Similarity-based mistakes in choice

We characterize the following choice procedure. The decision maker is endowed with two binary relations over alternatives, a preference and a similarity. In every choice problem she includes in her choice set all alternatives which are similar to the best feasible alternative. Hence she can, by mistake, choose an inferior option because it is similar to the best. We characterize this boundedly rational behavior by suitably weakening the rationalizability axiom of Arrow (1959). We also characterize a variation where the decision maker chooses alternatives on the basis of their similarities to attractive yet infeasible options. We show that similarity-based mistakes of either kind lead to cyclical behavior. Finally, we reinterpret our procedure as a method for choosing a bundle given a set of individual items, in which the decision maker combines the best feasible item with those that complement it.     

Time‐to‐market,window of opportunity,and salvageability of a new product development

The time‐to‐market in the presence of a window of opportunity is analyzed using ;a probabilistic model, i.e. a model where the completion time of new product development is a random variable characterized by a gamma distribution. Two cases are considered: the first, a case where the discounted return‐on‐investment exceeds the return expected from a conservative investment—e.g. investment in bonds—termed ‘the profitable case’; and the second, a case where the discounted return‐on‐investment just balances the cost of new product development, termed ‘the salvageable case’. The model constructed is focused on the financial aspects of new product development. It allows a decision‐maker to monitor, as well as terminate, a project based on its expected value (at any time prior to completion) by computing the mean time‐to‐market that provides profit, investment salvage, or loss. The mean time‐to‐market computed by the model may be compared with that estimated by the technology development team for decision‐making purposes. Finally, in the presence of a window of opportunity and for the specific cases analyzed, we recommend to always keep the expenditure rate lower than the expected return rate. This will provide the decision‐maker a salvageable exit opportunity if project termination is decided. Copyright © 2002 John Wiley & Sons, Ltd.     

Characterizing lexicographic preferences

We characterize lexicographic preferences on product sets of finitely many coordinates. The main new axiom is a robustness property. It roughly requires this: Suppose $x$ is preferred to $y$; many of its coordinates indicate that the former is better and only a few indicate the opposite. Then the decision maker is allowed a change of mind turning one coordinate in favor of $x$ to an indifference: even if one less argument supports the preference, the fact that we started with many arguments in favor of $x$ suggests that such a small change is not enough to give rise to the opposite preference.     

Weakened WARP and top-cycle choice rules

We propose the following weakened version of WARP: if the decision maker selects an alternative x and rejects another alternative y in some context, he cannot select y and reject x in another context. This axiom is consistent with cyclic choices. It is necessary and sufficient for the choice from every subset A of a (finite) universal set X to coincide with the weak upper-contour set of the transitive closure of some fixed complete relation at some alternative in A. Adding further simple axioms forces the choice from each subset to coincide with the top cycle (in that subset) of some fixed tournament over the universal set.     

Unawareness without AU Introspection

This paper studies unawareness in terms of the lack of knowledge in a model that generalizes both a non-partitional standard-state-space model and a stationary generalized-state-space model. The resulting model may not necessarily satisfy AU Introspection: an agent, who is unaware of an event, is unaware of being unaware of it. Yet, the paper shows that such agent does not know whether she is unaware of it, i.e., she is ignorant of being unaware of it. First, the paper asks when and how the generalized model (in particular, a standard-state-space model) has a non-trivial form of unawareness and sensible properties of unawareness. Second, the paper studies the implications of the violation of AU Introspection. An agent, when facing infinitely many objects of knowledge, may know that there is an event of which she is unaware. Treating new information only at face value can cause an agent to become unaware of some event.     

Adjusting inconsistency through learning in group decision-making, and its application to China's MBA recruiting interview

In group decision-making, because of limitations on individual knowledge and information bases, or because of the existing decision rule, an individual decision maker may not be capable of evaluating selected alternatives. Such circumstances can lead to inconsistencies across group decision matrices. These inconsistencies are difficult to remedy under existing approaches. Based on Rough Set Theory, we thus propose a new approach that integrates two types of learning techniques. It first applies a machine-learning procedure that extracts possible alternatives from other decision makers that are currently not included in a given decision maker's alternative set. It then applies a group knowledge-learning model to determine corresponding attribute values of those newly learned alternatives in meeting a group's consistency requirement. Efficacy of the approach is illustrated by its application to China's MBA recruiting interview.     

