Articles scientifiques

Deciding about human lives: an experimental measure of risk attitudes under prospect theory

E. KEMEL, C. PARASCHIV

Social Choice and Welfare

juin 2018, vol. 51, n°1, pp.163-192

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

https://link.springer.com/article/10.1007/s00355-018-1111-y


For public policies in the health, security or safety domains, the main consequences concern the number of human lives that are saved or lost, and are uncertain ex-ante. In classic economic evaluations of such policies, losses and gains of human lives are often monetized and aggregated with other costs and benefits. Uncertainty about human lives is thus treated as uncertainty about monetary consequences. In this paper, we question whether people risk human lives as they risk money.We present an experiment comparing risk attitudes towards human lives and towards money under prospect theory. The results show that respondents treat the two attributes differently when losses are involved. Specifically, the decisions involving human lives are characterizedby less elevated probability weighting in the loss domain and higher loss aversion compared to decisions involving money. These findings suggest that public preferences may differ from the cost-benefit analysis recommendations

Decision Theory Made Relevant: Between the Software and the Shrink

I. GILBOA, M. ROUZIOU, O. SIBONY

Research in Economics

juin 2018, vol. 72, n°2, pp.240-250

Départements : Economie et Sciences de la décision, GREGHEC (CNRS), Stratégie et Politique d’Entreprise

https://www.sciencedirect.com/science/article/pii/S1090944317303204


Decision theory offers a formal approach to decision making, which is often viewed and taught as the rational way to approach managerial decisions. Half a century ago it generated high hopes of capturing and perhaps replacing intuition, and providing the “right” answer in practically all managerial situations. Today it seems fair to say that decision theory has not lived up to these expectations. Behavioral science provides ample evidence that managers fail to follow the dicta of decision theory, even when these are explained to them. As a result, executives often find decision theory frustrating and useless and prefer to rely on their intuition. This paper suggests that this extreme conclusion is unwarranted and calls for a re-appraisal of decision theory. We propose that it should not always be regarded as a mathematical tool that produces the answer; rather, it can be viewed as a framework for a dialog between the decision maker and the decision theorist. In one extreme, the decision theorist studies the problem and provides the “correct’’ answer. But in another, the decision theorist only challenges the decision maker’s intuition and logic. In between, a whole gamut of possible dialogs exists, in which decision theory doesn’t replace intuition, but supports and refines it

Dynamic Atomic Congestion Games with Seasonal Flows

M. SCARSINI, M. SCHÖDER, T. TOMALA

Operations Research

mars-avril 2018, vol. 66, n°2, pp.327-339

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

Mots clés : network games, dynamic flows, price of anarchy, price of stability, Braess ratio, max-flow min-cut

https://pubsonline.informs.org/doi/pdf/10.1287/opre.2017.1683


We propose a model of discrete time dynamic congestion games with atomic players and a single source-destination pair. The latencies of edges are composed by free-flow transit times and possible queuing time due to capacity constraints. We give a precise description of the dynamics induced by the individual strategies of players and of the corresponding costs, either when the traffic is controlled by a planner, or when players act selfishly. In parallel networks, optimal and equilibrium behavior eventually coincides, but the selfish behavior of the first players has consequences that cannot be undone and are paid by all future generations. In more general topologies, our main contributions are three-fold. First, we show that equilibria are usually not unique. In particular, we prove that there exists a sequence of networks such that the price of anarchy is equal to n-1, where n is the number of vertices, and the price of stability is equal to 1.Second, we illustrate a new dynamic version of Braess's paradox: the presence of initial queues in a network may decrease the long-run costs in equilibrium. This paradox may arise even in networks for which no Braess's paradox was previously known.Third, we propose an extension to model seasonalities by assuming that departure flows fluctuate periodically over time. We introduce a measure that captures the queues induced by periodicity of inflows. This measure is the increase in costs compared to uniform departures for optimal and equilibrium flows in parallel networks

Economics: Between prediction and criticism

I. GILBOA, A. POSTLEWAITE, L. SAMUELSON, D. SCHMEIDLER

International Economic Review

mai 2018, vol. 59, n°2, pp.367-390

Départements : Economie et Sciences de la décision, GREGHEC (CNRS)

https://onlinelibrary.wiley.com/doi/abs/10.1111/iere.12273


We suggest that one way in which economic analysis is useful is by offering a critique of reasoning. According to this view, economic theory may be useful not only by providing predictions, but also by pointing out weaknesses of arguments. It is argued that, when a theory requires a non‐trivial act of interpretation, its roles in producing predictions and offering critiques vary in a substantial way. We offer a formal model in which these different roles can be captured

Honoring Sovereign Debt or Bailing Out Domestic Residents? The Limits to Bailouts

E. MENGUS

Journal of International Economics

septembre 2018, vol. 114, pp.14-24

Départements : Economie et Sciences de la décision

Mots clés : Sovereign debt, Internal cost of default, Bailouts

https://www.sciencedirect.com/science/article/pii/S0022199618300850


Why does a borrowing country not avoid the internal cost of default, an important driver of sovereign debt repayment, by implementing domestic sector bailouts? This paper investigates sovereign debt sustainability in a model where domestic and foreign investors optimally select their portfolios and the sovereign decides over its default and bailout policies. It shows that internal bailouts do not preclude sovereign borrowing when domestic private exposures to sovereign debt, direct or indirect, cannot be observed or inferred by the sovereign. In equilibrium, when these exposures are correlated with future liquidity needs, bailouts are less efficient to compensate domestic losses making repayment more desirable. “Opacity" on financial exposures is then a commitment device for sovereigns to honor their debts and thus may be welfare improving


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