2007
Venezia, Zur Shapira, and Itzhak.
“On The Preference For Full-Coverage Policies: Why Do People Buy Too Much Insurance?”.
Discussion Papers 2007. Web.
Publisher's VersionAbstractOne of the most intriguing questions in insurance is the preference of consumers for low or zero deductible insurance policies. This stands in sharp contrast to a theorem proved by Mossin, 1968, that under quite common assumptions when the price of insurance is higher than its actuarial value, then full coverage is not optimal.We show in a series of experiments that amateur subjects tend to underestimate the value of a policy with a deductible and that the degree of underestimation increases with the size of the deductible. We hypothesize that this tendency is caused by the anchoring heuristic. In particular, in pricing a policy with a deductible subjects first consider the price of a full coverage policy. Then they anchor on the size of the deductible and subtract it from the price of the full coverage policy. However, they do not adjust the price enough upward to take into account the fact that there is only a small chance that the deductible will be applied toward their payments. We also show that professionals in the field of insurance are less prone to such a bias. This implies that a policy with a deductible priced according to the true expected payments may seem overpriced to the insured and therefore may not be purchased. Since the values of full coverage policies are not underestimated the insured may find them as relatively better deals .
Maya Bar-Hillel, David V. Budescu, and Moty Amar.
“Predicting World Cup Results: Do Goals Seem More Likely When They Pay Off?”.
Discussion Papers 2007. Web.
Publisher's VersionAbstractIn a series of experiments, Bar-Hillel and Budescu (1995) failed to find a desirability bias in probability estimation. The World Cup soccer tournament (of 2002 and 2006) provided an opportunity to revisit the phenomenon, in a context where wishful thinking and desirability bias are notoriously rampant (e.g., Babad, 1991). Participants estimated the probabilities of various teams to win their upcoming games. They were promised money if one particular team, randomly designated by the experimenter, would win its upcoming game. Participants judged their target team more likely to win than other participants, whose promised monetary reward was contingent on the victory of its rival team. Prima facie this seems to be a desirability bias. However, in a follow-up study we made one team salient, without promising monetary rewards, by simply stating that it is "of special interest". Again participants judged their target team more likely to win than other participants, whose "team of special interest" was the rival team. Moreover, the magnitude of the two effects was very similar. On grounds of parsimony, we conclude that what seemed like a desirability bias may just be a salience/marking effect, and – though optimism is a robust and ubiquitous human phenomenon – wishful thinking still remains elusive.In 2008, a shorter version of this paper was published under the title Wishful thinking in predicting world cup results as chapter 2 of Rationality and Social Responsibility (J. Krueger, ed.), 175-186. In the link todp448, it follows the version published in Psychonomic Bulletin and Review.
Metge, Jens .
“Protecting The Domestic Market: Industrial Policy And Strategic Firm Behaviour”.
Discussion Papers 2007. Web.
Publisher's VersionAbstractForeign firms to break into a new market commonly undercut domestic prices and, hence, subsidise the consumer's costs of switching in order to get a positive market share. However, this may constitute the act of dumping as drawn in Article VI of the General Agreement on Tariffs and Trade (GATT). Consequently, domestic firms trying to protect themselves against potential competitors often demand an anti-dumping (AD) investigation. In a two-period model of market entry with horizontally differentiated products and exogenous switching costs, it is demonstrated that the mere existence of switching costs and AD-rules may result in an anti-competition effect: the administratively set minimum-price rule protects the domestic firm and yields larger prices. Therefore, there are some consumers who will not buy either product in both periods although they would have done so in absence of AD. Consequently, competition policy should reassess the AD-regulation.
Lehmann, Daniel .
“Quantic Superpositions And The Geometry Of Complex Hilbert Spaces”.
Discussion Papers 2007. Web.
Publisher's VersionAbstractThe concept of a superposition is a revolutionary novelty introduced by Quantum Mechanics. If a system may be in any one of two pure states x and y, we must consider that it may also be in any one of many superpositions of x and y. This paper proposes an in-depth analysis of superpositions. It claims that superpositions must be considered when one cannot distinguish between possible paths, i.e., histories, leading to the current state of the system. In such a case the resulting state is some compound of the states that result from each of the possible paths. It claims that states can be compounded, i.e., superposed in such a way only if they are not orthogonal. Since different classical states are orthogonal, the claim implies no non-trivial superpositions can be observed in classical systems. It studies the parameters that define such compounds and finds two: a proportion defining the mix of the different states entering the compound and a phase difference describing the interference between the different paths. Both quantities are geometrical in nature: relating one-dimensional subspaces in complex Hilbert spaces. It proposes a formal definition of superpositions in geometrical terms. It studies the properties of superpositions.
Heifetz, Elchanan Ben-Porath, and Aviad.
“Rationalizable Expectations”.
