Laboratory investigation of individual and market behavior under risk: three Essays

Update Item Information
Publication Type dissertation
School or College College of Social & Behavioral Science
Department Economics
Author Besliu, Corina
Title Laboratory investigation of individual and market behavior under risk: three Essays
Date 2018
Description This dissertation uses experiments to study individual and market behavior in the presence of uncertainty. The first chapter tests the predictions of the expected utility theory applied to the context of coverage selection and the effects of complexity on choice quality. Out of the five complexity measures considered here, three have a statistically significant negative effect on participants ability to choose coverage efficiently: Similarity, Type of Stochastic Dominance, and the Number of Payoff Relevant States. Individuals' decisions can be predicted by the expected utility paradigm only to a certain extent. When the number of payoff relevant states contained within an insurance plan increases, participants evaluate options in accordance with mean-variance analysis. This leads to violations of rationality axioms as participants select plans that are first order dominated by other options. The second chapter assesses the separability of utility between money and aversive experiences. A number of studies in the area of health economics raise the question about the validity of utility separability across health states. If this assumption does not hold and marginal utility of consumption changes in sick versus healthy states, the optimality predictions for the health plan reimbursement levels, as well as the optimal level of coverage for individuals will be different than what is conjectured by the classical insurance model. The results provide robust evidence against the separability assumption. In the data for the majority of participants, the marginal utility of money decreases with aversive experience, yet for a sizable portion of the pool it increases. The third chapter uses market experiments to study the longstanding question of whether investors have a preference for particular patterns of firm payouts. Despite the absence of meaningful market frictions, the data suggest that investors do not view "homemade" dividends as perfect substitutes for cash payouts. Instead investors with known consumption needs prefer to fund these needs with certain cash payouts rather than through security sales at potentially unknown prices. Moreover, preferences for dividend paying securities are also reflected in market prices.
Type Text
Publisher University of Utah
Dissertation Name Doctor of Philosophy
Language eng
Rights Management (c) Corina Besliu
Format Medium application/pdf
ARK ark:/87278/s62k1f50
Setname ir_etd
ID 1528654
Reference URL
Back to Search Results