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Highlights of this issue:
1. The monetary value of increased life expectancy: How much are you willing to pay for a year of increased life expectancy?
2. Decision-making behavior under ambiguity
Journal Introduction: Journal of Risk and Uncertainty is a bimonthly journal with 6 issues per year, and about 4 articles are published in each issue. The impact shadow in 2022-2023 is 47. JCR is classified as Q1 and is a top authoritative academic journal in the field of risk and insurance. The journal features theoretical or empirical articles that study risk-taking behavior and decision analysis under uncertainty, covering topics such as: decision theory and uncertainty economics, psychological models of choice under uncertainty, risk and public policy, empirical analysis of behavior under uncertainty, and empirical research on real-world risk-taking behavior.
Table of Contents, Vol. 67, No. 2.
injury risk, concussions, race, and pay in the nfl
delegated risk-taking, accountability, and outcome bias
the predictive power of risk elicitation tasks
on the psychology of the relation between optimism and risk taking
“injury risk, concussions, race, and pay in the nfl”
"NFL Injury Risk, Brain**, Race and Pay Issues."
Author
quinn a. w.Keefer (California State University); thomas j.Knisner (Claremont Graduate University).
Abstract:We make two main contributions to the literature on work-related injury risk and economic outcomes in the context of American professional football one is to examine an increasingly important specific injury, concussions, and compare its subsequent economic effects to those of other types of football injuries. our other contribution is to study the role of race in understanding injury risk and severity and their resulting economic consequences, which has been overlooked in previous sports injury research. using a specific position, tight ends, which allows conditioning on fine-grained relevant measures of player demographics, playing time, and performance, we find that whether a player continues to play nfl football from year to year is affected by type of injury and the player’s race. we calculate that the **erage ex post loss in annual compensation from a concussion is about 7%. moreover, the effect of games missed due to concussion on continued employment is triple that of other injuries. being white positively affects length of playing career independent of the measured productivity of the players involved. the racial gap in career length is approximately equal to the effect of an additional game missed from concussion. with respect to heterogeneity in the effects of injuries, both concussions and other injury types affect ex post economic outcomes equally for white and nonwhite players. both injuries and race affect compensation solely through their effects on career length.
We make two major contributions to the literature on work-related injury risk and economic consequences in professional football in the United States. One is to look at a specific injury that is becoming increasingly important – the brain ** and compare its subsequent economic impact with that of other types of rugby injuries. Another of our contributions is to study the role of race in understanding injury risk and severity and its resulting economic consequences, which have been overlooked in previous sports injury studies. We chose tight ends as specific positions, which allowed us to base our analysis on granular metrics such as player demographics, game time and performance. Our study found that whether a player plays in NFL football continuously each year is influenced by the type of injury and the race of the player. We calculated that the average post-event loss in annual compensation caused by brain** is about 7%. In addition, missing a game due to brain ** has three times the impact on continued employment than other injuries. Caucasians have a positive impact on the length of a career and have nothing to do with the productivity of the player in question. The racial disparity in career length is roughly equivalent to the impact of extra missed games due to brain **. In terms of heterogeneity in injury impact, brain** and other injury types had the same effect on post-match economic consequences for white and non-white players. Both injuries and race affect compensation only by affecting career length.
Original link:delegated risk-taking, accountability,
and outcome bias
Delegated risk-taking, accountability, and outcome bias
Author
robert m.Gillenkirch (University of Osnabrück); Louis Velthuis (University of Mainz).
Abstract:In a sequence of experiments, this study investigates how people evaluate others who make risky decisions on their behalf, and how such evaluations affect delegated risk-taking a decision maker acts on behalf of a client who holds the decision maker accountable by way of a subjective evaluation after observing a risky decision’s outcome. if evaluation is biased towards the outcome, it may h**e dysfunctional effects with respect to delegated risk-taking in that decision makers’ risk choices are increasingly misaligned with their clients’ risk preferences. we find evidence giving support to this conjecture. across and within three experiments, we test for the effects of different types and degrees of accountability in that we manipulate the information **ailable to clients as well as the consequences which evaluations h**e for decision makers. evaluations are biased towards outcomes in all experiments.
when evaluations affect decision maker’s compensations, a stronger outcome bias in evaluations translates into risk-taking decisions being less frequently aligned with clients’ risk preferences. in the same situation, giving clients the opportunity to make peer comparisons increases outcome bias. we further find that clients do not hold decision makers accountable for their risk choices when they cannot observe the risk-taking decision, but h**e to infer it from observing the outcome. theoretical and practical implications of the results are discussed.
