infonet-economy

Most models of ambiguity aversion satisfy Anscombe-Aumann’s Monotonicity axiom. This paper proposes a test of Monotonicity, the Allais Horse Race. It is an adaptation of the Allais paradox to a setting with both subjective and objective uncertainty. Viewed as a thought experiment, the Allais Horse Race allows for introspective assessment of Monotonicity. Imple- menting it as an incentivized experiment, we find that the modal choice of subjects violates Monotonicity in a specific, intuitive way. Overall, we find that models of ambiguity aversion that satisfy Monotonicity cannot describe the behavior of about half of all subjects.

This paper analyzes the design of innovation contests when the quality of an innovation depends on the research approach of the supplier, but the best approach is unknown. Diversity of approaches is desirable because it generates an option value. In our main model with two suppliers, the buyer optimally uses a bonus tournament, where suppliers can choose between a low bid and a high bid. This allows the buyer to implement any level of diversity with the lowest revenue for the suppliers. We also compare other common contests, in particular, fixed-prize tournaments and auctions. Like bonus tournaments, auctions implement the socially optimal diversity, but usually with higher rents for the suppliers. Fixed-prize tournaments implement insufficient diversity, but may nevertheless be preferred by the buyer to auctions because of lower supplier rents.

This paper shows how asymptotically valid inference in regression models based on the weighted least squares (WLS) estimator can be obtained even when the model for reweighting the data is misspecified. Like the ordinary least squares estimator, the WLS estimator can be accompanied by heteroskedasticity-consistent (HC) standard errors without knowledge of the functional form of conditional heteroskedasticity. First, we provide rigorous proofs under reasonable assumptions; second, we provide numerical support in favor of this approach. Indeed, a Monte Carlo study demonstrates attractive finite-sample properties compared to the status quo, in terms of both estimation and inference.

Extracts of this paper were presented at the conference "Work Beyond 60: Preparing for the Demographic Shock", 6–7 March 2003 in Vienna organized by The Geneva Association, The Club of Rome, and The Risk Institute. Parts were also presented at the Bertelsmann Foundation conference "Strategien gegen den Fachkräftemangel" in Berlin, 2 July 2002 and at the Bertelsmann Foundation conference "Reformen zur Steigerung der Beschäftigungsfähigkeit älterer Arbeitskräfte" in Berlin, 26 October 2001. The authors would like to thank the participants as well as Jaap van Dam, Thomas Liebig, Fred Henneberger, and Geneviève Reday-Mulvey for their valuable comments and discussions. Alfonso Sousa-Poza would like to thank the Swiss National Science Foundation for financial assistance. The usual disclaimer applies.

We experimentally demonstrate how "unpacking" provides a possible approach for mitigating the dilemma of public goods provision through private contributions. Subjects' total contributions increase when a single public good is split into two identical public goods.

Recent literature makes a distinction between ‘voluntary’ and ‘involuntary’ early retirement, where ‘involuntary’ early retirement results from employment constraints rather than from a preference for leisure relative to work. This article analyses ‘voluntary’ and ‘involuntary’ early retirement based on international microdata covering 19 industrialized countries. The results show that ‘involuntary’ early retirement is particularly widespread in Continental Europe. Countries facing economic recessions and having strict employment protection legislation have higher shares of ‘involuntary’ retirements among early retirees. Generous early retirement provisions of the social security system do not only make ‘voluntary’ early retirement more attractive for individuals, but also induce firms to push more employees to retire early.

Many studies document failures of expected utility’s key assumption, the independence axiom. Here, we show that independence can be decomposed into two distinct axioms – betweenness and homotheticity – and that these two axioms are necessary and sufficient for independence. Thus, independence can fail because homotheticity, betweenness, or both are violated. Most research has focused on models that assume subjects will violate both axioms or models that assume subjects will satisfy betweenness but violate homotheticity. Our decomposition of independence into betweenness and homotheticity allows us to show, however, that a significant share of subjects obey homotheticity but violate betweenness. Using data from a revealed preference experiment, and without making any parametric assumptions, we show that 1/3 of participants belong in the neglected class of preferences that violate independence but satisfy homotheticity, indicating that betweenness is violated. Another 1/3 of participants satisfy independence. The remaining 1/3 fail both independence and homotheticity and may also fail betweenness. Our results provide useful constraints on future modeling attempts by highlighting, in a non-parametric way, an empirically relevant class of preferences.

Objective

Attention-deficit/hyperactivity disorder (ADHD) is currently diagnosed on the basis of subjective measures, despite evidence for multi-systemic structural and neurofunctional deficits. A consistently observed neurofunctional deficit is in fine-temporal discrimination (TD). The aim of this proof-of-concept study was to examine the feasibility of distinguishing patients with ADHD from controls using multivariate pattern recognition analyses of functional magnetic resonance imaging (fMRI) data of TD.

Method

A total of 20 medication-naive adolescent male patients with ADHD and 20 age-matched healthy controls underwent fMRI while performing a TD task. The fMRI data were analyzed with Gaussian process classifiers to predict individual ADHD diagnosis based on brain activation patterns.

Results

The pattern of brain activation correctly classified up to 80% of patients and 70% of controls, achieving an overall classification accuracy of 75%. The distributed activation networks with the highest delineation between patients and controls corresponded to a distributed network of brain regions involved in TD and typically compromised in ADHD, including inferior and dorsolateral prefrontal, insula, and parietal cortices, and the basal ganglia, anterior cingulate, and cerebellum. These regions overlapped with areas of reduced activation in patients with ADHD relative to controls in a univariate analysis, suggesting that these are dysfunctional regions.

Conclusions

We show evidence that pattern recognition analyses combined with fMRI using a disorder-sensitive task such as timing have potential in providing objective diagnostic neuroimaging biomarkers of ADHD.

Background The catecholamine reuptake inhibitors methylphenidate (MPH) and atomoxetine (ATX) are the most common treatments for attention deficit hyperactivity disorder (ADHD). This study compares the neurofunctional modulation and normalization effects of acute doses of MPH and ATX within medication-naive ADHD boys during working memory (WM).

Method A total of 20 medication-naive ADHD boys underwent functional magnetic resonance imaging during a parametric WM n-back task three times, under a single clinical dose of either MPH, ATX or placebo in a randomized, double-blind, placebo-controlled, cross-over design. To test for normalization effects, brain activations in ADHD under each drug condition were compared with that of 20 age-matched healthy control boys.

Results Relative to healthy boys, ADHD boys under placebo showed impaired performance only under high WM load together with significant underactivation in the bilateral dorsolateral prefrontal cortex (DLPFC). Both drugs normalized the performance deficits relative to controls. ATX significantly enhanced right DLPFC activation relative to MPH within patients, and significantly normalized its underactivation relative to controls. MPH, by contrast, both relative to placebo and ATX, as well as relative to controls, upregulated the left inferior frontal cortex (IFC), but only during 2-back. Both drugs enhanced fronto-temporo-striatal activation in ADHD relative to control boys and deactivated the default-mode network, which were negatively associated with the reduced DLPFC activation and performance deficits, suggesting compensation effects.

Conclusions The study shows both shared and drug-specific effects. ATX upregulated and normalized right DLPFC underactivation, while MPH upregulated left IFC activation, suggesting drug-specific laterality effects on prefrontal regions mediating WM.