Decision-Making Under Risk: A Normative and Behavioral Perspective

People are a component of the environment. Where human involvement with the environment has an effect on other forms of life. The environment evolves in tandem with societal transformations. Human survival is extremely dependent on the environment. In the social perspective, the environment (ecosystem) is a unit that cannot be separated. The influence of environmental pollution on human growth and survival is unfavorable. If the environment (ecology) is healthy, it will have a favorable effect on the development of human life's carrying capacity. On the other side, driven by limitless human wants, there is frequently excessive and unregulated exploitation of the environment, resulting in environmental harm and contamination. To counteract the negative effects of excessive environmental exploitation, it is essential to have a social engineering tool, namely the law, in order to establish an orderly society (law as a tool of social engineering). This study employs a normative legal approach as its methodology. This study will examine normatively applicable legal structures pertaining to the environment in Indonesia, with an emphasis on the necessity of law enforcement (law as a tool of social engineering). This study employs a normative legal approach as its methodology. This study will examine Indonesian environmental legal structures from a normative perspective, focusing on the urgency of law enforcement. Specifically, the law to establish an orderly society (law as a tool of social engineering). This study employs a normative legal approach as its methodology. This study will examine Indonesian environmental legal structures from a normative perspective, focusing on the urgency of law enforcement.

There is growing public concern about the ‘unfairness’ of many pricing practices that have become common in consumer, particularly digital, markets. Industrial and behavioural economists have developed theories that explain the conditions under which these practices are profitable for firms, and their implications for consumer welfare. We identify a mismatch between the welfare economic principles used in this theoretical work and the normative perspective in which these practices are viewed as unfair. We develop a concept of ‘transactional fairness’, grounded in the normative approach of Sugden's Community of Advantage, that is reflective of public concerns. Transactional fairness is complementary to established criteria of economic efficiency and distributional equity but is based entirely on the relationship between individual buyers and sellers. It establishes clear principles with realistic information requirements that are appropriate for compliance by firms. Regulation based on this approach can help to restore public faith in markets.

Background Most of the about 140 million informal sector workers in urban China do not have health insurance. A 1998 central government policy leaves it to the discretion of municipal governments to offer informal sector workers in cities voluntary participation in a social health insurance for formal sector workers, the so-called 'basic health insurance' (BHI).MethodsWe used the contingent valuation method to assess the maximum willingness to pay (WTP) for BHI among informal sector workers, including unregistered rural-to-urban migrants, in Wuhan City, China. We selected respondents in a two-stage self-weighted cluster sampling scheme. ResultsOn average, informal sector workers were willing to pay substantial amounts for BHI (30 Renminbi (RMB), 95% confidence interval (CI) 27-33) as well as substantial proportions of their incomes (4.6%, 95% CI 4.1-5.1%). Average WTP increased significantly when any one of the copayments of the BHI was removed in the valuation: to 51 RMB (95% CI 46-56) without reimbursement ceiling; to 43 RMB (95% CI 37-49) without deductible; and to 47 RMB (95% CI 40-54) without coinsurance. WTP was higher than estimates of the cost of BHI based on past health expenditure or on premium contributions of formal sector workers. Predicted coverage with BHI declined steeply with the premium contribution at low contribution levels. When we applied equity weighting in the aggregation of individual WTP values in order to adjust for inequity in the distribution of income, mean WTP for BHI increased with inequality aversion over a plausible range of the aversion parameter. Holding other factors constant in multiple regression analysis, for a 1% increase in income WTP for BHI with different copayments increased by 0.434-0.499% (all p < 0.0001), and for a 1% increase in past health care expenditure WTP increased by 0.076-0.148% (all p < 0.0004). Being male, a migrant, or without permanent employment significantly decreased WTP for BHI. Education was not a significant determinant of WTP for BHI. ConclusionOur results suggest that Chinese municipal governments should allow informal sector workers to participate in the BHI. From a normative perspective, BHI for informal sector workers is likely to increase social welfare because average WTP for BHI is significantly higher than estimates of the average cost of BHI. We further find that informal sector workers do not value the BHI as a mechanism to recover the relatively frequent but small financial losses associated with common illnesses, but because it protects against the rare but large financial losses associated with catastrophic care. From a behavioural perspective, our results predict that at a price equal to the average premium contribution of formal sector workers 35% of informal sector workers will enrol in the BHI. Subsidies and changes in insurance attributes (e.g. including catastrophic care and portability) should be effective in increasing BHI coverage. In addition, coverage should expand with rising incomes among informal sector workers in China. Finally, adverse selection will be unlikely to be a large problem, if the BHI is offered to informal sector workers.