In a series of experiments, this study investigated how people evaluate others who make risk decisions on their behalf, and how this assessment affects the risk-taking of the commission. The decision-maker acts on behalf of the client, and the client observes the outcome of the risky decision and holds the decision-maker accountable through subjective assessment. If the evaluation is biased towards the outcome of the decision, it can have a dysfunctional effect on the delegated risk-taking, as the decision-maker's risk choices are increasingly inconsistent with the client's risk appetite. We found evidence to support this hypothesis. In three experiments, we tested the impact of different types and degrees of accountability by manipulating the information available to customers and assessing the impact on decision-makers. In all experiments, the evaluation results were biased in favor of the decision results. When evaluating compensation that influences decision-makers, stronger outcome bias in the assessment translates into risk-taking decisions that align with the client's risk appetite less frequently. In the same situation, giving customers the opportunity to make peer comparisons can increase bias in the results. We further found that when a client is unable to observe a risk decision and has to extrapolate from the observations, the client does not hold the decision-maker accountable for the risk choice. We also discuss the theoretical and practical implications of the findings.
Original link:the predictive power of risk elicitation tasks
The ability to trigger a task
Author
Michele Garagnani (University of Melbourne).
Abstract:This work reports the results of two online experiments with a general-population sample examining the performance of different tasks for the elicitation of risk attitudes first, i compare the investment task of gneezy and potters (1997), the standard choice-list method of holt and laury (2002), and the multi-alternative procedure of eckel and grossman (2002) and evaluate their performance in terms of the number of correctly-predicted binary decisions in a set of out-of-sample lottery choices. there are limited differences between the tasks in this sense, and performance is modest. second, i included three additional budget-choice tasks (selection of a lottery from a linear budget set) where optimal decisions should h**e been corner solutions, and find that a large majority of participants provided interior solutions instead, casting doubts on people’s understanding of tasks of this type. finally, i investigate whether these two results depend on cognitive ability, numerical literacy, and education. while optimal choices in budget-choice tasks are related to numerical literacy and cognitive ability, the predictive performance of the risk-elicitation tasks is unaffected.
This work reports the results of two experiments conducted on a sample of the general population, examining the performance of different tasks in eliciting people's attitudes towards risk. First, I compared the investment assignments of Gneezy and Potters (1997), the standard picklist method of Holt and Laury (2002), and the multiple-choice procedures of Eckel and Grossman (2002) and evaluated their performance based on the number of correct binary decisions in a set of out-of-sample lottery choices. In this sense, the differences between the different tasks are limited and the performance is average. Second, I have included three additional budget selection tasks (selecting lots from linear budget sets) in which the best decision should theoretically be the boundary solution, but finding that the vast majority of participants provide internal solutions, which raises questions about the understanding of this type of task. Finally, I investigated whether these two results depended on cognitive ability, mathematical literacy, and educational attainment. Although the optimal choice of the budget selection task was related to mathematical literacy and cognitive ability, the performance of the risk-induced task was not affected.
Original link:on the psychology of the relation between optimism and risk taking
Psychological research on the relationship between optimism and risk-taking behavior
Author
Thomas Dohmen (University of Bonn); Simone Quercia (University of Verona); Jana Willrodt (University of Bonn).
Abstract:in this **we provide an explanation for why risk taking is related to optimism using a laboratory experiment, we show that the degree of optimism predicts whether people tend to focus on the positive or negative outcomes of risky decisions. while optimists tend to focus on the good outcomes, pessimists focus on the bad outcomes of risk. the tendency to focus on good or bad outcomes of risk in turn affects both the self-reported willingness to take risk and actual risk taking beh**ior. this suggests that dispositional optimism may affect risk taking mainly by shifting attention to specific outcomes rather than causing misperception of probabilities. in a second study we find evidence that dispositional optimism is related to elicited parameters of rank dependent utility theory suggesting that focusing may be among the psychological determinants of decision weights. finally, we corroborate our findings with process data related to focusing showing that optimists tend to remember more and attend more to good outcomes and this in turn affects their risk taking.
