the replacement problem abstract a prototypical vintage capital model of economic growth is developed where the decision to replace old technologies with new ones is modeled explicitly technological change is investment specific depreciation in this environment is an economic not a physical concept the vintage capital economy s balanced growth paths and transitional dynamics are analyzed the transitional dynamics are markedly different from the standard neoclassical growth model

the causes of preference reversal observed preference reversal cannot be adequately explained by violations of independence the reduction axiom or transitivity the primary cause of preference reversal is the failure of procedure invariance especially the overpricing of low probability high payoff bets this result violates regret theory and generalized nonindependent utility models preference reversal and a new reversal involving time preferences are explained by scale compatibility which implies that payoffs are weighted more heavily in pricing than in choice copyright 1990 by american economic association

estimating the extent of potential competition in the korean mobile telecommunications market switching costs and number portability abstract number portability service in the mobile communications market is believed to play an important role in lowering the switching costs which can increase the level of competition among providers the aim of this study was to estimate the switching costs and consumers valuation of the number portability service in the korean mobile communications market using conjoint analysis and the stated preference approach the analysis showed that the switching costs have been lowered considerably since number portability has been in force however a significant level of switching costs still remains despite number portability finally this paper provides some implications for the competition strategy in the mobile communications market

non transitive choice event splitting effects or framing effects recent studies have examined possible causes of the robust empirical failure of the transitivity axiom of expected utility theory by pitting regret aversion against alternative explanations such as event splitting effects these tests show that cycles replicate when the latter are controlled but are sensitive to changes in problem representation the control for event splitting effects however does not rule out their contribution to cyclical choices in some circumstances an experiment is reported which investigates this possibility cyclical choices are observed that cannot be due to event splitting effects but appear attributable to within event and between act evaluations of decision problems plus framing effects

econometric issues in estimating consumer preferences from stated preference data a case study of the value of automobile travel time this paper explores a number of methodological issues related to the econometric analysis of stated preference data in the context of estimating the value of automobile travel time estimates of parameters and the willingness to pay wtp to save time are obtained using conventional ordered probit and rank ordered logit models and an innovation called mixed logit we find that the average wtp is low and does not exhibit much variation among motorists although our findings using data on respondents rankings of alternatives are robust we find that caution should be used in estimating stated preferences based on respondents ratings

equipment investment and growth in developing countries abstract differences in equipment investment or equipment prices account for large variations in growth rates across countries an important task is to understand the economic mechanism underlying the equipment growth nexus and its policy implications in order to study this issue this paper develops a model in which growth is driven by the adoption of technologies that are embodied in equipment i show that this model can quantitatively account for the observed cross country relationships between equipment investment equipment prices and growth i find that the competitive equilibrium is characterized by inefficiently low levels of learning and too slow growth and study which policies are able to remedy this inefficiency

does the preference reversal phenomenon necessarily contradict the independence axiom one of the most puzzling paradoxes in decision theory is the preference reversal phenomenon this phenomenon seems to contradict the transitivity axiom for a long time one of the cornerstones of utility theory this paradox is established whenever a decision maker prefers lottery x to lottery y but is willing to put a lower selling price on x than on y such experiments first reported by harold lindman 1971 and sarah lichtenstein and paul slovic 1971 were repeated by david grether and charles plott 1979 werner pommerehne et al 1982 and robert reilly 1982 although the later researchers improved the mechanism through which the selling price emerges they all found systematic reversals a new approach to this problem was developed by charles holt 1986 and edi karni and zvi safra 1987 from two different starting points these authors showed that the preference reversal phenomenon does not necessarily prove a violation of the transitivity axiom as it may contradict the independence axiom this implies that people do not maximize expected utility but in that case the preference reversal phenomenon becomes just another evidence against expected utility theory but not against the transitivity axiom these results have their own disadvantages although the independence axiom is not as fundamental as transitivity it is nevertheless very appealing on normative grounds of course the preference reversal phenomenon necessarily contradicts at least one of the assumptions of expected utility theory but empirical evidence shows that despite its normative appeal violations of the reduction of compound lotteries axiom may happen see for example joshua ronen 1971 and doug snowball and clif brown 1979 in this paper i therefore suggest a decision mechanism for the preference reversals lotteries which is transitive and satisfies the independence axiom but not the reduction axiom

vintage capital and the dynamics of the ak model this paper analyzes the equilibrium dynamics of an ak type endogenous growth model with vintage capital the inclusion of vintage capital leads to oscillatory dynamics governed by replacement echoes which additionally influence the intercept of the balanced growth path these features which are in sharp contrast to those from the standard ak model can contribute to explaining the short run deviations observed between investment and growth rates time series to characterize the optimal solutions of the model we develop analytical and numerical methods that should be of interest for the general resolution of endogenous growth models with vintage capital