Discussion Papers 2007. Web.
Publisher's VersionAbstractConsider an exchange economy with asymmetric information. What is the set of outcomes that are consistent with common knowledge of rationality and market clearing?We propose the concept of CKRMC as an answer to this question. The set of price functions that are CKRMC is the maximal set F with the property that every fˆˆF defiłdots}nes prices that clear the markets for demands that can be rationalized by some profile of subjective beliefs on F. Thus, the difference between CKRMC and Rational Expectations Equilibrium (REE) is that CKRMC allows for a situation where the agents do not know the true price function and furthermore may have different beliefs about it. We characterize CKRMC, study its properties, and apply it to a general class of economies with two commodities. CKRMC manifests intuitive properties that stand in contrast to the full revelation property of REE. In particular, we obtain that for a broad class of economies: (1) There is a whole range of prices that are CKRMC in every state. (2) The set of CKRMC outcomes is monotonic with the amount of information in the economy.
Tamar Keasar, Adi Sadeh, and Avi Shmida.
“Signaling Function Of An Extra-Floral Display: What Selects For Signal Development?, The”.
Discussion Papers 2007. Web.
Publisher's VersionAbstractThe vertical inflorescences of the Mediterranean annual Salvia viridis carry many small, colorful flowers, and are frequently terminated by a conspicuous tuft of colorful leaves ("flags") that attracts insect pollinators. Insects may use the flags as indicators of the food reward in the inflorescences, as long-distance cues for locating and choosing flowering patches, or both. Clipping of flags from patches of inflorescences in the field significantly reduced the number of pollinators that arrived at the patches, but not the total number of inflorescences and flowers visited by them. The number of flowers visited per inflorescence significantly increased with inflorescence size, however. Inflorescence and flower visits rates signific antly increased with patch size when flags were present, but not after flag removal. 6% of the plants in the study population did not develop any flag during blooming, yet suffered no reduction in seed set as compared to flag-bearing neighboring individuals. These results suggest that flags signal long-distance information to pollinators (perhaps indicating patch location or size), while flower-related cues may indicate inflorescence quality.Plants that do not develop flags probably benefit from the flag signals displayed by their neighbors, without bearing the costs of flag production. Thus, flagproducing plants can be viewed as altruists that enhance their neighbors' fitness. Greenhouse-grown S. viridis plants allocated '' 0.5% of their biomass to flag production, and plants grown under water stress did not reduce their biomassallocation to flags as compared to irrigated controls. These findings suggest that the expenses of flag production are modest, perhaps reducing the cost of altruism. We discuss additional potential evolutionary mechanisms that may select for the maintenance of flag production.
Clelia Di Serio, Yosef Rinott, and Marco Scarsini.
“Simpson S Paradox For The Cox Model”.
Discussion Papers 2007. Web.
Publisher's VersionAbstract{In the context of survival analysis, we define a covariate X as protective (detrimental) for the failure time T if the conditional distribution of [T | X = x] is stochastically increasing (decreasing) as a function of x. In the presence of another covariate Y, there exist situations where [T | X = x
Peretz, Ron .
“Strategic Value Of Recall, The”.
Discussion Papers 2007. Web.
Publisher's VersionAbstractThis work studies the value of two-person zero-sum repeated games in which at least one of the players is restricted to (mixtures of) bounded recall strategies. A (pure) k-recall strategy is a strategy that relies only on the last k periods of history. This work improves previous results [Lehrer, Neyman and Okada] on repeated games with bounded recall. We provide an explicit formula for the asymptotic value of the repeated game as a function of the stage game, the duration of the repeated game, and the recall of the agents.
Ben-Porath, Elchanan .
“Trade With Heterogeneous Beliefs”.
Discussion Papers 2007. Web.
Publisher's VersionAbstractThe paper analyzes an economy with asymmetric information in which agents trade in contingent assets. The new feature in the model is that each agent may have any prior belief on the states of nature and thus the posterior belief of an agent maybe any probability distribution that is consistent with his private information. We study two solution concepts: Equilibrium, which assumes rationality and market clearing, and common knowledge equilibrium (CKE) which makes the stronger assumption that rationality, market clearing, and the parameters which de'łdots}ne the economy are common knowledge. The two main results characterize the set of equilibrium prices and the set of CKE prices in terms of parameters which specify for each state s and event E the amount of money in the hands of agents who know the event E at the state s. The characterizations that are obtained apply to a broad classof preferences which include all preferences that can be represented by the expectation of a state dependent monotone utility function. One implication of these results is a characterization of the information that is revealed in a CKE.
Babichenko, Yakov .
“Uncoupled Automata And Pure Nash Equilibria”.
Discussion Papers 2007. Web.
