneiras alternativas para a estimação consistente de uma medida abstrata, crucial para o estudo de decisões intertemporais, o qual é central a grande parte dos estudos em macroeconomia e finanças: o Fator Estocástico de Descontos (SDF, sigla em Inglês). Pelo emprego da Equação de Apreçamento constrói-se um inédito estimador consistente do SDF que depende do fato de que seu logaritmo é comum a todos os ativos de uma economia. O estimador resultante é muito simples de se calcular, não depende de fortes hipóteses econômicas, é adequado ao teste de diversas especificações de preferência e para a investigação de paradoxos de substituição intertemporal, e pode ser usado como base para a construção de um estimador para a taxa livre de risco. Alternativas para a estratégia de identificação são aplicadas e um paralelo entre elas e estratégias de outras metodologias é traçado. Adicionando estrutura ao ambiente inicial, são apresentadas duas situações onde a distribuição assintótica pode ser derivada. Finalmente, as metodologias propostas são aplicadas a conjuntos de dados dos EUA e do Brasil. Especificações de preferência usualmente empregadas na literatura, bem como uma classe de preferências dependentes do estado, são testadas. Os resultados são particularmente interessantes para a economia americana. A aplicação de teste formais não rejeita especificações de preferências comuns na literatura e estimativas para o coeficiente relativo de aversão ao risco se encontram entre 1 e 2, e são estatisticamente indistinguíveis de 1. Adicionalmente, para a classe de preferência s dependentes do estado, trajetórias altamente dinâmicas são estimadas para a tal coeficiente, as trajetórias são confinadas ao intervalo [1,15, 2,05] e se rejeita a hipótese de uma trajetória constante.

Zazen meditation and no-task resting EEG compared with LORETA intracortical source localization

Meditation is a self-induced and willfully initiated practice that alters the state of consciousness. The meditation practice of Zazen, like many other meditation practices, aims at disregarding intrusive thoughts while controlling body posture. It is an open monitoring meditation characterized by detached moment-to-moment awareness and reduced conceptual thinking and self-reference. Which brain areas differ in electric activity during Zazen compared to task-free resting? Since scalp electroencephalography (EEG) waveforms are reference-dependent, conclusions about the localization of active brain areas are ambiguous. Computing intracerebral source models from the scalp EEG data solves this problem. In the present study, we applied source modeling using low resolution brain electromagnetic tomography (LORETA) to 58-channel scalp EEG data recorded from 15 experienced Zen meditators during Zazen and no-task resting. Zazen compared to no-task resting showed increased alpha-1 and alpha-2 frequency activity in an exclusively right-lateralized cluster extending from prefrontal areas including the insula to parts of the somatosensory and motor cortices and temporal areas. Zazen also showed decreased alpha and beta-2 activity in the left angular gyrus and decreased beta-1 and beta-2 activity in a large bilateral posterior cluster comprising the visual cortex, the posterior cingulate cortex and the parietal cortex. The results include parts of the default mode network and suggest enhanced automatic memory and emotion processing, reduced conceptual thinking and self-reference on a less judgmental, i.e., more detached moment-to-moment basis during Zazen compared to no-task resting.

Direct versus indirect channels: Differentiated loss aversion in a high‐involvement, non‐frequently purchased hedonic product