long term growth and short term economic instability when learning by doing is at the origin of growth the long run growth rate should be negatively related to the amplitude of the business cycle if human capital accumulation is increasing and concave in the cyclical component of production empirical evidence strongly supports this nding for industrialized countries and european regions using the standard control variables we nd that countries and regions that have a higher standard deviation of growth and of unemployment have lower growth rates the result does not come from an e ect of instability on investment the negative relation however does not hold for non industrialized countries for which learning by doing may not to be the main engine of growth 2000 elsevier science b v all rights reserved jel classixcation o40 e32

preference reversals and the independence axiom of all of the paradoxical patterns of behavior reported in laboratory experiments one of the most perplexing for decision theorists is the preference reversal phenomenon a subject in a preference reversal experiment is typically given a choice between a lottery with a high probability of winning a modest amount of money a p bet and a lottery with a low probability of winning a large amount of money a bet the lowest amount of money for which the subject would willingly sell either of these lotteries is also elicited the most common reversal is for a subject to choose the p bet over the bet but to put a higher selling price on the bet preference reversals were first reported by harold lindman 1971 and sarah lichtenstein and paul slovic 1971 in discussing the psychologists discovery of such reversals david grether and charles plott remark the inconsistency is deeper than mere lack of transitivity or even stochastic transitivity it suggests that no optimization principles of any sort lie behind even the simplest of human choices 1979 p 623 this paper offers a simple alternative explanation of documented preference reversals an explanation that does not require the abandonment of the transitivity assumption

are preferences monotonic testing some predictions of regret theory in this paper the authors demonstrate that the assumption of regret aversion which has been invoked in regret theory to explain several well documented violations of expected utility theory also implies the existence of strict preferences between some stochastically equivalent actions and implies certain systematic violations of monotonicity the authors report an experimental test of these predictions they find that while choices between stochastically equivalent actions are entirely consistent with expected utility theory there is clear evidence of the monotonicity violations predicted by regret theory copyright 1992 by the london school of economics and political science

choice by sequential procedures article history we propose a rule of decision making the sequential procedure guided by routes and show that three influential boundedly rational choice models can be equivalently understood as special cases of this rule in addition the sequential procedure guided by routes is instrumental in showing that the three models are intimately related we show that choice with a status quo bias is a refinement of rationalizability by game trees which in turn is also a refinement of sequential rationalizability thus we provide a sharp taxonomy of these choice models and show that they all can be understood as choice by sequential procedures

decomposing learning by doing in new plants the paper examines learning by doing in the context of a production function in which the other arguments are labor human capital physical capital and vintage as a proxy for embodied technical c

organizational capital learning by doing and investment volatility this paper addresses the issue of plant level investment volatility in the context of a purely convex model where fluctuations are driven by technological shocks the aim is to assess the role of learning by doing in reproducing the well documented non smooth investment dynamics at the plant level instead of relying on typical non convexities fixed costs or indivisibilities used to account for lumpy investment behavior the concept of organizational capital is essential in the analysis and it provides the channel through which learning affects production our results indicate that learning by doing constitutes a potentially important source of investment volatility at the plant level and that one should not believe that convex models of investment necessarily deliver smooth dynamics

value of time speeding behavior and gasoline prices abstract value of time vot is a key parameter in economics and policy this paper presents an alternative method to estimate vot by analyzing an hourly dataset on drivers speeding behavior as a function of the gasoline price our identification strategy is novel as it is based on the intensive margin in comparison previous studies reveal vot on the extensive margin but choice alternatives have multiple attributes thereby potentially confounding estimates consistent with the range of the prior literature we find a vot of about 50 of the wage rate and analyze sources of bias from accidents and traffic tickets these bias functions suggest that previous stated preference vot estimates are likely downward whereas previous revealed preference estimates are likely upward biased

economic theory of choice and the preference reversal phenomenon a reexamination in a recent issue of this review david grether and charles plott 1979 hereinafter referred to as g p presented a series of experiments that show that individual decisions are made in a manner inconsistent with standard preference theory this inconsistency can be illustrated by the following example individuals under suitable laboratory conditions first have a choice between a lottery with a high probability of winning a small sum of money the p bet probability bet and a lottery with a high stake but low probability of winning the m bet money bet after indicating a preference for one of the lotteries in the pair the same subjects are then asked to place a monetary value on each of the individual lotteries grether and plott found that a large number of participants stated a preference for the p bet in the first round but placed a higher value on the other lottery the m bet in the second round this behavior a preference reversal is inconsistent with the traditional statements of preference theory

the economics of has beens the evolution of technology causes human capital to become obsolete we study this phenomenon in an overlapping generations setting assuming that technology evolves stochastically and that older workers find updating uneconomic experience and learning by doing may offer the old some income protection but technology advance always turns them into has beens to some degree we focus on the determinants demand elasticities persistence of technology change etc of the severity of the has beens effect it can be large even leading to negatively sloped within occupation age earnings profiles and an occupation dominated by a few young high income workers architecture displays the sort of features the theory identifies as magnifying the has beens effect and both anecdotes and some data suggest that the has beens effect in architecture is extreme indeed