Shortlisting procedure with a limited capacity

A decision maker, who is overwhelmed by the number of available alternatives, limits her consideration. We investigate a model where a decision maker’s capacity determines whether she is overwhelmed: She considers all the available alternatives if their number does not exceed her capacity; otherwise, she applies a shortlisting procedure to reduce the number of alternatives to within her capacity. We show how to deduce the decision maker’s capacity, her preference and the alternatives that she considers from the observed behavior. Furthermore, we provide the necessary and sufficient conditions for a consideration function to be derived by the shortlisting procedure with a limited capacity.     

Biased recommendations from biased and unbiased experts

When can you trust an expert to provide honest advice? We develop and test a recommendation game where an expert helps a decision maker choose among two actions that benefit the expert and an outside option that does not. For instance, a salesperson recommends one of two products to a customer who may instead purchase nothing. Subject behavior in a laboratory experiment is largely consistent with predictions from the cheap talk literature. For sufficient symmetry in payoffs, recommendations are persuasive in that they raise the chance that the decision maker takes one of the actions rather than the outside option. If the expert is known to have a payoff bias toward an action, such as a salesperson receiving a higher commission on one product, the decision maker partially discounts a recommendation for it and is more likely to take the outside option. If the bias is uncertain, then biased experts lie even more, whereas unbiased experts follow a political correctness strategy of pushing the opposite action so as to be more persuasive. Even when the expert is known to be unbiased, if the decision maker already favors an action the expert panders toward it, and the decision maker partially discounts the recommendation. The comparative static predictions hold with any degree of lying aversion up to pure cheap talk, and most subjects exhibit some limited lying aversion. The results highlight that the transparency of expert incentives can improve communication, but need not ensure unbiased advice.     

Conditions and benefits of applying decision technological solutions as a tool to curb corruption within the procurement process: The case of Hungary

Unethically influencing a decision maker is as old as civilization. Corruption is an especially damaging phenomenon in the field of public procurement. Experiences in curbing procurement corruption in Hungary, a former Eastern-block country which recently joined the EU, strengthens the view that by raising the level of evaluation practices through the use of decision support methodologies that can serve to narrow the possible damaging effects of corruption. This outcome may be achieved if legal regulations provide a supportive frame and organizational culture can be shaped to accommodate new decision practices.     

Robustness as a corporate objective under uncertainty

This paper examines the nature of the objective function of the firm when operating under conditions of uncertainty. Robustness is presented as a purposeful maximand for decision making both under conditions of certainty and uncertainty - a robust decision being one in which the decision maker retains the maximum flexibility with regard to future decisions after an initial decision has been made. Its incorporation within a managerial objective function provides a measurable scale for making choices between alternative courses of action, including under conditions of internal organizational conflict and environmental reaction by other decision makers.     

The relationship between revealed preference and the Slutsky matrix

This paper presents a method of calculating the utility function from a smooth demand function whose Slutsky matrix is negative semi-definite and symmetric. The calculated utility function is the unique upper semi-continuous function corresponding with the demand function. Moreover, we present an axiom for demand functions. We show that under the strong axiom, this new axiom is equivalent to the existence of the corresponding continuous preference relation. If the demand function obeys this axiom, the calculated utility function is also continuous. Further, we show that the mapping from the demand function into a continuous preference relation is continuous, which ensures the applicability of our results for econometrics. Moreover, if this demand function satisfies the rank condition, then our utility function is smooth. Finally, we show that under an additional axiom, the above results hold even if the demand function has corner solutions.     

Cardinal versus ordinal criteria in choice under risk with disconnected utility ranges

This paper provides a formal justification for the existence of subjective random components intrinsic to the outcome evaluation process of decision makers and explicitly assumed in the stochastic choice literature. We introduce the concepts of admissible error function and generalized certainty equivalent, which allow us to analyze two different criteria, a cardinal and an ordinal one, when defining suitable approximations to expected utility values. Contrary to the standard literature requirements for irrational preferences, adjustment errors arise in a natural way within our setting, their existence following directly from the disconnectedness of the range of the utility functions. Conditions for the existence of minimal errors are also studied. Our results imply that neither the cardinal nor the ordinal criterion do necessarily provide the same evaluation for two or more different prospects with the same expected utility value. As a consequence, a rational decision maker may define two different generalized certainty equivalents when presented with the same prospect in two different occasions.     

