Risk aversion and strategic voting

We study the voting game where agents' preferences are endogenously decided by the information they receive, and they can collaborate in a group. We show that strategic voting behaviors have a positive impact on leading to the "correct" decision, outperforming the common non-strategic behavior of informative voting and sincere voting. Our results give merit to strategic voting for making good decisions.

The literature on strategic voting has provided evidence that some electors support large parties at the voting booth to avoid wasting their vote on a preferred but uncompetitive smaller party. In this paper we argue that district conditions also elicit reactions from abstainers and other party voters. We find that, when ballot gains and losses from different types of responses to the constituency conditions are taken into account, large parties still benefit moderately from strategic behaviour, while small parties obtain substantial net ballot losses. This result stems from a model that allows for abstention in the choice set of voters, and uses counterfactual simulation to estimate the incidence of district conditions in the Spanish general elections of 2000 and 2008.

Majority Runoff Elections: Strategic Voting and Duverger's Hypothesis

The majority runoff system is widely used around the world, yet our understanding of its properties and of voters’ behavior is limited. In this paper, we fully characterize the set of strictly perfect voting equilibria in large three-candidate majority runoff elections. Considering all possible distributions of preference orderings and intensities, we prove that only two types of equilibria can exist. First, there are always equilibria in which only two candidates receive votes. Second, there may exist an equilibrium in which three candidates receive votes. Its characteristics challenge common beliefs: (i) neither sincere voting by all voters nor pushover tactics (i.e., supporters of the front-runner voting for a less preferred candidate so as to influence who will face the front-runner in the second round) are supported in equilibrium, and (ii) the winner does not necessarily have democratic legitimacy since the Condorcet winner may not even participate in the second

PurposeThis paper investigates the associations among the Big 5 personality traits (neuroticism, conscientiousness, agreeableness, openness to experience and extroversion), nine prominent investment biases and the moderating role of financial literacy.Design/methodology/approachWe used survey data from 475 individual investors in India based on various benchmarked scales in the literature and structural equation modeling to evaluate the desired relationship between the constructs.FindingsOur evidence shows that the extroversion personality trait is the most vulnerable to behavioral biases, and overconfidence bias affects individual Indian investors the most. Financial literacy is positively associated with two biases (risk aversion and representativeness bias) and moderates the relationship between two personality traits (extroversion and agreeableness) and risk aversion.Research limitations/implicationsOur study has limitations. First, it does not examine financial literacy in detail. Therefore, researchers should examine financial literacy within larger frameworks than those used in our study. Second, we confined our analysis to the Big 5 personality traits and nine behavioral biases. Our selection of biases to include in the study involved some subjectivity. Third, we limited our analysis to Indian investors. Researchers should replicate our study to see if its findings are generalizable in other countries with differing characteristics. Our findings call for a more careful examination of the circumstances behind which personality traits manifest in specific bias.Practical implicationsInvestment advisors can help their clients make rational investment decisions by guiding them to deal with their investment biases.Social implicationsImproving financial literacy could help investors avoid the pitfalls of behavioral biases and increase their performance in the stock market.Originality/valueThis study is the first to provide a comprehensive framework that examines the relationship between personality traits and investor biases and the moderating role of financially literate investors.

Political elites are generally reluctant to alter the status quo unless a change will benefit them. Scholars have found that institutions, and the rules governing them, tend to evolve in ways that maintain equilibrium, preserving the status of winners. Are voters—when presented the opportunity—more likely than elites to alter political institutions? Using survey data, the authors explore mass support in the American states for changing how legislative districts are drawn. They find evidence that representational losers at statewide and district levels are more likely to vote for reforms to create nonpartisan redistricting in ballot issue contests, while electoral winners oppose reform. They argue that ordinary voters—like elected officials—may exhibit a similar instrumental rationale, using a self-interested calculus when serving as policy makers for a day. Beyond theorizing about conditions under which the mass public might engage in strategic voting, the analysis has implications for practical election reform efforts in the American states.