Positive Net Neutrality: Zero-Rating and the Material Reduction of Consumer Choice

Behavioral Law &amp; Economics Goes to Court: The Fundamental Flaws in the Behavioral Law &amp; Economics Arguments Against No-Surcharge Laws

Herbert Simon’s bounded rationality offers three principles for building a theory of behavior: (i) to study the process of actual decision making (as opposed to as-if models of expected utility maximization), (ii) to study how decisions are made in situations of uncertainty and intractability (as opposed to risk and ambiguity alone), and (iii) to study how minds adapt to environments (as opposed to modeling solely the mind or the environment). Economists hijacked bounded rationality by reinterpreting it to mean optimization under constraints, and psychologists by reinterpreting it as the study of cognitive biases, that is, deviations from optimization. This contradictory double-takeover silenced the revolutionary essence of Simon’s program. My colleagues and I have revived and extended Simon’s lost program, choosing the term ecological rationality to avoid any confusion. As opposed to the cognitive biases program, the study of ecological rationality is both descriptive and prescriptive. It investigates the repertoire of heuristics individuals or institutions have at their disposal (their adaptive toolbox) as well as the conditions under which each heuristic is successful and thus should be used, as measured by real-world criteria (the ecological rationality of heuristics). The study of the adaptive toolbox relies on observation and experimentation; the study of the conditions under which various heuristics should be used relies on mathematical analyses and computer simulations. This combination of descriptive and prescriptive analysis offers a novel perspective for behavioral economics and the study of decision-making in general.

The study examines the institutional approach in the context of the legal culture of entrepreneurship. Particular attention is paid to the influence of this approach on the managerial sphere of the corporate sector. The interpretation of legal culture as a flexible institution, including formal and informal norms and standards, as well as changing managerial practices, is proposed. There is a correlation between the level of legal culture and the quality of management practices in the context of legal uncertainty. Legal culture in entrepreneurship, more often viewed from a behavioral or normative perspective, allows for a deeper understanding of the mechanisms of formation of legal norms and their impact on management decisions through an institutional approach, especially in a changing business legal environment, which is relevant when analyzing the legal culture of entrepreneurship as a social institution influencing management decisions. Thus, the institutional approach provides valuable tools for analyzing the legal culture of entrepreneurship, while requiring consideration of the context of social order, legal differentiation, and socio-cultural differences in the entrepreneurial environment. The problematic area of analyzing the space of legal culture in the sociology of management involves considering its contours through the prism of scientific approaches and detailing one of them when determining the structure of the legal culture of a particular type of activity – entrepreneurship. Theoretical research is aimed at the logical substantiation of the patterns put forward before the beginning of empirical research on a given topic.

Housing is a complex commodity and housing market choices carry with them substantial economic and social consequences for the households making them. Housing market decisions are complex, uncertain and involve expectations-formation. This paper argues that the standard economic theory of decision-making under uncertainty – expected utility theory – is particularly ill-suited as the basis for understanding such complexity. The paper then explores alternative avenues for potential development, reviewing the key characteristics of owner-occupied housing markets and housing search, and examining how the resources of institutional and behavioural economics could be used to inform our understanding of the residential mobility process. The paper concludes by outlining an agenda for empirical research.

