Stock purchase and the weather: Individual differences

Evidence in psychology and finance suggests that lack of sunlight influences people’s moods. In this paper, using a sample of individual accounts from a large commercial bank, we document differential effects of cloud coverage on individuals’ tendencies to buy and sell equity. We find that men, low income, and young individuals are net buyers on cloudy days. These findings are consistent with widespread evidence suggesting that gambling is more pronounced within individuals suffering from mood disorder/depression, and the over-representation of men, low-income, and young persons in the population of gamblers.     

Individual decisions and household demand for consumption and leisure

The standard microeconomic assumption of a household utility function raises two theoretical problems: it contradicts methodological individualism and it ignores economic phenomena such as income and consumption sharing, division of labour, externalities and altruism within a household. This paper reviews two approaches, aggregation theory and the more recent non-unitary models, to compare the different properties that household consumption and leisure demands have to satisfy in the two contexts. The paper also discusses some recent empirical evidence that seems to encourage further investigation in the non-unitary framework.     

The fundamental problem of accounting

The fundamental problem of economic accounting is to determine a forward‐looking schedule of rentals, user costs or quasi‐rents to provide for the recovery of irreversible investments. The method derived herein relaxes some restrictive assumptions that are common in capital theory. There can be multiple forms of comprehensive capital. Accounting for all forms of capital, including tangible and intangible capital, is symmetrical. The analytical focus becomes one of fixities and frictions and not optimality. Rentals obey inequalities as opposed to marginal conditions. If discounted profit is positive, rentals, depreciation, and capital value are not unique.     

The macroeconomics of the labor market: three fundamental views

We distinguish and assess three fundamental views of the labor market regarding the movements in unemployment: (1) the frictionless equilibrium view; (2) the chain reaction theory, or prolonged adjustment view; and (3) the hysteresis view. While the frictionless view implies a clear compartmentalization between the short- and long-run, the hysteresis view implies that all the short-run fluctuations automatically turn into long-run changes in the unemployment rate. We assert the problems faced by these conceptions in explaining the diversity of labor market experiences across the OECD labor markets. We argue that the prolonged adjustment view can overcome these problems since it implies that the short, medium, and long-runs are interrelated, merging with one another along an intertemporal continuum.

The necessity of imperfect decisions

I construct a general model which neither postulates decisions are always optimal, nor that decision errors necessarily arise when ‘real world’ agents are involved. Nevertheless, I show that agents always have a positive marginal incentive to use some information imperfectly, but never to use all potential information even if they have costless access to perfect information about how to select every action. These results imply that in order for a decision problem to be internally consistent without simply postulating the extreme limit of perfect decisions, it must explicitly incorporate the effects of both information and decision errors on behavior.     

Location decisions: The role of uncertainty about consumer tastes

This paper analyzes to what extent firms make decisions about location based on uncertainty about consumer tastes. The model used in this analysis incorporates a linear city and quadratic consumer-transportation costs. In this framework, when firms choose locations, or in other words, choose the kind of product they are going to manufacture, they ignore the location, or real tastes, of their consumers. The existence of uncertainty raises the degree of product differentiation, because the anti-competitive effect that arises as distance from rivals increases counteracts the reduction in the degree of differentiation provided by the demand effect.     

减税:分析与抉择

自 1998年以后,在政府实行积极的财政政策应对通货紧缩的声浪中,有关减税的呼声和动议一直与我们相伴。每年一度的中央经济工作会议,几乎都要对是否减税做出相应的安排。特别是近两年,在税务部门加大征管力度、税收收入高速增长的背景下,关于减税的讨论再一次热烈起来了。仔细地梳理一下这 4年来关于减税话题的讨论,总的感觉是,认识越来越深入,视野越来越开阔,考虑越来越周全,结论也越来越贴近现实。现在,似乎到了对围绕减税展开的讨论加以总结并做出相应判断的时候。     

影响经济收敛的因素——微观最优与外部约束

发展经济学领域最具挑战性的课题之一是尝试理解落后国家是否可以以及如何追赶领先国家。本文从落后国家的最优选择以及其所面临的外部约束来考虑经济赶超的机制。主要包括:模仿能力及成本;合适技术的选择;对产权的保护;政府对经济的控制;储蓄对收敛的影响。文章最后对有关"后发优势"和"后发劣势"的争论进行一个简短的评论。     

The Theory of the Individual in Economics: Identity and Value

Fundamental to social provisioning is ensuring that community members have access to employment opportunities that pay living wages and sustain the environment. In a previous study, two of us (Underwood, Friesner and Cross 2014 Underwood, Daniel, Dan Friesner and Jason Cross. “Toward an Institutional Legitimation of Sustainability.” Journal of Economic Issues 48, 3 (2014): 870–885. [Google Scholar]) presented criteria for sustainable community economic development, a three-fold test to comparatively assess economic development policies: ecological holism, community centeredness, and institutional legitimacy. Applying this test generates an iterative, evolutionary process of economic development. Absent from these criteria is the concept of intention, as policy options are not “given,” but rather designed by self-interested groups to manipulate interpretations of these test criteria in advancement of their vested interests — outcomes which can be juxtaposed to the “interests of community.” Here, we integrate two additional principles: economic diversity and solidarity. Economic diversity emphasizes living wages in numerous industries to stabilize exogenous economic shocks. Solidarity, as a unit of socio-economic interdependence, stresses commonality of wellbeing within communities. Integrating solidarity and economic diversity into the criteria for sustainable community economic development improves policy design and outcomes that sustain the environment, while also providing living wage employment for community members.     

