wealth volume and stock market volatility case of hong kong 1993 2001 this article attempts to answer the question of whether the gain and loss in property market speculations and rate of information flow play a significant role in stock market volatility in hong kong to test for our wealth volume volatility hypothesis two different measures of volatility absolute absolute value of sd from mean with monthly dimension and conditional egarch are used and results are compared in both measures we find evidence of a statistical presence of a wealth effect on stock market volatility particularly in the investment of luxury class of property in hong kong to account for this result we apply the prospect theory house money effect and the newly developed conditional confidence theory although we fail to establish a volume volatility relationship in our estimation we offer additional dimensions to the explanation of our observation

menu dependent stochastic feasibility we examine the role of stochastic feasibility in consumer choice using a random conditional choice set rule rccsr and uniquely characterize the model from conditions on stochastic choice data feasibility is modeled to permit correlation in availability of alternatives this provides a natural way to examine substitutability complementarity we show that an rccsr generalizes the random consideration set rule of manzini and mariotti 2014 we then relate this model to existing literature in particular an rccsr is not a random utility model

resolving differences in willingness to pay and willingness to accept reply gwendolyn c morrison 1997 raises a logical point regarding our experimental test of the divergence between willingness to pay wtp and willingness to accept wta measures of economic value shogren et al 1994 she argues that our design does not provide a true test of the existence of a fundamental endowment effect since we did not control for the potential of a pivoting indifference map daniel kahneman et al 1990 she concludes that even though our ev idence shows that the mean wtp and wta bids for market goods with close substitutes e g candy bars and coffee mugs converge after market experience the endowment effect might still be alive and well albeit at statisti cally insignificant levels

imports of technology and the technological effort of indian enterprises abstract an important policy oriented question currently asked in some of the newly industrializing countries is whether their enterprises imports of technology discourage or enhance their own technological effort and whether the private benefits of the imported technologies differ from the social benefits this paper examines the question with reference to the experience of indian enterprises using multiple regression analysis it was found that these enterprises technological efforts are favorably affected in cases where the imports are intended to complement their technological effort rather than merely to produce new products but are discouraged if those enterprises have obtained an exclusive right of sale in the home market increases in the number of collaboration agreements and in enterprise size induce only an equiproportionate increase in the level of technological effort the evidence from the empirical analyses is then used to argue that the social benefits of the imported technologies are likely to be less than the private benefits

estimating willingness to pay from survey data an alternative pre test market evaluation procedure closed ended contingent valuation surveys are used to assess demands in hypothetical markets and recently have been applied widely to the valuation of non market environmental resources this int

estimation using contingent valuation data from a dichotomous choice with follow up questionnaire reply abstract our original article proposed that the two yes no willingness to pay wtp responses produced by this survey format should be viewed as a pair of jointly distributed correlated discrete random variables the comparison model the conventional approach to estimation using these types of data contained a programming error correction alters the results from the comparison model but our original claim that estimation by conventional methods can produce misleading inferences if ours is the appropriate specification still stands this is especially true if negative wtp is precluded when e wtp is calculated

managing technological development lessons from the newly industrializing countries this survey looks at the technological development of the newly industrializing countries to draw some important lessons for firms and governments in other developing countries first inventing products and processes is not at the center of the technological development needed for successful industrialization it is at the fringe what is at the center is acquiring the capabilities needed for efficient production and investment second some countries have overemphasized the drive for technological self sufficiency and paid a high price in poor productivity what makes the best economic sense is to combine foreign and local technological elements and to do this in a way that progressively develops local capabilities in areas where they can be more efficient third the acquisition of technological capability does not come merely from experience though experience is important fourth the economic environment through its influence on the technological efforts of firms is very important in determining the productivity of a country s resources

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

preference reversals under ambiguity preference reversals have been widely studied using risky or riskless gambles however little is known about preference reversals under ambiguity unknown probabilities subjects were asked to make a binary choice between ambiguous p bets big likelihood of giving small prize and ambiguous bets small likelihood of giving large prize and their willingness to accept was elicited subjects then performed the same two tasks with risky bets where the probability of winning for a given risky bet is the center of the probability interval of the corresponding ambiguous bet preference reversals are not only replicated under ambiguity but are even stronger than are those under risk this is due to higher elicited prices for the bet and lower elicited prices for the p bet under ambiguity than under risk this result can be explained by the shape of the weighting function for different levels of uncertainty and for different elicitation modes this paper was accepted by peter wakker decision analysis

