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Competing Solutions to the Principal-Agent Model Haptonstahl, Stephen Uploaded 07-23-2009 Keywords bargaining principal agent risk aversion fairness quantal response equilibrium strategic statistical model random utility experiment Abstract Principal-Agent (PA) theory has been used for over three decades to model the relationship between an information-advantaged Agent and a Principal able to issue a contract ultimatum. For its common implementation as a game, the subgame-perfect Nash equilibrium is reasonably simple but generally wrong in predicting experimental or observational data. This paper implements PA theory theoretically and statistically as two kinds of strategic statistical model, then develops methods for testing competing behavioral hypotheses. I show that subgame-perfect Nash equilibrium, risk aversion/affinity, distributive justice/fairness theories, agent error, and random utility can be observationally distinct and how they might be distinguished statistically.

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Estimating Voters' Taste for Risk: Candidate Choice under Uncertainty Berinsky, Adam Lewis, Jeffrey B. Uploaded 07-08-2002 Keywords elections risk preferences Abstract Recent work in political science has taken up the question of issue voting under conditions of uncertainty -- situations in which voters have imperfect information about the policy positions of candidates. Models that recognize this principle are realistic portrayals of the campaign environment, but may be limited in important respects. To date, the study of vote choice under uncertainty has made a common assumption of quadratic preferences. Such preferences implying that citizens behave in a very risk-averse manner when casting votes But this assumption is simply that; an assumption. Many other utility functions consistent with ``proximity'' voting could be chosen, including functions that imply risk neutral and risk acceptant behavior The assumption of risk-aversion is, after all, not simply a technical choice: it has important implications for how we view the process of citizen choice in elections and campaigns. If voters are risk-averse, candidates can benefit by making clear their positions on issues that they know will appeal to the electorate. Risk-averse voters therefore improve the quality of campaign discourse because candidates are punished for taking vague positions. But this scenario is only one among several possibilities. If voters are risk-neutral or risk-acceptant, candidates may have incentive to muddle the details of their policy plans and send ambiguous signals about their positions. Such a story of the campaign process may be less normatively appealing than one in which voters are risk-averse, but it might also more accurate portray the dynamics of political campaigns. We believe that the nature of risk preferences among the electorate should, therefore, be subject to greater scrutiny. In this paper, we move beyond the assumption of a particular spatial utility function and estimate voter's preferences for risk. We find that, contrary to the literature, voters are less risk averse than the quadratic model implies. Indeed, by the definition of risk preference developed in the paper, we find voters to be generally (nearly) risk-neutral and, in some cases, risk-acceptant.

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Estimating Risk and Rate Levels, Ratios, and Differences in Case-Control Studies King, Gary Zeng, Langche Uploaded 05-06-2001 Keywords Logistic Models Case-Control Studies Relative Risk Odds Ratio Risk Ratio Risk Difference Hazard Rate Rate Ratio Rate Difference Abstract Classic (or ``cumulative'') case-control sampling designs do not admit inferences about quantities of interest other than risk ratios, and then only by making the rare events assumption. Probabilities, risk differences, and other quantities cannot be computed without knowledge of the population incidence fraction. Similarly, density (or ``risk set'') case-control sampling designs do not allow inferences about quantities other than the rate ratio. Rates, rate differences, cumulative rates, risks, and other quantities cannot be estimated unless auxiliary information about the underlying cohort such as the number of controls in each full risk set is available. Most scholars who have considered the issue recommend reporting more than just risk and rate ratios, but auxiliary population information needed to do this is not usually available. We address this problem by developing methods that allow valid inferences about all relevant quantities of interest from either type of case-control study when completely ignorant of or only partially knowledgeable about relevant auxiliary population information.

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Negotiating Coalitions Bottom, William P. Miller, Gary J. Holloway, James McClurg, Scott D. Uploaded 09-15-1998 Keywords Game theory Experimental Design Coalition Formation Negotiation Risk Abstract Game theory's best efforts have done little but verify the undecidability of coalitional problems. The typical solution concept specifies the hypothesized distribution for each of several viable coalition structures--but cannot choose among the coalition structures. For example, the bargaining set presumes that bargaining proceeds by objection and counter-objection until potential coalition members are indifferent between the coalitions that they pivot between. Thus, the bargaining set makes a clear distributional hypothesis, but thereby gives up any leverage on which coalition will occur. In this paper, we explore how risk preferences and the nature of coalitional goods influence the coalition-building process. We test a variety of potential explanations with data collected in an experimental setting. Foremost among our conclusions is that the coalitions which form among inexperienced subjects are affected by their risk preferences. We further find that this effect disappears among experienced subjects. We conclude the paper by discussing some of the explanations for and questions stemming from our results.

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Tau-b or Not Tau-b: Measuring Alliance Portfolio Similarity Signorino, Curtis S. Ritter, Jeffery M. Uploaded 04-02-1997 Keywords alliances tau-b similarity utility risk ordinal Abstract The pattern of alliance commitments among states is commonly assumed to reflect the extent to which states have common or conflicting security interests. For the past twenty years, Kendall's tau-b has been used to measure the similarity between two nations' ``portfolios'' of alliance commitments. Widely employed indicators of systemic polarity, state utility, and state risk propensity all rely upon tau-b. We demonstrate that tau-b is inappropriate for measuring the similarity of states' alliance commitments. We develop an alternative measure of alliance portfolio similiarity, S, which avoids many of the problems associated with tau-b, and we use data on alliances among European states to compare the effects of S versus tau-b in measures of utility and risk propensity. Finally, we identify several problems with inferring state interest from alliance commitments and we provide a method to overcome those problems using S in combination with data on alliances, trade, UN votes, diplomatic missions, and other types of state interaction.