when do losses loom larger than gains abstract in defining limits to loss aversion novemsky and kahneman 2005 offer important new data and a needed summary of appropriate ways to think about loss aversion in this comment to novemsky and kahneman s article the authors consider the new empirical results that involve probabilistic buying and selling suggesting caution in generalizing the results to nonprobabilistic commerce the authors expand novemsky and kahneman s summary by exploring two critical constructs that help define the boundaries of loss aversion emotional attachment and cognitive perspective emotional attachment alters loss aversion by moderating the degree to which parting with an item involves a loss whereas shifts in cognitive perspective explain why items typically viewed as a loss are given more or less weight the goal is to use these constructs to characterize more specifically contexts in which losses loom larger than gains and to suggest specific ways that research into loss aversion could evolve

heterogeneity and the evaluation of efficiency the case of italian universities a random parameters stochastic frontier model is applied to italian data in order to evaluate the cost function and efficiency of higher education institutions the method yields useful information about inter institutional variation in cost structure and technical efficiency returns to scale and scope are evaluated for the typical university and it is found that these returns are almost ubiquitously decreasing a finding with clear policy implications

overlapping expectations and hart s conditions for equilibrium in a securities model hart j econ theory 9 1974 293 311 gave conditions for equilibrium to exist in a securities model where each agent undertakes asset transactions to maximize expected utility of wealth these conditions rule out agents wanting to undertake unbounded balanced transactions to reach a pareto superior allocation given their expectations with mild extra assumptions to make agents unwilling to risk incurring unbounded losses on their portfolios hart s conditions become equivalent to an assumption of overlapping expectations which is comparable to a much weaker form of green s common expectations econometrica 41 1973 1103 1124

the disparity between willingness to accept and willingness to pay measures of value psychologists have long argued that people are much more averse to a loss than attracted to an equivalent gain this behavior termed loss aversion has been formalized by kahneman and tversky 1979 in their reformulation of expected utility theory prospect theory in prospect theory the utility function is replaced by a value function that evaluates changes in income from the current level increases in income are weighted by a relatively small marginal utility decreases in income are weighted by a much larger marginal utility in effect the value function implies that a kink in the relationship between utility and income occurs at the initial income or reference point and that the slope of the utility function for losses in income is steeper than it is for gains in a recent paper knetsch and sinden 1984 report a series of experiments that demonstrate the existence of a large disparity between willingness to accept wta and willingness to pay wtp measures of value they argue that the psychological theory of loss aversion explains this difference economic theory would suggest that individuals who exhibit a large disparity between wta and wtp are perhaps underperceiving the value of gains or overperceiving the value of losses are behaving in an irrational manner and will consequently achieve a lower level of well being than if they behaved in a true utility maximizing manner this would in contrast to loss aversion usually imply near equal values for wta and wtp see willig 1976 further documentation of a larger than expected disparity between wta and wtp has been obtained in surveys asking for the value of a variety of public goods for example cummings brookshire and schulze 1986 document six

a reference price theory of the endowment effect abstract the common finding that selling prices exceed buying prices the so called endowment effect is typically explained by the assumptions that consumers evaluate potential transactions with respect to their current holdings and that the owners of a good regard its potential loss to be more significant than nonowners regard its potential acquisition in contrast to this pain of losing account the authors propose that the endowment effect reflects a reluctance to trade on terms that appear unfavorable with respect to salient reference prices in six experiments and eight more summarized in appendixes the authors show that manipulations that reduce the gap between valuations and reference prices reduce or eliminate the endowment effect these results suggest that the endowment effect is often best construed as an aversion to bad deals rather than an aversion to losing possessions

do we really need to change the decision maker counterintuitive escalation of commitment results in real options contexts a robust finding in the escalation literature termed as the preference effect is that involvement in the period 1 initial project assessment decision increases the tendency for decision makers to stick with a losing course of action during the period 2 project reassessment decision the proposed solution is to bring in a new decision maker in period 2 across multiple studies we show that providing period 1 information in real options format increases the tendency for decision makers to view period 2 focal event information as both more negative and more important consequently such decision makers exhibit less escalation in period 2 i e exhibit behavior opposite to the preference effect this suggests that in real option contexts not only do we not need to bring in a new decision maker but also counterintuitively it is beneficial to retain the same decision maker in situations where escalation is likely to occur this paper was accepted by yuval rottenstreich judgment and decision making