Pluralism and Anti-pluralism in Economics: The Atomistic Individual and Religious Fundamentalism

This short paper examines a possible connection between religion and economics in terms of the parallelism between the atomistic individual doctrine and the individual soul doctrine. The paper explores whether resistance to pluralism in economics as a methodological practice might be illuminated in terms of this connection. On this view, resistance to pluralism in economics is not a matter of economists holding methodological views about economics practice that are contrary to pluralism, but is rather a kind of anti-pluralism reflecting an intransigent defense of the atomistic individual view as a kind of core or ‘untouchable’ deep doctrine. Two arguments are advanced to demonstrate the parallelism between the atomistic individual doctrine and the individual soul doctrine.     

Individual versus group behavior and the role of the decision making procedure in gift-exchange experiments

We test for behavioral differences between groups and individuals in gift-exchange experiments. Related studies in economics establish group behavior as often closer to the standard game-theoretic equilibrium under the assumptions of rationality and selfishness. We show that this result may depend crucially on the decision making procedure within groups and the nature of the task. A novel experimental decision making protocol opens the black box of group decision making and allows tracking important features of the group interaction process. We are also able to show that acting in a group may shift initial individual choices.

The long and the short in migration decisions: an American case study

The author attempts an empirical analysis of the migration process. She starts with the assumption that migration involves an attempt to maximize long-term income and includes both micro-level aspects of individual's decisions to migrate and macro-level aspects, that is to say, aggregate migration flows. The model is used to analyze black internal migration in the United States between 1910 and 1970     

The role of personality traits in pension decisions: findings and policy recommendations

Many countries need to stimulate pension participation and contribution to ensure their citizens are prepared adequately for retirement. Identifying at-risk groups with tendencies of not joining pension plans will help governments target strategies to improve pension awareness and participation. This study investigates the role of personality traits in pension decision making using data from the UK Household Longitudinal Study. Our results demonstrate that Extraversion significantly correlates with non-participation in private pensions, including both employer run and personal pensions. Individuals who are high in Conscientiousness are more likely to participate and pay more into personal pensions. Openness to experience is negatively correlated with saving via personal pensions. Agreeableness and Extraversion correlate inversely with the amount contributed to personal plans. This paper discusses our findings in detail and offers policy implications which may help promote pension participation and ease the problem of old age poverty.     

Trees and decisions

Summary. The traditional model of sequential decision making, for instance, in extensive form games, is a tree. Most texts define a tree as a connected directed graph without loops and a distinguished node, called the root. But an abstract graph is not a domain for decision theory. Decision theory perceives of acts as functions from states to consequences. Sequential decisions, accordingly, get conceptualized by mappings from sets of states to sets of consequences. Thus, the question arises whether a natural definition of a tree can be given, where nodes are sets of states. We show that, indeed, trees can be defined as specific collections of sets. Without loss of generality the elements of these sets can be interpreted as representing plays. Therefore, the elements can serve as states and consequences at the same time.Received: 23 January 2003, Revised: 2 November 2003, JEL Classification Numbers: C72, D70. Correspondence to: Klaus RitzbergerWe are grateful to Larry Blume, Ariel Rubinstein, Jörgen Weibull, an anonymous referee, and seminar participants at the universities of Vienna, Salamanca, and Heidelberg for helpful comments. Financial support from the Austrian Science Fund (FWF) under project P15281 is also gratefully acknowledged.     

The impact of financial factors on export decisions: The evidence from Turkey

The paper tests the validity of the financial constraint hypothesis in Turkey. In this context, we apply a panel logit model by using the dataset of firms whose stocks are traded in Istanbul Stock Exchange (ISE) for the period 2000–2011. As a result of analysis, we find that the financial constraint hypothesis is not valid in Turkey. The findings are crucial for firms in Turkey since the hypothesis has not been tested before for Turkey.     

The Disposition Effect and Individual Investor Decisions: The Roles of Regret and Counterfactual Alternatives

Recent studies have documented a strong tendency for individual investors to delay realizing capital losses, while realizing gains prematurely (Odean [1996], Shefrin and Statman [1985], Weber and Camerer [1996]). This tendency has been termed the "disposition effect." The disposition effect is inconsistent with normative approaches to stock sales, such as those based on tax losses (see, for example, Constantinides [1983]). We surveyed individual investors, and found that more respondents reported regret about holding on to a losing stock too long than about selling a winning stock too soon. This finding suggests that individual investors are consistently engaging in behavior that they have been warned can cost them money and that they regret later. Two additional experiments confirm the disposition effect and the role of regret, and offer evidence about the role of an agent (broker) in the assignment of blame and regret. We show that investor satisfaction and regret are not simply functions of outcome, but are influenced by counterfactual alternatives and the type of action taken (holding versus selling). We suggest that the disposition effect may be highly related to reduction of anticipated regret.     

Trade in technology : Management decisions and pricing

In this article, a model of technology price estimation is developed. The process of trade in technology is seen as resulting in a partial transfer of the market in which the seller of the technology had previously sold his product to the buyer of the technology. Profit decrease of the seller because of market cuts is taken as the basis for the pricing of technology. The random nature of the useful lifetime of the technology is taken into account, and the influence of seller-firm characteristics on the technology price is analyzed.     

Public decisions: Solidarity and the status quo

A public decision model specifies a set of alternatives, a variable population, and a common set of admissible preferences. We study the implications of the principle of solidarity, for social choice functions in all such models. The principle says that when the environment changes, all agents not responsible for the change should either all weakly win, or all weakly lose. Under weak additional requirements, but regardless the domain of preferences, each of two formulations of this principle, population-monotonicity and replacement-domination, imply coalition-strategy-proofness; that the choice only depends on the set of preferences that are present in the society, but not on the number, nor on the labels of agents having particular preferences; and that there exists an alternative always weakly Pareto-dominated by the alternative selected by the rule. Replacement-domination is generally at least as strong as population-monotonicity.