Aggregation of multiple prior opinions

Experts are asked to provide their advice in a situation of uncertainty. They adopt the decision maker?s utility function, but each has a potentially different set of prior probabilities, and so does the decision maker. The decision maker and the experts maximize the minimal expected utility with respect to their sets of priors. We show that a natural Pareto condition is equivalent to the existence of a set Λ of probability vectors over the experts, interpreted as possible allocations of weights to the experts, such that (i) the decision maker?s set of priors is precisely all the weighted-averages of priors, where an expert?s prior is taken from her set and the weight vector is taken from Λ; (ii) the decision maker?s valuation of an act is the minimal weighted valuation, over all weight vectors in Λ, of the experts? valuations.     

Russian experts: missing actors of the budget process

Abstract

This article provides an examination of the role of experts in the Russian budget process. Experts are those whose role is based on specialised knowledge and technical skills, rather than affiliation to an agency, association or political party. Ideally their contributions are impartial. In the first part of the article the channels of expert influence are described, primarily within the executive branch. Features are found in these channels that mean that impartial advice is not always guaranteed. In the second part, on the basis of a survey of experts, the answers to two questions are sought: whether they feel that impartial advice is expected of them and whether they provide it. There are negative elements in the responses on both counts, suggesting that despite some evidence of demand for such advice on the part of policy-makers, expert advice is often not impartial.     

GENERAL EQUILIBRIUM ANALYSIS OF OVERLAPPING GENERATIONS WITH HETEROGENEOUS TIME PREFERENCES

The overlapping generations model presented herein requires incorporation of exactly three periods in which one lives, but makes intertemporal decision‐making twice, neither once nor three times. Single decision‐making at the outset, none thereafter, ignores the fact that one makes decisions every day anew as long as tomorrow exists. Incorporating such observations most simply requires decisions to be made at the first period and the second, but not at the third or last period. Our model reveals how the Mabiki (infanticides) and the Narayama (elderlycides) can occur simultaneously. We also find conditions under which child‐indulgence and parental overprotection called sunekajiri might be reckoned a virtue.     

Informational and Monetary Lobbying: Expert Politicians,Good Decisions?

This paper finds that the strategic interaction between opposing interest groups depends on the decision maker's expertise. If the costs to provide information are sufficiently low, then the decision quality is nonmonotonic in the politician's expertise. An expert may attract less informational lobbying and make worse decisions than a politician who is ex ante endowed with less information and therefore less predisposed to a particular policy.     

Financial advice and individual investors’ investment decisions

Findings from previous studies generally indicate that relying on advice from financial advisors is associated with investment decisions. This study uses data from the 2013 Survey of Consumer Finances (SCF) to mainly investigate three types of advisors: (a) financial planners, (b) accountants, and (c) lawyers. Getting investment advice from financial planners is found to be positively associated with stock ownership, while this relationship is negative for individual investors relying on advice from lawyers. Evidence from this study also suggests that some personal characteristics, such as age, education, risk tolerance may play a key role in shaping individual investors’ investment decisions.     

Harmful lie aversion and lie discovery in noisy expert advice games

This study tests whether individuals are reluctant to tell lies, or perhaps only “harmful lies”, in a previously untested environment: an expert sending a message to a decision maker whose interpretation of that message is subject to error, i.e. a noisy sender–receiver game. In the Aligned treatment, the expert can send a “white lie” to the receiver, eliminating the negative effects of noise and improving both parties’ payoffs. In the Conflict treatment, lies are harmful and the inability to commit to truthtelling destroys all meaningful communication in equilibrium unless there is a cost of lying. In the experiment, receivers are overly trusting and experts learn to take advantage of this. As experts gain experience they tell stronger and more frequent lies in both treatments, consistent with models of reinforcement learning. The findings suggest that neither harmful nor universal lie aversion is a factor when communication is noisy, provided individuals have time to discover their personal benefits of lies.     