technology adoption learning by doing and economic growth abstract we develop a model in which firms choose which technologies to adopt as well as the timing of such adoptions in between adoptions a firm accumulates expertise in its technology which allows it to operate the technology more efficiently thus there is firm specific learning by doing for certain parameterizations of the model and appropriate initial distributions of technologies and expertise equilibria are characterized by positive and constant growth of per capita output and positive but nonconstant growth of each firm s output we find firms adoption decisions and output growth depend upon the efficiency of capital markets journal of economic literature classification numbers o41 o33

path dependence endogenous innovation and growth the article presents a model of endogenous innovation and growth in which technological change is path dependent the historical pattern of technological development plays a central role in determining the pace of future technological change path dependence is explained using a distinction between fundamental and secondary knowledge the economy moves endogenously between periods of drastic and nondrastic innovation technological lock in is shown to be a special case of path dependence the model provides a rationale for cycles in technological leadership this rationale exists in equilibria with positive levels of fundamental research and in a world with no imitation

disruption costs learning by doing and technology adoption abstract we study technology adoption in a dynamic model of price competition adoption involves disruption costs and learning by doing because of disruption costs the adopting firm begins in a market disadvantage which may persist if its rival captures the customers that the adopting firm needs to learn the technology the prospect of future rents by the rival results in i a failure to adopt socially efficient technologies ii an equilibrium preference for technologies that are learned faster but have lower social value and iii more technologies being adopted if more firms enter the market

absorptive capacity socially enabling mechanisms and the role of learning from trial and error experiments a tribute to dan levinthal s contribution to international business research the concept of absorptive capacity ac of firms cohen and levinthal 1989 and 1990 is a foundational feature of organizational learning and adaptation that has had enormous influence in international business ib and innovation studies and management research in general in this tribute to dan levinthal we discuss the close connection between ac and learning two areas central to dan levinthal s research in relation to different contexts where ac comes into play in extant ib research we discuss four specific aspects of the nexus of ac and learning in the context of ib 1 bridging between intra and inter firm learning 2 a routine based framing of ac that emphasizes processes and capabilities underlying seeking assimilating and innovation in a global setting 3 the role of socially enabling mechanisms and 4 the logic of learning through trial and error experiments within firms and countries

learning by doing and investment in training a synthesis of two rival models of the life cycle this paper provides a theoretical synthesis of recent discussions of learning by doing and investment in training as alternative forms of human capital accumulation these theoretical notions relate to essentially different phenomena in particular pace becker and mincer investment in training does not completely encompass learning by doing the paper then develops a model in which human capital accumulation occurs via both training and learning by doing the joint training learning model since it is more general then pure models in which all accumulation occurs via either training or learning avoids certain restrictive and seemingly implausible implications of either kind of pure model however the joint model also has implications that while compatible with stylized facts about the life cycle are sharper than those of either kind of pure model for example the joint model implies that market time and earnings must rise early in the life cycle while neither pure model without corners does so finally the notion of learning by doing provides a rationale for an empirical finding that has recently received attention to the effect that the rate of depreciation of human capital is not constant but rather depends on the extent to which it is used in market activities

vintage human capital and learning curves abstract i study a vintage human capital model in which long lived workers accumulate human capital following an exogenous learning curve different skill levels inside a vintage are complementary in production this makes the ex ante homogeneous workers enter different vintages the continuous time framework allows me to study the timing decision for the technology phase out differentially and to derive sharp characterization for wages and the distribution of workers in the dying technology i show how to posit and solve a planner s problem and construct equilibrium in this way consistent with empirical evidence i show that the experience premium is always positive but diminishes as a technology ages the connection between workers learning curves and the technology s progress curve is characterized

does productivity growth fall after the adoption of new technology abstract a number of theoretical models of technology adoption have been proposed that imply that measured productivity growth may initially fall and then later rise after the adoption of a new technology this paper investigates whether or not this implication is a feature of plant level data from the colombian manufacturing sector we focus on technology adoption embodied in new equipment we find evidence that the effect of a large equipment purchase is initially to reduce plant level total factor productivity growth

market experience eliminates some anomalies and creates new ones we report two experiments which investigate whether experience of decision making in repeated markets purges behaviour of preference reversals we investigate two behavioural mechanisms that may be shaping bids in repeated auctions a tendency to adjust bids towards previously observed market prices and a tendency to reduce bids following bad market outcomes we find little support for the former but strong support for the latter also whilst just enough market exposure eliminates the typical preference reversal phenomenon continued exposure fosters the mirror image anomaly therefore although market experience shapes behaviour in our experiments it does not generally promote consistency with standard preference theory