arbitrage and the flattening effect of large numbers abstract in a model of an exchange economy with a continuum of individuals we show that competitive equilibrium can be regarded as resulting from the elimination of arbitrage opportunities generically the elimination of such opportunities results in a phenomenon we call the flattening effect of large numbers the flattening effect provides a precise meaning to the statement that under perfect competition individuals cannot influence prices they face perfectly elastic demands and supplies the attractive geometry associated with arbitrage and the flattening effect is highlighted in several figures we also link the demonstration of equilibrium through arbitrage with the logic of marginalism journal of economic literature classification number d51

asset market equilibrium with short selling this paper presents simple conditions and a simple proof of the existence of equilibrium in asset markets where short selling is allowed and satiation is possible unlike standard non satiation assumptions the one used here is weak enough to be reasonable in the mean variance capital asset pricing model and in asset market models where investors maximize expected utility and where total returns to individual assets may be negative this paper analyses the existence of equilibrium in exchange economy models where choice sets may be unbounded below and satiation is likely there are two main examples of such models one is an asset market model where investors maximize expected utility and the total return to individual assets may be negative with positive probability the other is the mean variance capital asset pricing model capm where investors do not necessarily maximize expected utility but instead maximize a function of only the mean and variance of return to their portfolios in both of these models the investors choice sets will be unbounded if short selling is allowed to short sell a share of an asset means to borrow it and sell it promising to buy it back and return it to the lender at a later date formally short selling corresponds to holding a negative number of shares if unlimited short selling is allowed then there is no limit to how large negative numbers of shares can be held and therefore the choice sets are unbounded satiation can also occur both in the mean variance model and in the expected utility model unless there is a riskless asset in the expected utility model there may be satiation if the individual assets have negative returns with positive probability as the investor gets more and more shares the potential positive returns get larger and larger but so do the potential negative returns if the investor is very averse to large negative returns then he may eventually be satiated and not want any more shares in the mean variance model the expected return to an investor s portfolio increases as he holds more and more shares of the assets but so does the variance of return it may be that at some point the additional expected return gained from adding more shares to the portfolio is not sufficient to compensate for the increase in variance if so then there will be satiation satiation in the mean variance model iie analysed in nielsen 1987 1988 the expected utility model with short selling has been used in many specific analyses of portfolio selection and asset pricing to name but one connor 1984 studies arbitrage pricing in a general equilibrium model where there are no short sales restrictions the mean variance capm is of course very prominent in the finance literature because the

inherent rule variability in consumer choice changing rules for change s sake the present research demonstrates that consumers tend to vary their use of decision rules independent of option and set characteristics in five experiments increased choice of a particular option e g lower price brand name or compromise option was associated with relatively decreased choice of that same generic option on occasions that followed results indicate that this inherent rule variability is not an effect of background contrast but instead relates to consumers favorable valuation of decision change itself this research implies that the idea of contingent decision making applies not only to decision outcomes but also to decision processes

evaluating the productive performance of uk universities as cost constrained revenue maximizers an empirical analysis the study presents an empirical analysis of the relative revenue efficiency of uk universities in providing teaching and research with government policies pressurizing the largely public funded universities to secure efficiency in both input usage and output revenue university producers are modelled as cost constrained revenue maximizers taking explicit account of the quality of research output the methodology uses linear programming techniques to construct nonparametric cost indirect production frontiers and to compute revenue efficiency relative to these frontiers revenue efficiency is then decomposed into its output allocative and technical components further analysis investigates the sources of allocative and technical inefficiencies

seller beware how bundling affects valuation abstracthow does bundling affect valuation this research proposes the asymmetry hypothesis in the valuation of bundles consumers demand more compensation for the loss of items from bundles compared with the loss of the same items in isolation yet they express lower willingness to pay for items added to bundles compared with the same items purchased separately this asymmetry persists because bundling causes consumers to perceive multiple items as a single inseparable gestalt unit thus consumers resist altering the whole of the bundle by removing or adding items six studies demonstrate this asymmetry across judgments of monetary value studies 1 and 2 and dis satisfaction study 3 moreover bundle composition the ability of different items to create the impression of a whole moderates the effect of bundling on valuation study 4 and the need to replace missing items i e restoring the whole mediates the effect of bundling on compensation demanded for losses study 5 finally the a