consumer attitudes toward low stake risk in food markets consistency of quality is viewed as important for producers of consumer goods however there is no literature testing the importance of quality consistency on consumers willingness to pay for consumer goods we use an experimental auction market to investigate how inconsistency in tenderness affects consumers willingness to pay for beef we find that most consumers are risk averse with respect to sensory quality both the average tenderness and the variance of tenderness affected the consumers willingness to pay for beef reducing the uncertainty of the sensory quality by categorizing the beef into three tenderness classes increased the total value of the beef by 8

treatment of don t know responses in contingent valuation surveys a random valuation model abstract this paper provides a utility theoretic interpretation of don t know dk responses in contingent valuation surveys using a referendum elicitation procedure the random valuation model in this paper assumes that each respondent of a contingent valuation survey has an implicit valuation distribution rather than a single true value as traditionally assumed in his her mind if an offered referendum bid is not clearly different from the mean value of one s valuation distribution the respondent may give a dk answer to the cv referendum question based on this model a maximum likelihood procedure is proposed for estimating respondents willingness to pay for a nonmarket good with referendum contingent valuation data which include dk responses an empirical illustration of this estimation procedure is also provided

treating respondent uncertainty in contingent valuation a comparison of empirical treatments this research examines the impact of uncertainty on contingent valuation responses using 1 a survey of canadian landowners about willingness to accept compensation for converting cropland to forestry and 2 a survey of swedish residents about willingness to pay for forest conservation five approaches from the literature for incorporating respondent uncertainty are used and compared to the traditional random utility model with assumed certainty the results indicate that incorporating uncertainty has the potential to increase fit but could introduce additional variance while some methods for uncertainty can be an improvement over traditional approaches it is imperative to exercise caution when making systematic judgments about the effect of uncertainty on contingent valuation responses

rational inattention optimal consideration sets and stochastic choice we unite two basic approaches to modelling limited attention in choice by showing that the rational inattention model implies the formation of consideration sets only a subset of the available alternatives will be considered for choice we provide necessary and sufficient conditions for rationally inattentive behaviour which allow the identification of consideration sets in simple settings chosen options are those that are best on a stand alone basis in richer settings the consideration set can only be identified holistically in addition to payoffs prior beliefs impact consideration sets linear inequalities identify all priors consistent with each possible consideration set

technology imports and r d efforts of korean manufacturing firms abstract this paper analyzes the relationship between technology imports and r d efforts of korean manufacturing firms by a two stage method in the first stage using a sample representing the whole population of firms the paper shows that firms importing technology tend to commit themselves to r d efforts through having formal r d institutes in the second stage it shows that among firms with formal r d institutes technology imports have non complementary relationship with r d efforts moreover when technology imports are considered interactively with international inventive activity they turn out to have rather a substitutive relationship with r d efforts

independent private value auctions bidder behaviour in first second and third price auctions with varying numbers of bidders the symmetric equilibrium of third price auctions is characterized it makes a number of contrasting predictions relative to firms and second price auctions bids exceed private values the marginal effects on bids of an increase in private values is greater than one increasing numbers of bidders reduces bids and risk aversion requires bidding below the risk neutral nash equilibrium in the experiment bidders do not always satisfy the point predictions of the theory however the game theoretic models correctly anticipate at least directionally the important effects of the price rule changes copyright 1993 by royal economic society

attitudes to risk and attitudes to uncertainty experimental evidence in a series of experiments the interactions among individual attitudes towards risk and uncertainty the sign of the outcome domain and the way uncertainty is represented are tested this is done in a unified framework eliciting individual values by means of a second price auction results confirm the presence of the well known fourfold pattern of risk attitude risk aversion for gains and risk seeking for losses at high probability and risk seeking for gains and risk aversion for losses at low probability and show that this pattern can also be extended to uncertainty in the valuation of losses the modal pattern is decreasing risk and uncertainty aversion as the probability of loss increases while increasing risk and uncertainty aversion is observed for gains moreover it is found that the size of reaction to uncertainty does not depend on the outcome domain and that it persists in the face of an incentive compatible mechanism to elicit preferences

the size distribution of innovating firms in the uk 1945 1983 a survey of 4 378 significant innovations shows that firms with fewer than 1 000 employees commercialized a much larger share than is indicated by their share of r and d expenditures innovations per employee have been consistently above average in firms with more than 10 000 employees and have become so in firms with fewer than 1 000 intersectoral variation in the size distribution of innovating firms can be explained as a function of r and d based technological opportunities and of technological ease of entry by user firms with principal activities outside the sector copyright 1987 by blackwell publishing ltd