the use of alternative preference elicitation methods in complex discrete choice experiments we analyse stated preference data over nursing jobs collected from two different discrete choice experiments a multi profile case best worst scaling experiment bws prompting selection of the best and worst among alternative jobs and a profile case bws wherein the respondents choose the best and worst job attributes the latter allows identification of additional utility parameters and is believed to be cognitively easier results suggest that respondents place greater value on pecuniary over non pecuniary gains in the multi profile case there is little evidence that this discrepancy is induced by the extra cognitive burden of processing several profiles at once in the multi profile case we offer thoughts on other likely mechanisms

the relevance of irrelevant alternatives abstract in an experimental setting subjects face a standard elicitation task for certainty equivalents we show that when a third objectively irrelevant option is added to the standard task the willingness to take risks increases

consumers response to the eu quality policy allowing for heterogeneous preferences abstract using dry cured ham as an anchor product consumers preferences for eu quality certification schemes region of origin and price have been investigated with conjoint analysis in order to achieve this aim a mixed rank ordered logit which allows for the investigation of heterogeneous preferences and their sources has been estimated in particular we have analysed to what extent consumers socio demographic traits affect their price sensitiveness and whether consumers sensory hedonic valuations and attitudes towards ham with a protected designation of origin pdo affect the preferences for specific attributes results show that consumers with a low medium age and income are more price sensitive consumers more inclined sensorially towards the regional specialty with or without pdo are more likely to purchase this product and consumers with a more favourable attitude towards pdo ham are also more prone to purchase cured ham with quality certification findings also suggest that although the pdo scheme attracts a segment of consumers the origin by itself is still a more powerful signal of quality and more specifically the region of origin

estimating consumer preferences for online music services this article analyses consumer preferences with regard to important attributes of online music services conjoint analysis and a random coefficient discrete choice model using bayesian approach with gibbs sampling are used to estimate the preferences based on the quantitative results we use simulation to look at how a new pricing strategy and the threat of legal penalty for file sharing would influence the online music market findings include these estimated willingness to pay for downloading one music file is significantly less than the actual price of the file consumers are sensitive to longer search and download times for music files and very sensitive to the threat of legal action and consumers are not sensitive to online music services broadening their catalogues finally the simulation shows that a combination of increased transaction costs for illegal file sharing and lower priced digital music files would inhibit illegal file sharing and bolster the number of people purchasing music legally

preference reversals without the independence axiom the preference reversal phenomenon was believed to be inconsistent with the transitivity axiom of decision theory however recent theoretical papers have demonstrated that the preference reversals that were observed in earlier experiments could be explained by subject violations of the independence axiom or the compound lottery axiom therefore those preference reversals are not known to be inconsistent with generalization of expected utility theory that replace the independence axiom the present paper reports the results of experiments in which a substantial proportion of subject responses violate the asymmetry axiom these results are inconsistent with expected utility theory and its generalizations copyright 1989 by american economic association

a rank ordered logit model with unobserved heterogeneity in ranking capabilities in this paper we consider the situation where one wants to study the preferences of individuals over a discrete choice set through a survey in the classical setup respondents are asked to select their most preferred option out of a selected set of alternatives it is well known that in theory more information can be obtained if respondents are asked to rank the set of alternatives instead in statistical terms the preferences can then be estimated more e ciently however when individuals are unable to perform part of this ranking task using the complete ranking may lead to a substantial bias in parameter estimates in practice one usually opts to only use a part of the reported ranking in this paper we introduce a latent class rank ordered logit model in which we use latent segments to endogenously identify the ranking capabilities of individuals each segment corresponds to a difierent assumption on the ranking capability using simulations and an empirical application we show that using this model for parameter estimation results in a clear e ciency gain over a multinomial logit model in case some individuals are able to rank at the same time it does not sufier from biases due to ranking inabilities of some of the respondents

experimental economics hard science or wasteful tinkering i take it that in raising the question what have we learned from experimental economics under the broader umbrella of controversy the point is not to solicit a catalogue of experimental findings but rather to signal the more pointed question are we learning anything at all or at least much that is very useful form experimentation in economics as a practising experimentalist i am convinced that experiments do have the potential to make a significant contribution to knowledge in economics this abstract was borrowed from another version of this item

estimating distributed lags in short panels with an application to the specification of depreciation patterns and capital stock constructs this paper considers the problem of estimating distributed lags in short panels though the n time series contained in a panel may allow for relatively precise estimates of identified lag coefficients identification requires restrictions on the contribution of the unobserved pre sample x s to the current values of y and the shortness of panels focuses attention on this matter we investigate two such restrictions the first constrains the relationship between the presample and insample x s while the second constrains the lag distribution itself an example which investigates empirically how to construct capital stocks for the analysis of rates of return closes the paper

a context dependent model of the gambling effect this paper presents a context dependent theory of decision under risk the relevant contextual factor is the presence of a riskless lottery in a preference comparison the theory only deviates from expected utility if the set of options contains both riskless and risky lotteries the main motivation for the theory is to explain the gambling effect contrary to previous theories of the gambling effect the present theory is consistent with stochastic dominance it can however violate transitivity the theory allows for a decomposition of the interaction between risk aversion and gambling aversion and thereby extends the classical arrow pratt measure of risk aversion