institutions of higher education as multi product firms economies of scale and scope a multiple output cost function is estimated for institutions of higher education in the united states employing data for 1981 82 the authors flexible fixed cost quadratic function includes three outputs undergraduate teaching graduate teaching and research grants and one input price average faculty salaries results indicate the existence of scope economies at least up to a point for both public and private institutions of higher education ray economies of scale are more pronounced in the private sector and product specific economies of scale are observed only in the public sector for research and graduate teaching copyright 1989 by mit press

economics of academic research and its implications for higher education the principal output of the highereducation system is knowledge the system generates two kinds of knowledge a disembodied form which appears as information in journals and books and an embod ied form in the grey matter of its graduates these outputs are produced by the activities of research and teaching respectively moreover many of the resources used to produce these outputs are used for both albeit in somewhat different proportions this applies to buildings office space laboratories computer rooms libraries etc staff academic and support staff and equipment computers ex perimental machines measuring instruments etc other resources are more specialized devoted ei ther to research alone research assistants or to teaching lecture rooms finally to function at all all higher educational institutions have to provide a range of central services such as maintaining finan cial staff and student records building mainte nance and repairs catering facilities and so on

costs efficiency and economies of scale and scope in the english higher education sector an understanding of the production and cost technology of higher education institutions is of considerable policy interest as it motivates the structure of the sector how large universities should be and what mix of outputs they should produce we review the literature and using data for english institutions in 2013 14 apply appropriate frontier methods to model the structure of costs in this diverse sector in doing so we uncover information about the returns to scale and scope within the higher education sector in particular the class of institutions comprising larger research intensive universities and small specialist institutions could benefit from further concentrating postgraduate and research activity we find that the universities comprising the english higher education sector are largely efficient measured relative to observed practices and that there is little scope for gains in technical efficiency from allocating resources on the basis of efficiency scores

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

the efficiency of german universities some evidence from non parametric and parametric methods due to tight public budget constraints the efficiency of publicly financed universities in germany is receiving increasing attention in the academic as well as in the public discourse against this background we analyse the efficiency of 72 public german universities for the years 1998 2003 applying data envelopment and stochastic frontier analysis contrary to earlier studies we account for the faculty composition of universities which proves to be an essential element in the efficiency of higher education our main finding is that east german universities have performed better in total factor productivity change compared to those in west germany however when looking at mean efficiency scores over the sample period west german universities still appear at the top end of relative efficiency outcomes

overlapping risk adjusted sets of priors and the existence of efficient allocations and equilibria with short selling the theory of existence of equilibrium with short selling is reconsidered under risk and ambiguity modelled by risk averse variational preferences no arbitrage conditions are given in terms of risk adjusted priors a sufficient condition for existence of efficient allocations is the overlapping of the interiors of the risk adjusted sets of priors or the inexistence of mutually compatible trades with non negative expectation with respect to any risk adjusted prior these conditions are necessary when agents are not risk neutral at extreme levels of wealths it is shown that the more uncertainty averse or risk averse the agents the more likely are efficient allocations and equilibria to exist

the transient and persistent efficiency of italian and german universities a stochastic frontier analysis despite measures on the european level to increase the compatibility between the higher education sectors the recent literature exposes variations in their efficiencies to gain insights into thes

the effect of giving it all up on valuation a new look at the endowment effect in three experiments we show that the endowment effect the tendency to demand more money for relinquishing owned goods than one is willing to pay for the same goods fails to emerge when sellers are not fully depleted of their endowment this finding is incompatible with prospect theory s account of the effect as stemming primarily from aversion to loss relative to the individual s current state we suggest a new account of the endowment effect as reflecting the human aversion to giving it all up rather than simply an aversion to incurring any loss relative to the status quo experiments 1 and 2 show the effect employing a pricing paradigm experiment 3 examines what constitutes all in the giving it all up effect this paper was accepted by uri gneezy behavioral economics

choice based on reasons the case of attraction and compromise effects building on previous research this article proposes that choice behavior under preference uncertainty may be easier to explain by assuming that consumers select the alternative supported by the best reasons this approach provides an explanation for the so called attraction effect and leads to the prediction of a compromise effect consistent with the hypotheses the results indicate that 1 brands tend to gain share when they become compromise alternatives in a choice set 2 attraction and compromise effects tend to be stronger among subjects who expect to justify their decisions to others and 3 selections of dominating and compromise brands are associated with more elaborate and difficult decisions