In this article, we explain why risk-taking is associated with optimism. Through laboratory experiments, we found that optimism can be the difference between positive and negative outcomes of risky decisions. Optimists tend to focus on good outcomes, while pessimists focus on the unfavorable outcomes of risks. The tendency to focus on the good or bad outcomes of risk in turn influences self-reported risk-taking willingness and actual risk-taking behavior. This suggests that personality optimism may influence risk-taking behavior primarily by shifting attention to a particular outcome, rather than leading to a false perception of probability. In the second study, we found that personality optimism correlated with the eliciting parameters of rank-dependent utility theory, suggesting that attention may be one of the psychological determinants of decision weight. Finally, we corroborate our findings with attention-related process data that shows that optimists tend to remember more and focus more on good outcomes, which in turn influences their risk-taking behavior.
Original link: Table of Contents, Vol. 67, No. 3.
dynamic inconsistency under ambiguity: an experiment
monetary values of increasing life expectancy: sensitivity to shifts of the survival curve
the determinants of decision time in an ambiguous context
ambiguity **ersion and the degree of ambiguity
dynamic inconsistency under ambiguity: an experiment
Dynamic Inconsistencies in Fuzzy Contexts: An Experiment
Author
Rocco Caferra (University of Bari); john d.Hey (University of York); Andrea Morone (University of Barry); Marco Santorsola (University of Bari).
Abstract:This **experimentally investigates the potential existence of dynamically inconsistent individuals in a situation of ambiguity. the experiment involves participants **two sequential decisions concerning the allocation of a sum of money, with an ambiguous move by nature occurring after first decision, and again after the second. we conducted two between-subject sessions: one incentivised and one unincentivised. by analysing the resulting data, we are able to classify participants into four distinct decision-**types: myopic, resolute, sophisticated and expected utility (eu). our results suggest that a significant proportion of the participants do not exhibit dynamic inconsistency being either resolute, sophisticated or eu. we discuss how monetary incentives can change the dynamic consistency of decision-makers and the salience of the ambiguity. differently from the incentivised treatment, we detect a slight increase of the proportion of myopic beh**iour in the hypothetical case, suspecting that incentives might affect dynamic consistency. a noteworthy observation is that, in the majority of cases, ambiguity tends to simplify to risk in the absence of monetary incentives. these findings h**e implications for economic decision-**and policy***by identifying the different types of decision-makers and understanding how they make choices, we can develop more effective strategies to promote desirable outcomes.
In this paper, the potential existence of dynamically inconsistent individuals in fuzzy situations is investigated through experiments. The experiment involved participants making two decisions in a row about the distribution of a sum of money, with the first decision followed by a fuzzy shift in the state of nature and again after the second decision. We conducted two experiments between participants: one with motivation and one with no motivation. By analyzing the resulting data, we were able to classify participants into four different types of decision-making: short-sighted, resolute, complex, and expected utility (EU). Our results suggest that a large proportion of participants do not exhibit dynamic inconsistencies, but rather one of the resolute, complex, or eu types. We discuss how monetary incentives alter the dynamic consistency of decision-makers and the significance of ambiguity. Unlike the incentive treatment, we found a slight increase in the proportion of short-sighted behaviors in the hypothetical case, hence the suspicion that incentives may affect dynamic consistency. A notable observation is that in most cases, ambiguity tends to be reduced to risk in the absence of monetary incentives. These findings have important implications for economic decision-making and policymaking. By identifying different types of decision-makers and understanding how they make choices, we can develop more effective strategies to promote desired outcomes.
Original link:monetary values of increasing life expectancy: sensitivity to shifts of the survival curve
The Monetary Value of Extended Life Expectancy: Sensitivity to the Movement of the Survival Curve
Author
james k.Hammitt (Harvard University); Tuba Tun EL (Florida State University).
Abstract:Individuals' monetary values of decreases in mortality risk depend on the magnitude and timing of the risk reduction we elicited stated preferences among three time paths of risk reduction yielding the same increase in life expectancy (decreasing risk for the next decade, subtracting a constant from or multiplying risk by a constant in all future years) and willingness to pay (wtp) for risk reductions differing in timing and life-expectancy gain. respondents exhibited heterogeneous preferences over the alternative time paths, with almost 90 percent reporting transitive orderings. wtp is statistically significantly associated with life-expectancy gain (between about 7 and 28 days) and with respondents’ stated preferences over the alternative time paths. estimated value per statistical life year (vsly) can differ by time path and **erages about $500,000, roughly consistent with conventional estimates obtained by dividing estimated value per statistical life by discounted life expectancy.