Decision-making can be the difference between life and death in all types of aviation, but in general aviation (GA), where most of the flying is conducted as single-pilot operations, the decision-making of one individual becomes fundamentally important. It is critical to consider, first, why pilots make bad decisions that can ultimately lead to weather-related aviation accidents or incidents; and second, whether a better understanding of weather-related decision-making can inform regulations that will improve decision-making and consequently reduce the frequency of pilot-error accidents. Behavioral economics (BE) aims to better understand individual decision-making to model decision-making pathways. As individual decision-making is central to aviation safety, better modeling of decision-making pathways should be a central aim not just for pilots, but also for aviation regulators, such as the Civil Aviation Safety Authority (CASA) in Australia. While there has been little analysis of pilot decision-making using BE, we argue that BE, with its focus on predictive models of individual decision-making, provides a rich framework to understand pilot decision-making and inform more targeted regulation. This argument is in four parts. The first part identifies that there is an ongoing safety issue with visual flight rules (VFR) pilots flying into instrument meteorological conditions (IMC). The second part introduces some of the core concepts of BE, such as the rejection of perfect rationality and the reliance upon certain behavioral biases in decision-making. We argue that VFR into IMC is an appropriate context in which to apply BE as there is an identifiable measure of a pilot’s welfare and concerns around paternalism fall short when dealing with protecting the welfare of those likely to be impacted by a pilot’s decision-making, such as passengers and aircraft owners. The third part reviews the existing research applying behavioral models of decision-making in respect of VFR into IMC and identifies three behavioral biases that—among others—can lead to poor decision-making: (i) environmental literacy, (ii) overconfidence, and (iii) prospect theory. The final part briefly introduces some potential avenues for BE to inform regulatory reform, including better education of pilots and regulators in respect of the psychological factors to which pilots may fall victim, as well as more directed training for pilots to address the environmental literacy concerns identified in this part. We conclude that the regulatory environment should be reformulated to adequately account for predictable behavioral biases.

Behavioral economics for decision support systems researchers

In light of well-established principles in behavioral economics and cognitive psychology, we consider how minor variants in the structure, framing, and phrasing of several common design research activities may unintentionally elicit more biased participant responses than currently recognized. To begin investigating the relationship between minor modifications to design research activities and changes in participant responses, we propose designs for three experiments, and then explore their weaknesses and limitations through a short-term pilot study. In our discussion, we suggest that a better understanding of cognitive biases may be used to produce more accurate and salient participant responses – either by minimizing or by explicitly eliciting activity- and context-induced biases as appropriate to the research at hand. Additionally, we propose that recognition of context-dependent preferences could lead to more holistic models of user behavior. This early research is a work in progress. The principle aim of this paper is to provide a conceptual foundation for additional research into how participants’ cognitive biases might influence the outcome of design research activities, and related implications for research activity design.

The article is a conceptual work based on behavioural and evolutionary economics achievements. The aim of this article is to present the latest concepts and research achievements in behavioral economics, to help understand economic decision-making processes, and to suggest methods and procedures for improving them. The article presents the theoretical foundations of behavioral economics, based on literature studies and key concepts: intuition and cognitive biases, affective traits, reciprocity, trust and justice. Intuition and emotions are not the opposite of rationality but a reflection of the evolution of rationality. Neuroscience research strengthens the evolution theory of rationality development. Neuroscience has the potential to explain the mental processes involved in emotions, cognition, judgment and decision making. The second part presents a discussion on improving decision-making processes, taking into account the achievements of behavioural economics.