multiple unit holdings yield attenuated endowment effects previous endowment effect experiments have examined circumstances in which people encounter a single unit of a good e g one chocolate we contrast single unit treatments with multiple unit treatments in which participants encounter several units of a good e g five chocolates we observe endowment effects of typical magnitude for singleton holdings but attenuated endowment effects for multiple unit holdings moreover endowment effects consistently arise for singletons even as the definition of a unit is altered for instance participants holding one piece of chocolate show an endowment effect of standard size but so do participants holding one box of chocolates yet the box contains about 20 individual pieces of chocolate and participants given that many separate pieces show a substantially attenuated endowment effect we thus propose the property of unit dependence the definition of a unit can change but contingent on any given definition a pronounced endowment effect may emerge for singletons but not multiples this paper was accepted by teck ho decision analysis

on equilibrium in hart s securities exchange model in this paper we use a no unbounded arbitrage condition to give a very direct proof of the existence of equilibrium in hart s unbounded securities exchange model j econ theory 9 1974 293 311 we also examine the relationship between the no unbounded arbitrage condition and the sufficiency conditions of hart ibid and hammond j econ theory 31 1983 170 175 we present an example to show that if traders are not sufficiently risk averse then hammond s overlapping expectations condition is not in general equivalent to the no unbounded arbitrage condition or hart s sufficiency conditions and therefore is not sufficient to guarantee the existence of equilibrium we also present an example to show that it is possible for the no unbounded arbitrage condition to hold without overlapping expectations and therefore it is possible for equilibrium to exist without overlapping expectations

best practice benchmarking in uk higher education new nonparametric approaches using financial ratios and profit efficiency methodologies the neglected issue of using profit efficiency for the best practice benchmarking of uk universities is explored to see whether this supports the policy stance of encouraging more specialized university production the article also investigates whether nonparametric modelling with financial ratios in contrast to nonparametric modelling based on the prices and quantities of each university s inputs and outputs can yield ready insights into this profit efficiency issue the empirical results using two new approaches confirm that more specialized university production yields relatively higher performance on average than less specialized production the results also highlight certain advantages of financial ratios modelling

the benefits of higher education a comparison of universities and polytechnics the binary divide between the universities and polytechnics is ending should university teaching become more like polytechnic teaching or do the older universities provide a better model for the expanded university sector polytechnic teaching is often regarded as being cheaper but one should not look at the costs without also looking at the benefits one obvious measure of these is given by a comparison of the incomes earned by the gradu ates of the two types of institutions

a technically level playing field profit efficiency analysis of enforced competition between publicly funded institutions abstract the study demonstrates how recent advances in the data envelopment analysis dea of profit efficiency and in combining dea and stochastic frontier analysis sfa to measure producer performance can be used to obtain a technically level playing field profit efficiency performance measure a three stage analysis is used to provide an empirical investigation of public sector universities facing regulatory pressures to attain both profit efficiency and output quality stage one employs directional distance function analysis to decompose dea profit efficiency measures into technical and allocative components as these performance measures incorporate the impacts of managerial inefficiency the operating environment and luck statistical noise stage two applies sfa to total radial and non radial slacks to obtain a degree of disentanglement from the latter two impacts the stage two results are used to define a common environment and common luck scenario thus permitting university producers inputs to be adjusted so as to reflect operation within this more level playing field scenario stage three recomputes the first stage dea for this scenario to yield an input focused technically level playing field measure of profit efficiency that unifies the regulatory financial audit and output quality indicators in a single best practice benchmarked performance measure

temporary equilibrium with storable commodities abstract this paper fills a gap in temporary equilibrium theory by establishing necessary conditions and sufficient conditions for the existence of temporary equilibrium in a sequential economy with spot and incomplete futures markets for storable commodities and with heterogeneous expectations an important realistic feature of the model is an uncertain storage technology overlapping expectations and the usual sufficient conditions guarantee the existence of equilibrium inventory speculation implies a lower bound on current spot prices in terms of futures prices and the storage technology these results extend to an economy in which observed aggregate inventories influence expectations in a well behaved manner