Social learning and costly information acquisition

Summary. Short-lived agents want to predict a random variable q\theta and have to decide how much effort to devote to collect private information and consequently how much to rely on public information. The latter is just a noisy average of past predictions. It is shown that costly information acquisition prevents an unbounded accumulation of public information if (and only if) the marginal cost to acquire information is positive at zero (C￠(0) > 0)(C^\prime (0) > 0). When C￠(0) = 0C^\prime (0) = 0 public precision at period n, _boxclose_boxclose\tau_n, tends to infinity with n but the rate of convergence of public information to q\theta is slowed down with respect to the exogenous information case. At the market outcome agents acquire too little private information. This happens either with respect to a (decentralized) first best benchmark or, for n large, with respect to a (decentralized) second best benchmark. For high discount factors the limit point of market public precision always falls short of the welfare benchmarks whenever C￠(0) > 0C^\prime (0) > 0. In the extreme, as the discount factor tends to one public precision tends to infinity in the welfare-optimal programs while it remains bounded at the market solution. Otherwise, if C￠(0) = 0C^\prime (0) = 0 public precision accumulates in an unbounded way both at the first and second best solutions. More public information may hurt at either the market or second best solutions.     

The UK technology foresight programme: An assessment of expert estimates

Since the early 1990s, ‘Technology Foresight’ exercises with special emphasis on the use of Delphi surveys have played an important role in science and technology (S + T) policy across Europe in an effort to focus resource allocation. Yet, none of the estimates made in the European Delphi surveys have been formally assessed in retrospect, while this process has been incorporated into the Japanese surveys since 1996. Taking the UK Technology Foresight Programme, this research sets out to assess the estimates of three of the fifteen panel Delphi surveys. Whilst on average 2/3 of Delphi statements were predicted to be realised by 2004, it will be shown that only a fraction of these statements had been realised by 2006. Based on the evidence collected from the published panel reports, the ‘Hindsight on Foresight’ survey conducted by OST in 1995 and interviews with panel members, it will be argued that the overwhelming majority of estimates were overly optimistic. While optimism and strategic gaming of experts is the most convincing explanation for these results, process factors were also explored, including the quality of expert panels used, the Delphi statements and the respondents of the Delphi questionnaire. It is argued that at least the issue of short-range optimism and strategic gaming of experts should be addressed in future Delphi exercises, as decision makers relying on expert advice cannot deal with this issue alone.     

Viewpoint: The human capital approach to inference

The purpose of this essay is to discuss two approaches to inference and how “human capital” can provide a way to combine them. The first approach, ubiquitous in economics, is based upon the Rubin–Holland potential outcomes model and relies upon randomized treatment to measure the causal effect of choice. The second approach, widely used in the pattern recognition and machine learning literatures, assumes that choice conditional upon current information is optimal (or at least high quality), and then provides techniques to generalize observed choice to new cases. The “human capital” approach combines these methods by using observed decisions by experts to reduce the dimensionality of the feature space and allow the categorization of decisions by their propensity score. The fact that the human capital of experts is heterogeneous implies that errors in decision making are inevitable. Moreover, under the appropriate conditions, these decisions are random conditional upon the propensity score. This in turn allows us to identify the conditional average treatment effect for a wider class of situations than would be possible with randomized control trials. This point is illustrated with data from medical decision making in the context of treating depression, heart disease and adverse childbirth events.     

Measuring and combating corruption

Corruption thrives on misinformation and secrecy. In the Global Corruption Report 2003 , Transparency International ( TI ) puts access to information at the top of its agenda. TI catalogues a climate of mistrust that is working against the interests of shareholders and employees in the market economy, and against the interests of the developing world when economic and business decisions are taken on the basis of the size of a kickback rather than quality, competence and value for money. A sustainable and prosperous society requires a national integrity system based on the rule of law, checks and balances, and a thriving independent media and civil society.     

Risk aversion and framing effects

We present a new experimental evidence of how framing affects decisions in the context of a lottery choice experiment for measuring risk aversion. We investigate framing effects by replicating the Holt and Laury’s (Am. Econ. Rev. 92:1644–1655, 2002) procedure for measuring risk aversion under various frames. We first examine treatments where participants are confronted with the 10 decisions to be made either simultaneously or sequentially. The second treatment variable is the order of appearance of the ten lottery pairs. Probabilities of winning are ranked either in increasing, decreasing, or in random order. Lastly, payoffs were increased by a factor of ten in additional treatments. The rate of inconsistencies was significantly higher in sequential than in simultaneous treatment, in increasing and random than in decreasing treatment. Both experience and salient incentives induce a dramatic decrease in inconsistent behaviors. On the other hand, risk aversion was significantly higher in sequential than in simultaneous treatment, in decreasing and random than in increasing treatment, in high than in low payoff condition. These findings suggest that subjects use available information which has no value for normative theories, like throwing a glance at the whole connected set of pairwise choices before making each decision in a connected set of lottery pairs.     