the innovative performance of in house and contracted r d in terms of patents and utility models abstract the standard empirical framework for analysing the r d patents relationship is widened both by examining the different role of in house and contracted r d in the innovative performance of firms and by considering patents and utility models counts as measures of innovation output patents and utility models are considered to approximate for significant and incremental innovations respectively applying count data econometrics to a panel data set of spanish manufacturing firms surveyed in the period 1990 1996 a transcendental production function is estimated which allows for non constant elasticities of the r d inputs the results indicate that significant innovations are mainly gestated in house whereas contracted r d seems more orientated towards innovations of incremental nature

confidence intervals for evaluating benefits estimates from dichotomous choice contingent valuation studies i evaluate the potential usefulness of nonmarket valuation concepts and techniques from environmental economics for improving wildlife conservation the concepts include distinguishing between on site recreation use value and off site passive use or

a new paradigm for valuing non market goods using referendum data maximum likelihood estimation by censored logistic regression abstract this paper challenges the w m hanemann amer j agr econom 66 332 341 1984 and c sellar j p chavas and j r stoll j environ econom management 13 382 390 1986 utilizations of logit models to estimate the value of non market resources from referendum survey data these data are more informative than conventional choice data the random utility interpretation of logit models is therefore too restrictive bypassing the utility function entirely it will be shown that parameters and standard errors for utility theoretic inverse hicksian demand functions can be extracted directly and much more simply estimated demand functions need not be limited to those corresponding to the linear in parameters utility difference specifications which can be handled by packaged logit programs

ambiguity aversion is not universal assuming universal ambiguity aversion an extensive theoretical literature studies how ambiguity can account for market anomalies from the perspective of expected utility based theories we provide a systematic experimental assessment of ambiguity attitudes in different likelihood ranges and in the gain domain the loss domain and with mixed outcomes we draw on a unified framework to elicit preferences across these domains we replicate the usual finding of ambiguity aversion for moderate likelihood gains however when introducing losses or lower likelihoods we observe predominantly ambiguity neutrality or seeking rejecting universal ambiguity aversion

a human experiment on inventory decisions under supply uncertainty abstract controlled human experiments are adopted in this paper to investigate the impact of supply uncertainty on buyers inventory management the experiments aim at assessing the impact of one specific source of supply chain uncertainty namely stochastic lead times on inventory holdings and the extent of the bullwhip effect three experimental treatments are run within the framework of the beer game manipulating variability in demand and in lead times results confirm that the bullwhip effect arises in all experimental treatments and that the variance of orders is higher under stochastic lead times analysis of players behaviour in the course of the game suggests that players react to higher uncertainty by holding fewer inventories a behaviour consistent with the predictions of some psychological models of choice under ambiguity

tests of market outcomes with asymmetric valuations of gains and losses smaller gains fewer trades and less value abstract the pervasive finding that individuals value losses more than gains suggests that actual gains from trade and numbers of market exchanges may well be much smaller than would be the case if people s buying and selling prices were equivalent as normally assumed the results of two sets of costless market simulations using actual gain and loss valuations show that the actual gains from exchange and trade volumes are less than half of those expected with conventional assumptions and that completion of all pareto efficient exchanges fail by wide margins to shift entitlements to those willing to pay the most for them these findings suggest the valuation disparity has significant welfare implications and may be a major cause of market stickiness

learning and the capital goods sector under free trade the case of hongkong abstract attention is focused on technological change and attendant learning processes in the more industrialized third world countries the importance of relatively simple learning processes is stressed and the conditions necessary for facilitating more complex forms of learning particularly protection and promotion are examined here it is shown that the capital goods sector is of central importance the case study material deals with the machine producing sector in hong kong chosen as the representative case of free trade and minimal government intervention and comparison is made with learning processes in a number of other more industrialized third world countries including india argentina and taiwan in the final section the implications of the discussion of learning for theories and techniques of investment allocation including social cost benefit analysis the effective rate of protection and the related domestic cost of foreign exchange are examined

valuing health care using willingness to pay a comparison of the payment card and dichotomous choice methods this paper compares willingness to pay wtp estimates generated from the dichotomous choice dc and payment card pc approaches in a split sample wtp experiment concerned with allocating scarce health care resources across three health care interventions the dc approach is shown consistently to generate larger welfare estimates than the pc observed difference between pc and dc experiments cannot be explained by the inclusion of non demanders or methods of statistical analysis but may be partly explained by yea saying no evidence of range bias or mid point bias was found with pc responses data were also collected on respondents ordinal rankings of the three interventions and person trade offs ptos neither of these approaches converged with wtp future work must address the decision heuristics individuals employ when responding to valuation experiments