PurposeThis study tried to establish a metric framework of patient adherence to doctor’s advice based on the expected utility and prospect theories, and it explained why the key to patient adherence to doctor’s advice is patients’ perceptions.MethodsOur framework is primarily based on two mature theories: expected utility theory and prospect theory. We started with a basic assumption: the doctor is rational and cares for patient’s health utility. We analyzed the expected utility of therapy with a definite diagnosis. Then, we considered the impacts of the accuracy of diagnostic techniques. After that, we explored the patient’s response to the doctors’ advices based on behavioral economics. In addition, we launched a discrete choice experiment to test our main point: perception is the key to patients’ adherence. A total of 200 undergraduate students participated in the discrete choice experiment.ResultsThree main factors might impact a rational clinical decision: the therapeutic and side effects of the treatment, patient’s true disease risk, and diagnostic accuracy. However, another factor, patient’s individual percepion, was crucial for patient’s adherence since it may bias the patient’s estimations regarding the above three factors. As a result, doctors and patients would have a cognitive gap in the estimation of the disease and the treatment.ConclusionThe results indicate that without the necessary information, better clinical techniques may not help to improve patient adherence, which support our theoretical reasoning forcefully. Therefore, improving patient adherence should be more of a process of empathy and communication rather than a promotion of medical technology.

Theoretical models as Expected Utility Theory (EUT) start from the premise that decision making individuals follow subjective rules which they found e. g. on their personal probability judgements. Thus, EUT requires that the decision maker has a complete knowledge of all relevant states of the world and consequences of possible actions. Often, there is a lack of information basis to attribute probabilities to states of the world and to evaluate the utility of potentially occurring consequences. In such cases, alternative decision theories to EUT are to be applied for a reality adequate explanation of decision-making processes. Such a theory, being presented in the following, is Case-Based Decision Theory (CBDT), which will be analysed experimentally with respect to its empirical validity. The results shall substantiate the validity of the premises and the methods of the CBDT in the context of a repeated-choice problem.

Policy PointsNudges steer people toward certain options but also allow them to go their own way. “Dark nudges” aim to change consumer behavior against their best interests. “Sludge” uses cognitive biases to make behavior change more difficult.We have identified dark nudges and sludge in alcohol industry corporate social responsibility (CSR) materials. These undermine the information on alcohol harms that they disseminate, and may normalize or encourage alcohol consumption.Policymakers and practitioners should be aware of how dark nudges and sludge are used by the alcohol industry to promote misinformation about alcohol harms to the public.Context“Nudges” and other behavioral economic approaches exploit common cognitive biases (systematic errors in thought processes) in order to influence behavior and decision‐making. Nudges that encourage the consumption of harmful products (for example, by exploiting gamblers’ cognitive biases) have been termed “dark nudges.” The term “sludge” has also been used to describe strategies that utilize cognitive biases to make behavior change harder. This study aimed to identify whether dark nudges and sludge are used by alcohol industry (AI)–funded corporate social responsibility (CSR) organizations, and, if so, to determine how they align with existing nudge conceptual frameworks. This information would aid their identification and mitigation by policymakers, researchers, and civil society.MethodsWe systematically searched websites and materials of AI CSR organizations (e.g., IARD, Drinkaware, Drinkwise, Éduc'alcool); examples were coded by independent raters and categorized for further analysis.FindingsDark nudges appear to be used in AI communications about “responsible drinking.” The approaches include social norming (telling consumers that “most people” are drinking) and priming drinkers by offering verbal and pictorial cues to drink, while simultaneously appearing to warn about alcohol harms. Sludge, such as the use of particular fonts, colors, and design layouts, appears to use cognitive biases to make health‐related information about the harms of alcohol difficult to access, and enhances exposure to misinformation. Nudge‐type mechanisms also underlie AI mixed messages, in particular alternative causation arguments, which propose nonalcohol causes of alcohol harms.ConclusionsAlcohol industry CSR bodies use dark nudges and sludge, which utilize consumers’ cognitive biases to promote mixed messages about alcohol harms and to undermine scientific evidence. Policymakers, practitioners, and the public need to be aware of how such techniques are used to nudge consumers toward industry misinformation. The revised typology presented in this article may help with the identification and further analysis of dark nudges and sludge.