Ambiguity and the Bayesian Approach


Advances in Economics and Econometrics: Theory and Applications

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

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


Social Choice and Welfare

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

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


Research in Economics

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

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

Economics: Between prediction and criticism


International Economic Review

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

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

Two-sided reputation in certification markets


Management Science

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

Mots clés : Certification, Reputation, Credit rating agencies

In a market where sellers solicit certification to overcome asymmetric information, we show that the profit of a monopolistic certifier can be hump-shaped in its reputation for accuracy: a higher accuracy attracts high-quality sellers but sometimes repels low-quality sellers. As a consequence, reputational concerns may induce the certifier to reduce information quality, thus depressing welfare. The entry of a second certifier impacts reputational incentives: when sellers only solicit one certifier, competition plays a disciplining role and the region where reputation is bad shrinks. Conversely, this region may expand when sellers hold multiple certifications

Why the Empty Shells Were Not Fired: A Semi-Bibliographical Note



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

Zero-sum revision games


Games and Economic Behavior

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

Mots clés : Revision games, Zero-sum games, Deadline effect

In zero-sum asynchronous revision games, players revise their actions only at exogenous random times. Players' revision times follow Poisson processes, independent across players. Payoffs are obtained only at the deadline by implementing the last prepared actions in the “component game”. We characterize the value of this game as the unique solution of an ordinary differential equation and show it is continuous in all parameters. As the duration of the game increases, the limit revision value does not depend on the initial position and is included between the min-max and max-min of the component game. We characterize the equilibrium for 2×2 games. When the component game min-max and max-min differ, the revision game equilibrium have a wait-and-wrestle structure: far form the deadline, players stay put at sur-place action profile, close to the deadline, they take best responses to the action of the opponent