Choice Under Uncertainty: Problems Solved and Unsolved

Machina, Mark J.

doi:10.1257/jep.1.1.121

Cited by 816 publications

(216 citation statements)

References 45 publications

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“…Binswanger (1982) remarked that experiments and hypothetical alternatives in laboratory conditions can give different results than real-life situations, thus their results can be misleading. Robison (1982), Machina (1987) and Schoemaker (1991) made similar comments. The most popular alternative to experiments are various types of opinion polls (Damodaran, 2009).…”

Section: Risk Perception and Risk Aversion Among Farmersmentioning

confidence: 74%

Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland

Sulewski¹,

Kłoczko-Gajewska²

2014

stagec

102

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Agriculture is an activity burdened with multiple risk factors, some of which are related to the biological nature of production. Climate change, liberalisation of international agricultural trade and changes in the agricultural support system mean that the importance of risk in agriculture will increase. This means that increasing attention will be given to risk management at the farm level, although implementation of the appropriate risk management strategy is connected to farmers' perception of, and aversion to, risk. This study, which integrates these three aspects of risk in agriculture, is based on data collected from almost 600 participant farms from the Polish FADN system. It was shown that drought is perceived by farmers as the main factor of risk in production in Poland. Polish farmers are rather risk averse, but a little more in terms of their personal health and less in the case of the farm. The analysis showed that the following factors increased the level of risk aversion of Polish farmers: debt ratio, losses in production in previous years, soil quality and concentration on fi nancial independence as a hierarchy of priorities. The most important risk-coping strategy was crop insurance. Knowledge of farmers' perception of risk, risk aversion and preferred risk management strategies is essential for creating policy instruments to support agricultural risk management, and for the development of training programmes tailored to the needs of farmers.

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Section: Risk Perception and Risk Aversion Among Farmersmentioning

confidence: 74%

Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland

Sulewski¹,

Kłoczko-Gajewska²

2014

stagec

102

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“…Whereas subjective value estimated from direct preferences or choice indifference points is expressed on an objective, physical scale, formal economic utility provides an internal measure of subjective value (Luce 1959) that is often called utils. Experimental economics tools allow constructing continuous, quantitative, numeric mathematical utility functions from behavioral choices between risky rewards (Von Neumann and Morgenstern 1944; Caraco et al 1980; Machina 1987). The best-defined test for symmetric, variance risk employs binary equiprobable gambles (Rothschild and Stiglitz 1970).…”

Section: Midbrain Dopamine Neuronsmentioning

confidence: 99%

Reward functions of the basal ganglia

2016

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Besides their fundamental movement function evidenced by Parkinsonian deficits, the basal ganglia are involved in processing closely linked non-motor, cognitive and reward information. This review describes the reward functions of three brain structures that are major components of the basal ganglia or are closely associated with the basal ganglia, namely midbrain dopamine neurons, pedunculopontine nucleus, and striatum (caudate nucleus, putamen, nucleus accumbens). Rewards are involved in learning (positive reinforcement), approach behavior, economic choices and positive emotions. The response of dopamine neurons to rewards consists of an early detection component and a subsequent reward component that reflects a prediction error in economic utility, but is unrelated to movement. Dopamine activations to non-rewarded or aversive stimuli reflect physical impact, but not punishment. Neurons in pedunculopontine nucleus project their axons to dopamine neurons and process sensory stimuli, movements and rewards and reward-predicting stimuli without coding outright reward prediction errors. Neurons in striatum, besides their pronounced movement relationships, process rewards irrespective of sensory and motor aspects, integrate reward information into movement activity, code the reward value of individual actions, change their reward-related activity during learning, and code own reward in social situations depending on whose action produces the reward. These data demonstrate a variety of well-characterized reward processes in specific basal ganglia nuclei consistent with an important function in non-motor aspects of motivated behavior.

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“…[Other examples include ''the certainty effect'' and the ''Bergen paradox.'' See Machina (6,19) or Thaler (9) for a more in-depth treatment of these cases and the literature involving independence violations.] In our example, we ask subjects to make simple lottery choices.…”

Section: Experimental Designmentioning

confidence: 99%

A simple test of expected utility theory using professional traders

List

Haigh

2005

Proc. Natl. Acad. Sci. U.S.A.

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We compare behavior across students and professional traders from the Chicago Board of Trade in a classic Allais paradox experiment. Our experiment tests whether independence, a necessary condition in expected utility theory, is systematically violated. We find that both students and professionals exhibit some behavior consistent with the Allais paradox, but the data pattern does suggest that the trader population falls prey to the Allais paradox less frequently than the student population.Allais paradox ͉ experiments ͉ futures traders

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Choice Under Uncertainty: Problems Solved and Unsolved

Cited by 816 publications

References 45 publications

Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland

Farmers’ risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland

Reward functions of the basal ganglia

A simple test of expected utility theory using professional traders

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