Purpose – This article aims to investigate whether intermediaries reduce loss aversion in the context of a high-involvement non-frequently purchased hedonic product (tourism packages). Design/methodology/approach – The study incorporates the reference-dependent model into a multinomial logit model with random parameters, which controls for heterogeneity and allows representation of different correlation patterns between non-independent alternatives. Findings – Differentiated loss aversion is found: consumers buying high-involvement non-frequently purchased hedonic products are less loss averse when using an intermediary than when dealing with each provider separately and booking their services independently. This result can be taken as identifying consumer-based added value provided by the intermediaries. Practical implications – Knowing the effect of an increase in their prices is crucial for tourism collective brands (e.g. “sun and sea”, “inland”, “green destinations”, “World Heritage destinations”). This is especially applicable nowadays on account of the fact that many destinations have lowered prices to attract tourists (although, in the future, they will have to put prices back up to their normal levels). The negative effect of raising prices can be absorbed more easily via indirect channels when compared to individual providers, as the influence of loss aversion is lower for the former than the latter. The key implication is that intermediaries can – and should – add value in competition with direct e-tailing. Originality/value – Research on loss aversion in retailing has been prolific, exclusively focused on low-involvement and frequently purchased products without distinguishing the direct or indirect character of the distribution channel. However, less is known about other types of products such as high-involvement non-frequently purchased hedonic products. This article focuses on the latter and analyzes different patterns of loss aversion in direct and indirect channels.

Divided attention, selective attention and drawing: processing preferences in Williams syndrome are dependent on the task administered

The visuo-spatial abilities of individuals with Williams syndrome (WS) have consistently been shown to be generally weak. These poor visuo-spatial abilities have been ascribed to a local processing bias by some [R. Rossen, E.S. Klima, U. Bellugi, A. Bihrle, W. Jones, Interaction between language and cognition: evidence from Williams syndrome, in: J. Beitchman, N. Cohen, M. Konstantareas, R. Tannock (Eds.), Language, Learning and Behaviour disorders: Developmental, Behavioural and Clinical Perspectives, Cambridge University Press, New York, 1996, pp. 367-392] and conversely, to a global processing bias by others [Psychol. Sci. 10 (1999) 453]. In this study, two identification versions and one drawing version of the Navon hierarchical processing task, a non-verbal task, were employed to investigate this apparent contradiction. The two identification tasks were administered to 21 individuals with WS, 21 typically developing individuals, matched by non-verbal ability, and 21 adult participants matched to the WS group by mean chronological age (CA). The third, drawing task was administered to the WS group and the typically developing (TD) controls only. It was hypothesised that the WS group would show differential processing biases depending on the type of processing the task was measuring. Results from two identification versions of the Navon task measuring divided and selective attention showed that the WS group experienced equal interference from global to local as from local to global levels, and did not show an advantage of one level over another. This pattern of performance was broadly comparable to that of the control groups. The third task, a drawing version of the Navon task, revealed that individuals with WS were significantly better at drawing the local form in comparison to the global figure, whereas the typically developing control group did not show a bias towards either level. In summary, this study demonstrates that individuals with WS do not have a local or a global processing bias when asked to identify stimuli, but do show a local bias in their drawing abilities. This contrast may explain the apparently contrasting findings from previous studies. (C) 2002 Elsevier Science Ltd. All rights reserved.

Context-dependent visual preferences in starlings and blue tits: mate choice and light environment

There is considerable interest in the role that ultraviolet (UV) cues play in the foraging and mate choice decisions of birds. However, with the exception of the zebra finch, Taeniopygia guttata, it is not yet clear whether ultraviolet preferences are context specific, or whether birds show a general preference for full-avian-spectrum environments 320-700 nm) irrespective of the activity in which they are engaged. We investigated whether European starlings, Sturnus vulgaris, and blue tits, Parus caeruleus, show general (nonresource based) or context-specific preferences for full-spectrum environments. We found that neither species showed a general preference for UV-present (UV+) over UV-deficient (UV-) environments, when those environments contained no resources (experiment 1). Furthermore, neither species showed a UV+ preference when cages contained food, water and perches (starlings; experiment 2) or food, perches and heterospecifics (blue tits; Hunt et al. 1999. Animal Behaviour, 58, 809-815). However, both species did show highly significant preferences for UV+ conditions when viewing potential mates. Such experiments are necessary before one can conclude that particular wavebands have specific relevance to mate choice. In fact, our results suggest that the importance of particular wavelength compositions do indeed vary with behavioural context. (C) 2002 The Association for the Study of Animal Behaviour.