estimating willingness to pay by risk adjustment mechanism measuring consumers willingness to pay wtp without considering the level of uncertainty in valuation and the consequent risk premiums will result in estimates that are biased toward lower values this research proposes a model and method for correctly assessing wtp in cases involving valuation uncertainty the new method called risk adjustment mechanism ram is presented theoretically and demonstrated empirically it is shown that the ram outperforms the traditional method for assessing wtp especially in a context of a nonmarket good such as a totally new product

the effect of knowledge on the disparity between hypothetical and real willingness to pay the use of a contingent valuation cv method is controversial among economists because it is based on hypothetical rather than real economic choices this paper reports the results of an experiment designed to elicit the real and the hypothetical willingness to pay wtp for a private good the effect of different settings of knowledge direct and indirect of the good on subjects valuation behaviour are investigated the findings show that i a direct knowledge of the good reduces the observed disparity between hypothetical and real wtp and that ii different settings of knowledge generate different perceptions of the characteristics of the good

measuring consumers willingness to pay at the point of purchase abstract economists psychologists and marketing researchers rely on measures of consumers willingness to pay wtp in estimating demand for private and public goods and in designing optimal price schedules existing market research techniques for measuring wtp differ in whether they provide an incentive to consumers to reveal their true wtp and in whether they simulate actual point of purchase contexts the authors present an empirical comparison of several procedures for eliciting wtp that are applicable directly at the point of purchase in particular the authors test the applicability of becker degroot and marschak s 1964 well known incentive compatible procedure for assessing the utility of lotteries to measuring consumers wtp in three studies the authors explore the reliability validity and feasibility of the procedure and show that it yields lower wtp estimates than do non incentive compatible methods such as open ended and double bounded contingent valuation they show experimentally t

technology production and technology purchase in indian industry an econometric analysis an econometric analysis of the decisions of indian firms to invest in their own r d and to purchase technology through licensing agreements is undertaken these decisions are treated as being jointly determined by characteristics of indian industries indian prices and the supply of purchasable foreign technology the study finds that industrial structure firm size and public and private ownership influence the mix of own r d and technology purchase the pool of purchasable foreign technology indices both increased adaptive r d and technology purchase by indian firms copyright 1989 by mit press

discrete choice under preference uncertainty an improved structural model for contingent valuation abstract this paper is concerned with discrete choice contingent value estimation in the presence of response errors we attempt to extend the theoretical frameworks developed by hanemann 1984 amer j agric econom 66 332 341 and cameron 1988 j environ econom management 15 355 379 by introducing preference uncertainty with individual respondents we assume that respondents have incomplete knowledge about their true valuation of a nonmarket resource and thus may give wrong yes no answers on whether or not to pay a given bid amount for the resource a post decisional confidence measure for each observed yes no answer is elicited for characterizing the degree of preference uncertainty with the help of this confidence measure we develop an improved structural model for deriving value estimates data from a forest environment valuation survey are used for the empirical estimations

choosing among alternative technological strategies an empirical analysis of formal sources of innovation abstract this work aims to offer a detailed conceptual and empirical analysis of the inter firm differences in deciding the composition of their technological efforts using data for spanish firms in the period 1990 1996 the study begins with the standard analysis of the determinants of innovative investment then moves on to the less analysed question of the determinants of the generate versus import alternative and ends with a novel analysis of the characteristics which lead firms to organise research internally as compared to the possibility of contracting r d services externally in contrast to standard practice the econometric approach takes into account the existence of non linearities in the used data the results obtained support the conceptual ideas on which they are based

uncertainty aversion in game theory experimental evidence abstract this paper studies using a laboratory experiment the effects of uncertainty aversion the union of risk aversion and ambiguity aversion on behavior in a normal form game we isolate and identify two components of uncertainty aversion in games the effect of an agent s own uncertainty preferences and effect of the agent s beliefs regarding their opponent s uncertainty preferences uncertainty preferences are correlated with behavior in games induced beliefs about the risk preferences of an opponent have a larger effect on strategic behavior than induced beliefs about an opponent s ambiguity preferences although both components have a significant effect on behavior the results support the hypothesis that strategic uncertainty is an important determinant of strategic behavior and that the response to strategic uncertainty is modulated by subject uncertainty attitudes

probabilistic choice and procedurally bounded rationality abstract we derive a family of probabilistic choice models including the multinomial logit model from a microeconomic model in which the decision maker has to make some effort in order to implement any desired outcome the disutility of this effort enters the decision maker s goal function in an additively separable way a particular disutility function yielding the multinomial logit as a special case is characterized axiomatically the present approach naturally leads to a normalization of the achieved utility with respect to the number of alternatives the approach also applies to continuum choice sets in euclidean spaces and provides a microeconomic foundation for logit type quantal response models in game theory