sequentially rationalizable choice a sequentially rationalizable choice function is a choice function that can be retrieved by applying sequentially to each choice problem the same xed set of asymmetric binary relations rationales to remove inferior alternatives these con cepts translate into economic language some human choice heuristics studied in psychology and explain cyclical patterns of choice observed in experiments we study some properties of sequential rationalizability and provide a full character ization of choice functions rationalizable by two and three rationales

disappointment and dynamic consistency in choice under uncertainty the central proposition of disappointment theory is that an individual forms expectations about uncertain prospects and that if the actual consequence turns out to be worse than or better than that expectation the individual experiences a sensation of disappointment or elation generating a decrement or increment of utility which modifies the basic utility derived from the consequence by incorporating a simple disappointment elation function into a model of individual choice many observed violations of conventional expected utility axioms including violations of savage s sure thing principle and the isolation effect can be predicted and defended as rational and dynamically consistent behaviour

experience vs obsolescence a vintage human capital model abstract i introduce endogenous human capital accumulation into an infinite horizon version of chari and hopenhayn s 1991 4 vintage human capital model returns to skill and tenure premia are highest in young vintages where skill is scarcest and agents accumulate human capital fastest as the vintage ages the skill premium decreases and vanishes entirely upon vintage death workers run through cycles of human capital accumulation their wages rise as they accumulate skill undergo downward pressure as the technology ages and finally drop sharply when the worker switches to a new technology the results are in line with german linked employer employee data tenure premia are highest in young establishments as well as in fast growing industries occupations and establishments a calibration exercise suggests that human capital accumulation is the most important determinant of workers wage profiles whereas changes to the price of skill and vintage productivity gains play a smaller quantitative role

learning by drilling interfirm learning and relationship persistence in the texas oilpatch author s kellogg ryan m abstract production in many industries such as construction and heavy manufacturing relies on inputs from both lead firms and contractors these firms joint productivity often hinges on their ability to share information and coordinate activities suggesting that they have strong incentives to learn about each other s personnel procedures and expertise this learning differs from standard learning by doing in that it is relationship specific its benefits are not appropriable outside the relationship in which the learning takes place in this paper i empirically examine the importance of relationship specific learning using high frequency data from oil and gas drilling i find that the joint productivity of a lead firm and its drilling contractor is enhanced significantly as they accumulate experience working together this result is robust to other relationship specificities i also find that firms appear to recognize the benefits of joint experience controlling for other specificities lead firms are more likely to work with contractors with which they have substantial prior experience than those with which they have worked relatively little

incorporating a stochastic element into decision theories abstract recent papers by harless and camerer 1994 and hey and orme 1994 have employed two rather different models of errors in decision making under uncertainty the present paper develops a third approach and shows how different stochastic specifications of the same deterministic core theory may generate very different and sometimes surprising hypotheses

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

solving optimal growth models with vintage capital the dynamic programming approach this paper deals with an endogenous growth model with vintage capital and more precisely with the ak model proposed in r boucekkine o licandro l a puch f del rio vintage capital and the dynamics of the ak model j econ theory 120 1 2005 39 72 in endogenous growth models the introduction of vintage capital allows to explain some growth facts but strongly increases the mathematical difficulties so far in this approach the model is studied by the maximum principle here we develop the dynamic programming approach to the same problem by obtaining sharper results and we provide more insight about the economic implications of the model we explicitly find the value function the closed loop formula that relates capital and investment the optimal consumption paths and the long run equilibrium the short run fluctuations of capital and investment and the relations with the standard ak model are analyzed finally the applicability to other models is also discussed

the optimal timing of adoption of a green technology we study the optimal timing of adoption of a cleaner technology and its effects on the rate of growth of an economy in the context of an ak endogenous growth model we show that the results depend upon the behavior of the marginal utility of environmental quality with respect to consumption when it is increasing we derive the capital level at the optimal timing of adoption we show that this capital threshold is independent of the initial conditions on the stock of capital implying that capital poor countries tend to take longer to adopt also country specific characteristics as the existence of high barriers to adoption may lead to different capital thresholds for different countries if the marginal utility of environmental quality decreases with consumption a country should never delay adoption the optimal policy is either to adopt immediately or if adoption costs are too high to never adopt the policy implications of these results are discussed in the context of the international debate surrounding the environmental political agenda

observing violations of transitivity by experimental methods the preference reversal phenomenon is usually interpreted as evidence of nontransitivity of preference but has also been explained as the result of the difference between individuals responses to choice and valuation problems the devices used by experimenters to elicit valuations and the random lottery selection incentive system this paper reports an experiment designed so that none of these factors could generate systematic nontransitivities yet systematic violations of transitivity were still found the pattern of violation was analogous with that found in previous preference reversal experiments and is consistent with regret theory copyright 1991 by the econometric society