The monetary value of an individual's contribution to reducing the risk of death depends on the extent and timing of the reduction. We asked respondents about their preference for three time paths for risk reduction, all of which lead to the same increase in life expectancy (reducing risk over the next decade, subtracting a constant from risk in all future years, or multiplying risk by a constant), as well as willingness to pay (WTP) for risk reduction at different points in time and life expectancy increases. Respondents showed different preferences for different time paths, with nearly 90% reporting delivery ordering (for different paths). WTP was statistically significantly associated with an increase in life expectancy (approximately between 7 and 28 days) and respondents' preference for alternative time paths. The estimated value (VSLY) for each statistical life year will vary depending on the time path and average about $500,000, which is generally consistent with the conventional estimate of dividing the estimated value of each statistical life year by discounted life expectancy.
Original link:the determinants of decision time in an ambiguous context
Determinants of decision time in ambiguous contexts
Author
Anna Conte (University of Rome); Gianmarco de Sanis (University of Rome); john d.Hey (University of York); Ivan Soraperra (Max Planck Institute for Human Development, Center for Man and Machine).
Abstract:This **builds on the data from a published **on beh**iour under ambiguity (conte & hey, 2013)—henceforth c&h—to explore the determinants of decision time c&h categorized individual subjects as being of one of four types (of decision-maker)—expected utility, smooth ambiguity, rank dependent and alpha expected utility—by using the decisions of the subjects, but did not look at the decision times of the different types. we take as given the categorization identified by c&h, and explore whether the classification can explain the decision times of the subjects. we investigate whether and why different types take a different amount of time to decide. we explore the effects of various features related to (mainly psychological) theories of the process of decision-**i.e., experience with the task, complexity, closeness to indifference and similarity of the options. our results show that different types take a similar time to make their decisions on **erage, but decision times of different types are explained by different features of the decision task. this **is the first investigating the heterogeneity of decision times based on a classification of subjects into different types in an ambiguous (rather than risky) decision context.
This paper explores the determinants of decision time based on a published data (Conte and Hey, 2013) on behavior in ambiguous contexts (C&H). C&H classifies individual subjects into four types (decision-maker type) through their decision-making—expected utility, smooth fuzziness, rank dependence, and alpha expected utility. However, they did not look at different types of decision-making timing. We hypothesize that the classification determined by C&H is correct and whether the classification can explain the participant's decision-making time. We looked at whether different types of decision-makers need different amounts of time to make decisions, and why this is the case. We looked at the influence of various characteristics related to decision-making process theory (primarily psychology), such as task experience, complexity, near-neutral attitudes, and similarity of options. Our findings suggest that the average time required for different types of decision-making is similar, but different types of decision-making time can be explained by different characteristics of the decision-making task. This is the first study to study heterogeneity in decision-making time in an uncertain (rather than risk) decision-making environment in which participants are classified.
Original link:ambiguity **ersion and the degree of ambiguity
Ambiguity aversion and degree of ambiguity
Author
Ronald Klingebiel (Frankfurt School of Finance and Management); Feibai Zhu (Frankfurt School of Finance and Management).
Abstract:We empirically show that sample information not only moderates prospects' outcome ambiguity but also decision makers' revealed **ersion of them. since most natural prospects permit at least some sample inference, accounting for their degree of ambiguity improves prediction of **ersion. the special case of full ambiguity, as in ellsberg-type designs, is typically **erted—yet many decision makers systematically like low degrees of ambiguity while disliking higher degrees. ambiguity attitudes might thus usefully be characterized by not only their sensitivity to degrees of ambiguity but also such ambiguity thresholds. just as people like some risks but not others, they h**e ambiguity attitudes that depend on how much ambiguity there is. we thus show how attitudes towards a degree of ambiguity are systematic, enabling prediction across sources of ambiguity.
Through empirical research, we show that sample information not only moderates the ambiguity of prospect results, but also moderates the degree of aversion of decision-makers to revealing them. Since most natural prospects allow for at least some sample inferences, considering their degree of uncertainty can improve the aversion to **. The exception of complete ambiguity in Ellsberg-type designs is usually circumvented, yet many decision-makers systematically prefer a lower degree of ambiguity and dislike a higher degree of ambiguity. Thus, fuzzy attitudes can be characterized not only by sensitivity to ambiguity, but also by this threshold of ambiguity. Just as people like certain risks and dislike others, their attitude towards ambiguity depends on the degree of ambiguity. Thus, we show how attitudes towards a certain degree of ambiguity can be systematized, so that decisions can be made in a variety of ambiguous situations.
Original link:Previous Articles:
Link to the article:
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