Geographical and industrial spillovers in entry decisions across export markets

This article addresses sequential entry decisions in export markets. It focuses on externalities derived from previous export activity in countries close to those for which a potential entry decision is made (geographical spillovers) and externalities derived from previous presence of other firms in the same industry (industrial spillovers). The empirical analysis uses Spanish microdata for the period 2000–2010 in a firm decision model that also integrates country and industry characteristics. The results suggest that these two types of spillovers have a positive effect in explaining entry decisions in new export markets, though both are smaller in magnitude than the effects coming from previous presence in the same specific destination.     

Decentralized decision-making in a large team with local information

We study a problem involving a team of agents each associated with a node in a chain. Each agent makes a decision that influences only his own cost and those of adjacent agents. Prior to making his decision, each agent observes only the cost structure associated with nodes that can be reached by traversing no more than r arcs. Decisions are selected without any coordination, with the common objective of minimizing average cost among agents. We consider such decisions decentralized since agents act based on different information. Cost incurred by an optimal centralized strategy, in which a single decision-maker has access to all information and dictates all decisions, is employed as a performance benchmark. We show that, to maintain a certain level of performance relative to optimal centralized strategies, decentralized deterministic strategies require r to be proportional to the number of agents. This means that the amount of information accessible to any agent should be proportional to the total number of agents. Stochastic strategies, on the other hand, decentralize more gracefully—the amount of information required by each agent is independent of the total number of agents.     

Multiple Criteria Decision Making: A Case Study of the Columbia River Salmon Recovery Plan

A common problem faced by decision makers is choosing the best alternative from among many. Traditionally, such decisions in the public arena were made using benefit-cost analysis, which involves the conversion of all costs and benefits associated with a project into monetary terms. But public projects often have a variety of economic, ecological, social and political objectives, many of which cannot or perhaps should not be converted to monetary terms. In such projects decisions must be made based on multiple, even conflicting objectives. Multiple criteria decision making (MCDM) methods are widely used for such decisions. However, a common disadvantage among many such methods available in the literature is that they require input from a real decision maker. This paper presents the development and application of an expert system based on fuzzy set theory and IF-THEN rules. The system mimics a real decision maker. Along with two conventional MCDM methods the developed expert system was applied on a data set from the Columbia River Basin salmon recovery plan to assess its potential usefulness as a decision-making tool for natural resource projects. The results suggest that the fuzzy expert system is easy to develop and makes better decisions than the other two conventional MCDM methods used.     

Is Transparency To No Avail?*

Transparent decision‐making processes are widely regarded as a prerequisite for the working of a representative democracy. It facilitates accountability, and citizens might suspect that decisions, if taken behind closed doors, do not promote their interests. Why else would there be the secrecy? We provide a model of committee decision‐making that explains the public's demand for transparency, and committee members' aversion to it. In line with case study evidence, we show how pressures to become transparent induce committee members to organize pre‐meetings away from the public eye. Transparency does not improve accountability, but it might improve the decision.     

Anonymous Games with Binary Actions

In many economic decision problems the preferences of economic agents depend on the numbers or proportions of individuals choosing the same decision or other decisions. Examples include network or congestion externalities, location choices of firms, the tourist's choice of a vacation destination, the visit of public events like concerts, or the purchase of goods that are subject to fashion. In this article the relating equilibrium characterization and selection questions are formulated and solved in terms of anonymous games with a continuum of players facing a binary decision problem. Journal of Economic Literature Classification Numbers: C72, D62.     