investment age and dynamic productivity growth in the spanish food processing industry this article analyzes the relation between investment age measured as the number of years since investment spike and dynamic productivity growth and its components which include dynamic technical change dynamic inefficiency change and dynamic scale inefficiency change the empirical application focuses on firm level data for the spanish food processing industry covering the period from 1996 to 2011 this investigation of the impact of firms investment decisions on productivity growth employs a dynamic production framework and analyzes the impact of these decisions on the components of dynamic productivity growth our findings show that dynamic productivity growth is negatively affected by investment spikes in both the meat processing and oils and fats industries and that dynamic inefficiency change initially falls just after the infusion of large investment for oils and fats firms but then grows as the firms acquire experience with this investment we further find that investment spikes lead to improvements in dynamic technical change and worsening in dynamic technical inefficiency change in the meat processing industry while dynamic scale inefficiency change was negatively impacted in both industries

rational choice with status quo bias abstract motivated by the empirical findings concerning the importance of one s current situation on her choice behavior the main objective of this paper is to propose a rational choice theory that allows for the presence of a status quo bias and that incorporates the standard choice theory as a special case we follow a revealed preference approach and obtain two nested models of rational choice that allow phenomena like the status quo bias and the endowment effect and that are applicable in any choice situation to which the standard static choice model applies

testing new theories of choice under uncertainty using the common consequence effect a generalised common consequence problem is used to contrast the predictions of expected utility theory and several new theories of choice under uncertainty an experiment designed to test these predictions is reported systematic violations of expected utility theory are detected but although a consistent pattern emerges from the data it offers little support for any of the new theories the analysis is extended to test predictions which are unique to regret theory and significant regret effects are detected

technical change and irreversible investment under risk abstract a stochastic dynamic model was constructed to analyze investment decisions of an individual farmer under risk in the presence of irreversibilities embedded technical change and indivisible capital an analytical solution was obtained and its local behavior studied by numerical methods optimal investment is obtained by regulating the difference between the desired and actual capital stocks between two barriers that define an inaction interval while the desired capital drifts between the barriers no action is taken if the desired capital touches the upper barrier the farmer invests pushing the average efficiency of the actual capital stock up this in turn raises the desired capital even higher and contracts the inaction interval if these effects are strong enough the farmer will invest again until the potential gains of the technological package are exhausted if the desired capital falls enough the farmer disinvests pushing down the average productivity and expanding the inaction interval disinvestment continues until it stops either because the inaction interval becomes so wide that it is no longer optimal to disinvest or because the actual capital stock is so small that it is no longer profitable to produce

indifference or indecisiveness choice theoretic foundations of incomplete preferences abstract a commonly held belief in economics is that an individual s preferences that are revealed by her choices must be complete this paper takes issue with this position by showing that one may be able to distinguish between indifference and indecisiveness of an agent upon observing her choice behavior we relax the standard weak axiom of revealed preferences warp and show that a potent theory of individual choice with and without risk can be founded on this weaker axiom when it is coupled with some other standard postulates the most notable features here are that an agent is allowed to be indifferent between certain alternatives and indecisive about others moreover an outside observer can identify which of these actually occur upon examining the observable choice behavior of the decision maker as an application we also show how our theory may be able to cope with the classical preference reversal phenomenon

optimal regime switching under risk aversion and uncertainty abstract technology adoption is key for corporate strategy often determining the success or failure of a company as a whole however risk aversion often raises the reluctance to make a timely technology switch particularly when this entails the abandonment of an existing market regime and entry in a new one consequently which strategy is most suitable and the optimal timing of regime switch depends not only on market factors such as the definition of the market regimes as well as economic and technological uncertainty but also on attitudes towards risk therefore we develop a utility based regime switching framework for evaluating different technology adoption strategies under price and technological uncertainty we assume that a decisionmaker may invest in each technology that becomes available compulsive or delay investment until a new technology arrives and then invest in either the older laggard or the newer technology leapfrog our results indicate that if market regimes are asymmetric then greater risk aversion and price uncertainty in a new regime may accelerate regime switching in addition the feasibility of a laggard strategy decreases increases as price uncertainty in an existing new regime increases finally although risk aversion typically favours a compulsive and a laggard strategy a leapfrog strategy may be feasible under risk aversion provided that the output price and the rate of innovation are sufficiently high

productivity growth of east asia economies manufacturing a decomposition analysis abstract applying a stochastic production frontier to sector level data within manufacturing this paper examines total factor productivity tfp growth for seven east asian economies during 1963 98 using both single country and cross country regressions the analysis focuses on the trend in technological progress tp and technical efficiency change tec and the role of productivity change in economic growth the empirical results reveal that although input factor accumulation is still the main source for east asian economies growth tfp growth is accounting for an increasing and important proportion of output growth among which the improved tec plays a crucial role in productivity growth