decision theory under ambiguity we review recent advances in the field of decision making under uncertainty or ambiguity we start with a presentation of the general approach to a decision problem under uncertainty as well as the standard bayesian treatment and issues with this treatment we present more general approaches choquet expected utility maximin expected utility smooth ambiguity and so forth that have been developed in the literature under the name of models of ambiguity sensitive preferences we draw a distinction between fully subjective models and models incorporating explicitly some information we review definitions and characterizations of ambiguity aversion in these models we mention the challenges posed by some of the models presented we end with a review of part of the experimental literature and applications of these models to economic settings

effects of ambiguity in market experiments prior studies have shown that individuals are averse to ambiguity in probability many decisions are however made in market settings where an individual s decision is influenced by decisions of others participating in the market in this paper we extend the previous research to evaluate the effect of ambiguity on individual decisions and the resulting market price in market settings we therefore examine an important issue whether ambiguity effects persist in the face of market incentives and feedback two different market organizations the sealed bid auction and the double oral auction were employed the subjects in the experiments were graduate business students and bank executives our results show that the individual bids and market prices for lotteries with ambiguous probabilities are consistently lower than the corresponding bids and market prices for equivalent lotteries with well defined probabilities the aversion to ambiguity therefore does not vanish in market settings our results provide insights into what a manager can expect in bidding situations where the object of the sale oil leases mineral rights involves ambiguity in probability due to for example lack of information or prior experience the results may also be useful in understanding some phenomena in insurance and equity markets

coherent arbitrariness stable demand curves without stable preferences economic theories of valuation generally assume that prices of commodities and assets are derived from underlying fundamental values for example in finance theory asset prices are believed to reflect the market estimate of the discounted present value of the asset s payoff stream in labor theory the supply of labor is established by the tradeoff between the desire for consumption and the displeasure of work finally and most importantly for this chapter consumer microeconomics assumes that the demand curves for consumer products chocolates cds movies vacations drugs and so forth can be ultimately traced to the valuation of pleasures that consumers anticipate receiving from these products because it is difficult as a rule to measure fundamental values directly empirical tests of economic theory typically examine whether the effects of changes in circumstances on valuations are consistent with theoretical prediction for example whether labor supply responds appropriately to a change in the wage rate whether compensated demand curves for commodities are downward sloping or whether stock prices respond in the predicted way to share repurchases however such comparative static relationships are a necessary but not sufficient condition for fundamental valuation e g summers 1986 becker 1962 was perhaps the first to make this point explicitly when he observed that consumers choosing commodity bundles randomly from their budget set would nevertheless produce downward sloping demand curves

venture theory a model of decision weights several theories suggest that people replace probabilities by decision weights when evaluating risky outcomes this paper proposes a model called venture theory of how people assess decision weights it is assumed that people first anchor on a stated probability and then adjust this by mentally simulating other possible values the amount of mental simulation is affected by the absolute size of payoffs the extent to which the anchor deviates from the extremes of 0 and 1 and the level of perceived ambiguity concerning the relevant probability the net effect of the adjustment i e up or down vis i vis the anchor reflects the relative weight given in imagination to values above as opposed to below the anchor this in turn is taken to be a function of both individual and situational variables and in particular the sign and size of payoffs cognitive and motivational factors therefore both play important roles in determining decision weights assuming that people evaluate outcomes by a prospect theory value function kahneman and tversky 1979 and are cautious in the face of risk fourteen predictions are derived concerning attitudes toward risk and ambiguity as functions of different levels of payoffs and probabilities the results of three experiments are reported whereas only a subset of the model s predictions can be tested in experiment 1 all fourteen are tested in experiments 2 and 3 using hypothetical and real payoffs respectively several of the model s predictions are not supported in experiment 2 but almost all are validated in experiments 1 and 3 the failures relate to the exact nature of probability payoff interactions in attitudes toward risk and ambiguity for losses the theory and results are discussed in relation to other experimental evidence future tests of the theory alternative models of risky choice and implications of venture theory for explaining further phenomena

preference uncertainty in non market valuation a fuzzy approach in this article we consider uncertain preferences for non market goods but we move away from a probabilistic representation of uncertainty and propose the use of fuzzy contingent valuation we assume that a decision maker never fully knows her own utility function and we treat utility as a fuzzy number the methodology is illustrated using data on forest valuation in sweden fuzzy contingent valuation provides estimates of resource value in the form of a fuzzy number and includes estimates obtained using a standard probabilistic approach