Closure and preferences

We investigate the results of Kreps (1979), dropping his completeness axiom. As an added generalization, we work on arbitrary lattices, rather than a lattice of sets. We show that one of the properties of Kreps is intimately tied with representation via a closure operator. That is, a preference satisfies Kreps’ axiom (and a few other mild conditions) if and only if there is a closure operator on the lattice, such that preferences over elements of the lattice coincide with dominance of their closures. We tie the work to recent literature by Richter and Rubinstein (2015).     

The assessment of the expected value of information in the binary decision model

The expected value of information represents the maximum amount the decision maker should spend on inquiry before making a decision. This amount depends upon the accuracy of the information. In many cases of inquiry, prior objective knowledge of the accuracy is not available. This paper presents and compares two methods of subjectively assessing the value of imperfect information in the binary decision model. In the first method, the decision maker provides a likelihood function for the inquiry and hence the probabilities of error. The second method is the preposterior approach, in which the decision maker provides the prior distribution for the posterior probability.     

A representation of decision by analogy

We give a representation of analogical reasoning in choice under uncertainty. A decision maker is faced with two decision problems, a familiar and a novel one. It is shown that, under assumptions that capture the salience of alignable differences in choice, the decision maker can be construed as choosing between acts in the novel decision problem as if drawing all likelihood information from a multi-valued correspondence between states of the world in the familiar domain and states of the world in the novel domain. The latter is interpreted as an analogy between the two decision problems, and the fuzziness of the analogy is related to revealed ambiguity in the novel decision problem.     

A theory of iterative choice in lists

In a list, alternatives appear according to an order and the decision maker follows this order to evaluate alternatives. He records the first alternative as the initial survivor and then at every stage, he compares the current survivor with the next alternative in the list to determine whether the next alternative replaces that to become the new survivor. When the entire list is exhausted in this manner, the agent chooses the survivor in the last stage. We call this procedure “iterative” and provide an axiomatic characterization for it when the order in every list is observable. Then, we also study characterizations of the iterative procedure that is prone to the well-known primacy and recency effects. Finally, we analyze situations where the order of alternatives is unknown to an outside observer and provide a characterization result that enables such an outsider with limited information to understand whether the decision maker can indeed be an iterative list chooser for some order.     

Menu-dependent self-control

The literature on self-control problems has typically put forth models that imply behavior that is consistent with the weak axiom of revealed preference (WARP). We argue that when choice is the outcome of some underlying internal conflict, the resulting choices may not be perfectly consistent across choice problems: an agent’s ability to resist temptation may well depend on what alternatives are available to him. We generalize Gul and Pesendorfer (2001) so that self-control weakens in the presence of temptation. To model choices from menus explicitly, we consider a choice correspondence as well as a preference over menus and relax both the Independence axiom for the preference and the WARP condition for the choice correspondence. The model is shown to unify a range of well-known findings in the experimental literature on choice under risk and over time within a single specification.     

广州市居民环境意识现状及其原因分析--以广州市番禺区为个案

为了全面而深入了解广州市居民环境意识现状,分析影响居民环境意识的因素,探讨今后环境保护宣传教育的重点和方向,广东女子职业技术学院管理系与番禺区环保局就此对番禺区居民环境意识进行了抽样调查,并在此基础上提出了相关的对策和建议,以期为有关环保部门提供一些参考意见.     

Stochastic endogenous time preference

Preference for flexibility arises inherently in sequential decision making. However, a majority of the literature has limitations to capture a changing preference for flexibility across time in the sense that such an attitude is independent of past actions. This study incorporates the histories of past actions into an infinite-horizon extension of Dekel et al. (2001) and models a decision maker whose attitude toward flexibility evolves over time from the uncertainty of future time preference or discount factors. Moreover, we provide behavioral comparisons of the degree of patience across different histories and characterize the shift of subjective beliefs about discount factors in the sense of an increasing convex and concave stochastic order.     

Two managerial economics approaches to the R&D decision process

In this paper we present two different approaches that analyze the effects of rivals on the R&D decision process. The first approach assumes that the introduction time of the new product is uncertain to the manager. Given this assumption, the problem is analyzed in a framework similar to the one suggested by Kamien and Schwartz (1972). The second approch assumes technical certainty to study a set of models that extends and supports different views in the managerial economics literature regarding the properties of the R&D decision process from both private and social points of view.