Ebook Experimental business research: Marketing, accounting and cognitive perspectives (Volume III) Part 2

Continued part 1, part 2 of ebook Experimental business research: Marketing, accounting and cognitive perspectives (Volume III) provides readers with contents including: exploring ellsbergs paradox in vaguevague cases; overweighing recent observations: experimental results and economic implications; cognition in spatial dispersion games; cognitive hierarchy; partition dependence in decision analysis, resource allocation, and consumer... Đề tài Hoàn thiện công tác quản trị nhân sự tại Công ty TNHH Mộc Khải Tuyên được nghiên cứu nhằm giúp công ty TNHH Mộc Khải Tuyên làm rõ được thực trạng công tác quản trị nhân sự trong công ty như thế nào từ đó đề ra các giải pháp giúp công ty hoàn thiện công tác quản trị nhân sự tốt hơn trong thời gian tới.

Chapter EXPLORING ELLSBERG'S PARADOX IN VAGUE-VAGUE CASES Karen M Kramer Edward Mines Jr Veterans Administration Medical Center, Mines, IL David V Budescu University of Illinois, Urbana-Champaign, IL Abstract We explore a generalization of EUsberg's paradox to the Vague-Vague (V-V) case, where neither of the probabilities (urns) is specified precisely, but one urn is always more precise than the other We present results of an experiment explicitly designed to study this situation The paradox was as prevalent in the V-V cases, as in the standard Precise-Vague (P-V) cases The paradox occurred more often when differences between ranges of vagueness were large Vagueness avoidance increased with midpoint for P-V cases, and decreased for V-V cases Models that capture the relationships between vagueness avoidance and observable gamble characteristics (e.g., differences of ranges) were fitted Key words: EUsberg's paradox, ambiguity avoidance, vagueness avoidance, vague probabilities, imprecise probabilities, probability ranges, logit models Over eighty years ago Knight (1921) and Keynes (1921) independently distinguished between the problems of choice under uncertainty and ambiguity Forty years later, Ellsberg (1961) demonstrated the relevance of this distinction with the following simple problem: A Decision-Maker (DM) has to bet on one of two urns containing balls of two colors, say Red and Blue The composition (proportions of two colors) of one urn is known, but the composition of the other urn is completely unknown Imagine that one of the colors (Red or Blue) is arbitrarily made more desirable, simply by associating it with a positive prize of size $x If DMs are asked to choose one urn when each color is more desirable, many are more likely to select the urn with known content/ jc, Pr(Blue) > >', s.t., < x, y < 1, but (jc -H >') < This implies that x < Pr(Red) < (1 - >'), i.e., Pr(Red) is within a range of size R = {\ - x-y) centered at M = (1 -H JC - y)l2 Similarly, y < Pr(Blue) < (1 - x), i.e in a range of size R = {\ -x-y) centered a t M = ( l + y - x)l2 The current study follows this trend by extending the paradox to Vague-Vague (V-V) cases, where the composition of both ums is only partially specified Typically, the range of possible probabilities in one um is narrower than the range of the second um, but EXPLORING ELLSBERG'S PARADOX IN VAGUE-VAGUE CASES 133 both ranges share the same central value Thus, Pr(Red|Um I) > JC^, Pr(Blue|Um I) > ji, Pr(Red|Um II) > ^2, and Pr(Blue|Um II) > y2, subject to the constraints: < Xi, ji, X2, j2 ^ (-^1 + Ji) < te + yi) < 1- Furthermore, \x^ - y^\ = \x2-y2l but R^ = (l - Xi - yi) ^ R2 = (I - X2 - ^2)- In other words, x^ < Pr(Red|Um I) < (1 - ji) and X2 < Pr(Red|Um II) < (1 - J2)' ^^^ ^he common midpoint of both ranges is M = (1 + Xi - j i ) = (1 + X2 - }^2)- The effects of vagueness in P-V cases are relatively well understood (see for example the list of stylized facts in Camerer and Weber's 1992 review), but the V-V case is more complicated Becker and Brownson (1964) found inconsistencies when they tried to relate vagueness avoidance to differences in the ranges of vague probabilities, and Curley and Yates' studies (1985, 1989) were inconclusive with regard to the presence and intensity of vagueness avoidance in V-V cases Curley and Yates (1985) examined the choices subjects made in the P-V and V-V case as a function of the width(s) of the range(s) and the common midpoint of the range of probabilities They showed that people were more likely to be vagueness averse as the midpoint increased in P-V cases, but not in V-V cases Neither vagueness seeking nor avoidance was the predominant behavior for midpoints < 40 The range difference between the two urns was not sufficient for explaining the degree of vagueness avoidance, and no effect of the width of the range was found in preference ratings over the pairs of lotteries Undoubtedly, the range difference (wider range - narrower range) is the most salient feature of pairs of gambles with a common midpoint, and one would expect this factor to influence the degree of observed vagueness avoidance Range difference captures the relative precision of the two urns, and DMs who are vagueness averse are expected to choose the more precise urn more often In fact, it is sensible to predict a positive monotonic relationship between the relative precision of a pair of urns and the intensity of vagueness avoidance displayed It is surprising that Curley and Yates could not confirm this expectation We will consider this prediction in more detail in the current study However, the relative precision of a given pair can not fully explain the DM's preferences in the V-V case Consider, for example, the following three urns: Urn A: 0.45