Publisher's VersionAbstractWe study the problem of reaching Nash equilibria in multi-person games that are repeatedly played, under the assumption of uncoupledness: every player knows only his own payoff function. We consider strategies that can be implemented by 'łdots}finite-state automata, and characterize the minimal number of states needed in order to guarantee that a pure Nash equilibrium is reached in every game where such an equilibrium exists.
Tamar Keasar, Adi Sadeh, and Avi Shmida.
“Variability In Nectar Production And Yield, And Their Relation To Pollinator Visits, In A Mediterranean Shrub”.
Discussion Papers 2007. Web.
Publisher's VersionAbstractNectar yields (standing crops) in flowers within an individual plant are often highly variable. This variability may be a by-product of the foraging activity of insect pollinators. Alternatively, plants may be selected to produce highly variable rewards to reduce consecutive visitation by risk-averse pollinators, thus diminishing within-plant pollen transfer. This study evaluated the roles of pollinator control vs. plant control over nectar variability in the bee-pollinated shrub Rosmarinus officinalis L. We sampled nectar production, yield and pollinator visits in three shrubs of one population over 17 days during one blooming season. Nectar production rates were highly variable (CV=1.48), and increased after rainy days. Nectar yields were even more variable (CV=2.16), and decreased with increasing temperatures. Pollinator visit rates decreased with variability in nectar yields, increased with flower number per shrub, and were unaffected by variability in nectar production rates. Repeated sampling of marked flowers revealed no correlation between their nectar yields and production rates. These findings support the role of reward variance in reducing pollinator visits, but suggest that plants are not in complete control of this variability. Rather, plant-generated variability can be modified by intensive foraging activity of pollinators. Such pollinator control over nectar variability is likely to reduce the selective advantage of plant-generated reward variation. Plant-controlled variability may provide evolutionary advantage when pollinator activity is insufficient to generate reward variation.
Sheshinski, Eytan .
The Economic Theory Of Annuities. Princeton University Press, 2007. Print.
Annuities are financial products that guarantee the holder a fixed return so long as the holder remains alive, thereby providing insurance against lifetime uncertainty. The terms of these contracts depend on the information available to insurance firms. Unlike age and gender, information about individual survival probabilities cannot be readily ascertained. This asymmetric information causes market inefficiencies, such as adverse selection. Groundbreaking in its scope, The Economic Theory of Annuities offers readers a theoretical analysis of the functioning of private annuity markets. Starting with a general analysis of survival functions, stochastic dominance, and characterization of changes in longevity, Eytan Sheshinski derives the demand for annuities using a model of individuals who jointly choose their lifetime consumption and retirement age. The relation between life insurance and annuities that have a bequest option is examined and "annuity options" are proposed as a response to the lack of secondary markets. This book also investigates the macroeconomic policy implications of annuities and changes in longevity on aggregate savings. Sheshinski utilizes statistical population theory to shed light on the debate of whether the surge in savings and growth in Asia and other countries can be attributed to higher longevity of the population and whether this surge is durable. This book shows how understanding annuities becomes essential as governments that grapple with insolvency of public social security systems place greater emphasis on individual savings accounts.
Peleg, Bezalel, and Peter Sudhölter.
Introduction To The Theory Of Cooperative Games. 2007. Print.
This book systematically presents the main solutions of cooperative games: the core, bargaining set, kernel, nucleolus, and the Shapley value of TU games as well as the core, the Shapley value, and the ordinal bargaining set of NTU games. The authors devote a separate chapter to each solution, wherein they study its properties in full detail. In addition, important variants are defined or even intensively analyzed.
שמידע, אבי, גדי פולק, and אורי פרגמן-ספיר.
הספר האדום : צמחים בסכנת הכחדה בישראל. הוצאת רשות הטבע והגנים, 2007. Print.
בישראל 414 מיני צמחים בסכנת הכחדה ומתוכם 36 כבר נכחדו. רבים מצמחים אלה נדירים מאוד, חלקם אנדמיים. לכל מין צמח "אדום" נכתבו תיאור מפורט, תפוצתו בארץ ובעולם, היבטים ביוגיאוגרפיים וסיסטמטיים, מצב שמירת הטבע והמלצות לממשק, לשימור ולהגנה. לתיאור נלווים מפת אתרי התפוצה בארץ ותמונת הצמח. המידע בספר זה מהווה בסיס מדעי למדיניות ממשק ולקביעת עדיפות בשמירת הטבע ובהגנה על פי חוק.
Eva, Illouz .
Cold Intimacies. Cambridge University Press, 2007. Print.