learning by doing and the choice of technology the role of patience if agents learn by doing and are myopic less advanced firms might adopt new technologies while more advanced firms would stick with the old technology this kind of overtaking can also occur if agents are forward looking and have high discount rates however overtaking never occurs if agents are sufficiently patient a finite discount rate increases the set of states at which agents adopt new technologies so more patient agents tend to upgrade their technology more frequently journal of economic literature classification numbers d92 o14 o33

machine replacement and the business cycle lumps and bumps this paper explores investment fluctuations due to discrete changes in a plant s capital stock the resulting aggregate investment dynamics are surprisingly rich reflecting the interaction between a replacement cycle the cross sectional distribution of the age of the capital stock and an aggregate shock using plant level data lumpy investment is procyclical and more likely for older capital further the predicted path of aggregate investment that neglects vintage effects tracks actual aggregate investment reasonably well however ignoring fluctuations in the cross sectional distribution of investment vintages can yield predictable nontrivial errors in forecasting changes in aggregate investment

occupational choice and development abstract the rise in world trade since 1970 has been accompanied by a rise in the geographic span of control of management and hence also a rise in the effective international mobility of labor services we study the effect of such a globalization of the world s labor markets the world s welfare gains depend positively on the skill heterogeneity of the world s labor force we find that when people can choose between wage work and managerial work the worldwide labor market raises output by more in the rich and the poor countries and by less in the middle income countries this is because the middle income countries experience the smallest change in the factor price ratio and where the option to choose between wage work and managerial work has the least value in the integrated economy our theory also establishes that after economic integration the high skill countries see a disproportionate increase in managerial occupations using aggregate data on gdp openness and occupations from 115 countries we find evidence for these patterns of occupational choice

uncovering the distribution of motorists preferences for travel time and reliability we apply recent econometric advances to study the distribution of commuters preferences for speedy and reliable highway travel our analysis applies mixed logit to combined revealed and stated preference data on commuter choices of whether to pay a toll for congestion free express travel we find that motorists exhibit high values of travel time and reliability and substantial heterogeneity in those values we suggest that road pricing policies designed to cater to such varying preferences can improve efficiency and reduce the disparity of welfare impacts compared with recent pricing experiments

the learning curve and pricing in the chemical processing industries data on 37 chemical products are used to test a number of hypotheses about the learning curve and industrial price behavior the results document a strong and consistent learning effect learning is found to be a function of cumulated industry output and cumulated investment rather than calendar time standard economies of scale appear significant but small in magnitude relative to the learning effect variations in the slope of the learning curve are linked to differences in r d expenditures and capital intensity market concentration is found to be a strong influence on price flexibility and the timing of learningrelated price changes

choice under uncertainty evidence from ethiopia india and uganda we review experimental evidence collected from risky choice experiments using poor subjects in ethiopia india and uganda using these data we estimate that just over 50 of our sample behaves in accordance with expected utility theory and that the rest subjectively weight probability according to prospect theory our results show that inferences about risk aversion are robust to whichever model we adopt when we estimate each model separately however when we allow both models to explain portions of the data simultaneously we infer risk aversion for subjects behaving according to expected utility theory and risk seeking behaviour for subjects behaving according to prospect theory

preference reversal information processing effect or rational non transitive choice preference reversal is often explained as an information processing effect whereby individuals respond differently to valuation problems than to straight choices regret theory offers the alternative explanation that individuals act on consistent but nontransitive preferences regret theory in its most general form is shown to make specific predictions about nontransitive pairwise choices that correspond with the preferences reversal phenomenon some experiments designed to discriminate between these two explanations are reported the main finding is that as regret theory predicts the preference reversal phenomenon can be reproduced in situations in which subjects confront only choice problems copyright 1989 by royal economic society

non transitive preferences over gains and losses although transitivity is often regarded as an indispensable principle of rational choice under uncertainty some decision models allow nontransitive preferences one of these regret theory is consistent with a particular pattern of choice cycles when payoffs are nonnegative and the opposite pattern of cycles when payoffs are nonpositive this paper presents evidence from an experiment designed to test these implications of regret theory copyright 1992 by royal economic society

developments in non expected utility theory the hunt for a descriptive theory of choice under risk this article reviews recent developments in the economic theory of individual decision making under risk since the 1950s it has been known that individual choices violate the standard model of expected utility in predictable ways considerable research effort has now been devoted to the project of developing a superior descriptive model following an overview of non expected utility theories which distinguishes between conventional and non conventional approaches the paper seeks to assess these alternative models in terms of empirical success using laboratory and field data and theoretical usefulness the closing sections reflect on some new directions emerging in this literature

incentives in experiments a theoretical analysis experimental economists currently lack a convention for how to pay subjects in experiments with multiple tasks we provide a theoretical framework for analyzing this question assuming statewise mo

