Are risk‐averse agents more optimistic? A Bayesian estimation approach

Our aim is to analyze the link between optimism and risk aversion in a subjective expected utility setting and to estimate the average level of optimism when weighted by risk tolerance. Its estimation leads to a non‐trivial statistical problem. We start from a large lottery survey (1536 individuals). We assume that individuals have true unobservable characteristics. We adopt a Bayesian approach and use a hybrid MCMC approximation method to numerically estimate the distributions of the unobservable characteristics. We find that individuals are on average pessimistic and that pessimism and risk tolerance are positively correlated. Copyright © 2008 John Wiley & Sons, Ltd.     

When Borch's Theorem Does Not Apply: Some Key Implications of Market Incompleteness,with Policy Relevance Today

Markets are incomplete when the assets available to the agents do not span the space of future contingencies. In that case, competitive equilibria on the markets for assets and commodities fail (generically) to be constrained efficient. Pareto‐superior allocations can be implemented through price/wage rigidities and quantity constraints. However, nominal rigidities are conducive to multiple equilibria, implying endogenous macroeconomic uncertainties that compound the primitive (exogenous) uncertainties. This paper defines a temporary general equilibrium for which there exists a set of equilibria defining an inflation – unemployment locus. Various policy implications are drawn, with relevance to the current crisis.     

Choquet Rationality

Consider a decision problem under uncertainty for a decision maker with known (utility) payoffs over prizes. We say that an act is Choquet (Shafer, Bernoulli) rational if for some capacity (belief function, probability) over the set of states, it maximizes her “expected” utility. We show that an act may be Choquet rational without being Bernoulli rational, but it is Choquet rational if and only if it is Shafer rational. Journal of Economic Literature Classification Numbers: C72, D81.     

Teichopolitics: Re-considering Globalisation Through the Role of Walls and Fences

This article considers the trend in many countries towards securitised immigration policies and “hardening” of borders through the construction of walls or fences. In contrast the borderless world of globalisation, it identifies these attempts to strengthen control of borders as teichopolitics: the politics of building barriers. This article analyses the different types of hardened borders that exist today and proposes a typology of frontlines, fences/walls, and closed straights. Then the article maps the locations of these barriers and argues that although other justifications ranging from smuggling to terrorism are often put forward, these barriers are mostly connected with managing immigration flows. Indeed, many of these barriers are located on important economic or social discontinuity lines, precisely where the system reveals its underlying logics. These walls and fences symbolise the emergence of a privileged few who actually live the promise of globalisation and defend its privileges through teichopolitics.     

Can Sentiment Toward Advertising Explain Materialism and Vanity in the Globalization Era? Evidence From Dubai

ABSTRACT

This report presents the first study to address sentiment toward advertising, materialism, and vanity in the globalized city of Dubai. A conceptual model is developed and subsequent hypotheses are tested via structural equation modeling. The main research findings suggest that consumers in Dubai exhibit positive perceptions of advertising as well as higher levels of materialism and vanity. Sentiment toward advertising is found to positively influence materialism levels, while materialism strongly influences views, concern for physical appearance, and personal achievement. Sentiment toward advertising, however, has no direct effect on any vanity trait, suggesting that vanity is more an internal personal trait.     

National cultural values and the perceived relational risks in biotechnology alliance relationships

Cross-cultural interactions are growing at an exponential pace. Consequently, it is becoming important to be aware of the existence and precise nature of cultural differences in risk perceptions. Do national cultural values influence relational risk perception in alliance relationships? This is the issue addressed in this article. Through analyzing risk perception in 344 alliance relationships, the evidence presented demonstrates the importance of cultural values.