It is commonly assumed that capitalism has created an a-emotional world dominated by bureaucratic rationality; that economic behavior conflicts with intimate, authentic relationships; that the public and private spheres are irremediably opposed to each other; and that true love is opposed to calculation and self-interest. Eva Illouz rejects these conventional ideas and argues that the culture of capitalism has fostered an intensely emotional culture in the workplace, in the family, and in our own relationship to ourselves. She argues that economic relations have become deeply emotional, while close, intimate relationships have become increasingly defined by economic and political models of bargaining, exchange, and equity. This dual process by which emotional and economic relationships come to define and shape each other is called emotional capitalism. Illouz finds evidence of this process of emotional capitalism in various social sites: self-help literature, women's magazines, talk shows, support groups, and the Internet dating sites. How did this happen? What are the social consequences of the current preoccupation with emotions? How did the public sphere become saturated with the exposure of private life? Why does suffering occupy a central place in contemporary identity? How has emotional capitalism transformed our romantic choices and experiences? Building on and revising the intellectual legacy of critical theory, this book addresses these questions and offers a new interpretation of the reasons why the public and the private, the economic and the emotional spheres have become inextricably intertwined.
2006
Zamir, Todd R. Kaplan, and Shmuel.
“Asymmetric Auctions: Analytic Solutions To The General Uniform Case”.
Discussion Papers 2006. Web.
Publisher's VersionAbstractWhile auction research, including asymmetric auctions, has grown significantly in recent years, there is still little analytical solutions of first-price auctions outside the symmetric case. Even in the uniform case, Griesmer et al. (1967) and Plum (1992) find solutions only to the case where the lower bounds of the two distributions are the same. We present the general analytical solutions to asymmetric auctions in the uniform case for two bidders, both with and without a minimum bid. We show that our solution is consistent with the previously known solutions of auctions with uniform distributions. Several interesting examples are presented including a class where the two bid functions are linear. We hope this result improves our understanding of auctions and provides a useful tool for future research in auctions.
Zapechelnyuk, Yair Tauman, and Andriy.
“Bargaining With A Bureaucrat”.
Discussion Papers 2006. Web.
Publisher's VersionAbstractWe consider a bargaining problem where one of the players, the bureaucrat, has the power to dictate any outcome in a given set. The other players, the agents, negotiate with him which outcome to be dictated. In return, the agents transfer some part of their payoffs to the bureaucrat. We state five axioms and characterize the solutions which satisfy these axioms on a class of problems which includes as a subset all submodular bargaining problems. Every solution is characterized by a number $\pm$ in the unit interval. Each agent in every bargaining problem obtains a weighted average of his individually rational level and his marginal contribution to the set of all players, where the weights are $\pm$ and 1 - $\pm$, respectively. The bureaucrat obtains the remaing surplus. The solution when $\pm$ = 1/2 is the nucleolus of a naturally related game in characteristic form.
Yaniv, Ilan .
“Benefit Of Additional Opinions, The”.
Discussion Papers 2006. Web.
Publisher's VersionAbstractIn daily decision making, people often solicit one another's opinions in the hope of improving their own judgment. According to both theory and empirical results, integrating even a few opinions is beneficial, with the accuracy gains diminishing as the bias of the judges or the correlation between their opinions increases. Decision makers using intuitive policies for integrating others' opinions rely on a variety of accuracy cues in weighting the opinions they receive. They tend to discount dissenters and to give greater weight to their own opinion than to other people's opinions.
Avrahami, Yaakov Kareev, and Judith.
“Choosing Between Adaptive Agents: Some Unexpected Implications Of Level Of Scrutiny”.
Discussion Papers 2006. Web.
Publisher's VersionAbstractEven with ample time and data at their disposal, people often make do with small samples, which increases their risk of making the wrong decision. A theoretical analysis indicates, however, that when the decision involves selecting among competing, adaptive agents who are eager to be selected, an error-prone evaluation may be beneficial to the decision maker. In this case, the chance of an error can motivate competitors to exert greater effort, improving their level of performance which is the prime concern of the decision maker. This theoretical argument was tested empirically by comparing the effects of two levels of scrutiny of performance. Results show that minimal scrutiny can indeed lead to better performance than full scrutiny, and that the effect is conditional on a bridgeable difference between the competitors. We conclude by pointing out that error-prone decisions based on small samples may also maintain competition and diversity in the environment.
Hart, Sergiu, and Yishay Mansour.
“Communication Complexity Of Uncoupled Nash Equilibrium Procedures, The”.
Discussion Papers 2006. Web.
Publisher's VersionAbstractWe study the question of how long it takes players to reach a Nash equilibrium in "uncoupled" setups, where each player initially knows only his own payoff function. We derive lower bounds on the number of bits that need to be transmitted in order to reach a Nash equilibrium, and thus also on the required number of steps. Specifically, we show lower bounds that are exponential in the number of players in each one of the following cases: (1) reaching a pure Nash equilibrium; (2) reaching a pure Nash equilibrium in a Bayesian setting; and (3) reaching a mixed Nash equilibrium. Finally, we show that some very simple and naive procedures lead to similar exponential upper bounds.