extension services product quality and yields the case of grapes in argentina this article studies the impact of publicly subsidized agricultural extension services on yields and product quality we use panel data from grape producers in mendoza argentina to estimate the impacts of farmer trainings we find a negative overall impact on yields and evidence of a positive average impact on the adoption of higher quality grape varieties by analyzing the dynamic pattern of the estimated effects we find evidence of a temporary decrease in yields suggesting the existence of an adjustment process following the introduction of higher quality grapes the overall negative effect on yield is driven by a sharp drop in the year of participation this fades after year one and two to three years after treatment we observe increases in higher quality grape production findings reinforce the importance of temporal dimension of extension services

the value of automobile travel time implications for congestion policy abstract public policy has remained stoutly resistant to the economic profession s call to use congestion tolls to minimize the social costs from automobile congestion this paper explores this issue by using stated preference models to estimate the value that commuters are willing to pay to save travel time we find that this value is low and surprisingly insensitive to travel conditions and how toll revenues are used it appears that even high income commuters having adjusted to congestion through their modal residential workplace and departure time choices simply do not value travel time savings enough to benefit substantially from tolls

decomposing technical change within the conventional neoclassical framework a distinction is sometimes made between productaugmenting and factor augmenting technical change a parallel distinction is commonly made between embodied and disembodied technical change with the former associated with factor and the latter with product augmentation disembodied change is commonly assumed to arise from increases in the stock of knowledge independently of the characteristics of the inputs used while embodied change relates to increases in the efficiency of inputs that is labor skills or the productivity of physical capital unfortunately this distinction is ambiguous changes in the efficiency of the inputs used are usually accompanied indeed made possible by increases in knowledge and conversely increases in the stock of knowledge often favor some inputs more than others including the capital goods of one vintage relative to those of another notwithstanding the ambiguity the concept of embodiment has intuitive appeal and this partly explains the focus on decomposing the sources of technical change that followed solow s 6 seminal paper but by the late 1960s a reader of the literature might have concluded that such decomposition was impossible for with merely time series data on inputs and output product augmenting and factor augmenting technical change are empirically indistinguishable in an important paper hall 3 showed that with data on used equipment prices and the interest rate embodied technical change and the deterioration function can in principle be calculated however the paucity of data on the price of used capital goods has allowed little progress in this direction the new longitudinal research database created by the u s bureau of the census now permits still another approach to the estimation of embodied technical change associated

intrinsic variability in group and individual decision making the paper examines the random preference model which can explain inherent variability of preferences in managerial and individual decision making and provides axiomatizations for the utility components of two such models differentiated by the structure of core preferences expected utility eu and betweenness like preferences we then examine the possibility of violations of weak stochastic transitivity for these models and for a model with core dual eu preferences such violations correspond to the existence of condorcet cycles and therefore the analysis has implications for managerial decision making and for majority rule voting the paper also investigates implications of its findings for two popular experimental settings this paper was accepted by james smith decision analysis

do preference reversals disappear when we allow for probabilistic choice the preference reversal phenomenon a systematic disparity between people s valuations and choices poses challenges for theory and policy using a very general formulation of probabilistic preferences we show that the phenomenon is not mainly due to intransitive choice we find a high degree of regularity within choice tasks and also within valuation tasks but the two types of tasks appear to evoke very different cognitive processes even when the experimental environment tries to minimise differences we discuss possible implications for modelling and eliciting preferences data as supplemental material are available at http dx doi org 10 1287 mnsc 2015 2333 this paper was accepted by manel baucells decision analysis

technology adoption with finite horizons the purpose of this paper is to study the relation between the age of an agent and her decisions about adopting new technologies to this end i analyze the optimal sequence of technology upgrades by an agent who lives for a finite period of time other characteristics of the environment are the existence of technology specific learning by doing technology growth and adoption costs a finite planning horizon implies that the technology adoption problem is non stationary and the frequency of adoptions changes over time this paper provides results for the computation of the optimal plan and explores numerically the life cycle pattern of technology switches adoptions may become more frequent as the agent grows older however the sign of the association between age and the adoption of new technologies is sensitive to variation in parameters this is not at odds with the findings of recent empirical studies

optimal regime switching and threshold effects we consider a general control problem with two types of optimal regime switch the first one concerns technological and or institutional regimes indexed by a finite number of discrete parameter values and the second features regimes relying on given threshold values for given state variables we propose a general optimal control framework allowing to derive the first order optimality conditions and in particular to characterize the geometry of the shadow prices at optimal switching times if any we apply this new optimal control material to address the problem of the optimal management of natural resources under ecological irreversibility and with the possibility to switch to a backstop technology

mergers and the market for organization capital abstract in this paper mergers are an equilibrium outcome in which acquirers marry targets so as to gain access to their organization capital firms with lower learning costs about the new technology are not necessarily those that manage it best once it is mature since there are gains from trade a market for organization capital can arise through mergers this model generates a merger wave after a shock to technology and is consistent with several other stylized facts on mergers documented in the literature