Trust and trustworthiness in games: An experimental study of intergenerational advice

This paper investigates the development of conventions of trust in what we call intergenerational games, i.e., games played by a sequence of non-overplapping agents, who pass on advice on how to play the game across adjacent generations of players. Using the trust game of Berg et al. (1995) as our experimental decision problem, advice seems to decrease the amount of trustthat evolves when this game in played in an inter-generational manner in that it decreases the amount of money sent from Senders to Returners. Ironically, advice increases trustworthinessin that Returners tend to send more back. Further, subjects appear to follows conventions of reciprocity in that they tend to Send more if they think the Returners acted in a “kind” manner, where kind means the Sender sent more money than the receiver expected. Finally, while we find a causal relationship running from trustworthiness to trust, the opposite can not be established. We note that many of our results can only be achieved using the tools offered by inter-generational games. The inter-generational advice offered provides information not available when games are played in their static form. Combining that information with elicited beliefs of the Senders and Returners adds even more information that can be used to investigate the motives that subjects have for doing what they do. Electronic supplementary material Electronic supplementary material is available for this article at and accessible for authorised users. JEL Classification C91 · C72 Resources for this research were provided by National Science Foundation grants SBR-9709962 and SBR-9709079 and by both the Center for Experimental Social Science and the C.V. Starr Center for Applied Economics at New York University. We would like to thank Shachar Kariv for both his comments and research assistance. We also thank Mikhael Shor and Judy Goldberg for research assistance, and Yevgeniy Tovshteyn for computer programming.     

Professional advice

This paper studies strategic communication by an expert who is concerned about appearing to be well informed. The expert is assumed to observe a private signal with a simple and particularly tractable (multiplicative linear) structure. The quality of the expert's information is evaluated on the basis of the advice given and the realized state of the world. In equilibrium of this reputational cheap-talk game, no more than two messages are effectively reported. The model is extended to consider sequential communication by experts with conditionally independent signals. In the long run, learning is incomplete and herd behavior arises.     

Cost effectiveness of transcatheter aortic valve replacement compared to medical management in inoperable patients with severe aortic stenosis: Canadian analysis based on the PARTNER Trial Cohort B findings

Abstract

Objective:

The only effective treatment for severe aortic stenosis (AS) is valve replacement. However, many patients with co-existing conditions are ineligible for surgical valve replacement, historically leaving medical management (MM) as the only option which has a poor prognosis. Transcatheter Aortic Valve Replacement (TAVR) is a less invasive replacement method. The objective was to estimate cost-effectiveness of TAVR via transfemoral access vs MM in surgically inoperable patients with severe AS from the Canadian public healthcare system perspective.

Methods:

A cost-effectiveness analysis of TAVR vs MM was conducted using a deterministic decision analytic model over a 3-year time horizon. The PARTNER randomized controlled trial results were used to estimate survival, utilities, and some resource utilization. Costs included the valve replacement procedure, complications, hospitalization, outpatient visits/tests, and home/nursing care. Resources were valued (2009 Canadian dollars) using costs from the Ontario Case Costing Initiative (OCCI), Ontario Ministry of Health and Long-Term Care and Ontario Drug Benefits Formulary, or were estimated using relative costs from a French economic evaluation or clinical experts. Costs and outcomes were discounted 5% annually. The effect of uncertainty in model parameters was explored in deterministic and probabilistic sensitivity analysis.

Results:

The incremental cost-effectiveness ratio (ICER) was $32,170 per quality-adjusted life year (QALY) gained for TAVR vs MM. When the time horizon was shortened to 24 and 12 months, the ICER increased to $52,848 and $157,429, respectively. All other sensitivity analysis returned an ICER of less than $50,000/QALY gained.

Limitations:

A limitation was lack of availability of Canadian-specific resource and cost data for all resources, leaving one to rely on clinical experts and data from France to inform certain parameters.

Conclusions:

Based on the results of this analysis, it can be concluded that TAVR is cost-effective compared to MM for the treatment of severe AS in surgically inoperable patients.     

Hedging and flexing : Two ways of choosing under ignorance

Two strategies for making decisions under severe uncertainty—called here ignorance—are contrasted. A popular strategy under such conditions is to forego the best outcome in order to avoid the worst which might happen; this is hedging, and is shown to lead to a number of problems: once made, a hedge can rarely be revised if the worst does not occur; hedging often brings about the worst outcome which is being hedged against; the worst outcome is often undefined; and hedging can lead to a vicious circle, disregarding the benefits which an option might bring. Each problem is illustrated by a decision about technological change, which typically are decisions under ignorance. Flexing has none of these problems. Flexing aims at achieving the very best outcome. This too risks achieving the worst outcome, but the strategy insures against this. The decision maker should ensure that if the worst outcome arises, the original decision can be reserved quickly and without great cost. Ways in which this can be done are discussed through the examples.