The literature discusses risk aversion as one of the behavioral determinants of technology adoption. However, little attention has been paid to measuring ambiguity aversion of poor people in developing countries or in finding the role of ambiguity aversion in technology adoption. Risk experiments in the previous studies have been designed in such a way that individuals face the risky and/or ambiguous situations alone. Individuals in the real world, especially farmers in developing countries, are likely to get information from peers before making any decision regarding a new innovation that has an ambiguous nature. This paper addresses two broad issues. The first issue is to measure the risk and ambiguity preferences of Bangladeshi rural farmers. The paper investigates whether the attitudes toward uncertainty (risk and ambiguity) differ when farmers face the uncertainty alone versus when they are allowed to communicate with peer groups of 3 or 6. It also investigates whether farmers’ demographic characteristics affect their attitudes toward uncertainty or not. A second issue is to find whether measures of attitudes toward uncertainty is same across different groups of subjects using experimental lotteries. To do so, this paper replicates the same experiments with groups of students in two universities in Bangladesh. Finally, the paper also investigates whether demographic variables affect the attitudes toward risk and ambiguity aversion or not. It finds that risk attitudes of farmers and students are same when deciding alone. However, farmers tend to show higher variation in risk aversion than students sample when deciding in a group of 3. In the latter case, farmers tend to show less risk aversion than students. While disaggregating the measured risk attitudes across gender, female students tend to show more risk aversion as well as higher variation in risk aversion than male students in the sample. The study also finds that The study also finds that students’ and farmers’ demographic characteristics affect both risk and ambiguity aversion.

This paper seeks to prove that under a large class of group decision rules some sincere voting situations will be unstable because of strategic manipulation by single individuals. The concept of stability used is weaker than the stability concepts figuring in many earlier contributions in this area, insofar as under the concept used here any individual, while disrupting a given voting situation, considers the possibility of retaliation by other individuals. DUMMETT AND FARQUHARSON [2], Murakami [7], Farquharson [3], Sen [14], Gibbard [4], Satterthwaite [13], and Pattanaik [10, 11, and 12] have discussed various aspects of the problem of stability in voting. The general conclusion which emerges from these writings seems to be that stability of all possible sincere voting situations (which implies the absence of strategic distortion of preferences by voters) is an extremely rare feature of democratic group decision procedures. However, the notion of stability or equilibrium underlying many of these contributions is a simple one and does not take into account several phenomena usually associated with strategic voting such as the possibility of counter-coalitions when a coalition (of one or more individuals) threatens to disrupt a voting situation. The purpose of this paper is twofold. First, it introduces a less demanding notion of stability which takes into account the possibility of formation of countercoalitions when an individual seeks to influence the outcome in his own favor by strategic manipulations in voting. Secondly, using this very weak notion of stability, it is shown that, while under the changed definition the possibility of having unstable sincere voting situations because of strategic voting by single individuals is somewhat reduced, invulnerability of all possible sincere voting situations to voting maneuvres of single individuals still remains a very rare property among democratic group decision rules based on pairwise comparisons. We lay down the basic notation and some preliminary definitions in Section 1. In Section 2 we introduce a notion of stability taking into account the possibility of counter-coalitions. Using this very weak definition of stability, in Section 3 we show that under most democratic group decision rules based on pairwise comparisons, there is the danger of having unstable sincere voting situations owing to strategic manipulations by single individuals. We conclude in Section 4.

Erratum to: Risk Aversion and Strategic Voting

Information Acquisition and Decisions Under Risk and Ambiguity

Entrepreneurship training, risk aversion and other personality traits: Evidence from a random experiment

Two dynamic rational choice models of primaries are analyzed that demonstrate both reformers and their critics are right about primaries. Primaries can provide public instruction and a better informed electorate, and they can be poorly designed lotteries: A “recognition” and learning model describes how changing media coverage affects voters' knowledge about candidates and their subsequent voting behavior. A “strategic” voting model describes the dynamic implications of strategic voting and “horse-race” coverage by the media. We find that the recognition model has the normatively appealing dynamic of information leading to broadly self-interested outcomes while the strategy model has the unappealing behavior of a lottery the odds of which are fixed by the media's harsh judgments of who's winning and who's losing.In coming to these conclusions, this paper illustrates a number of methodological points such as the usefulness of macromodels based upon assumptions about individual behavior, the analysis of macromodels using methods from electrical engineering, the strengths and limitations of analytical results versus simulations for understanding dynamic models, and the use of “ideal type” recognition and strategic voting models to clarify the systemic consequences of individual risk aversion and strategic voting. More generally, the paper shows how models can be used as narratives or parables for organizing disparate observations, refining our intuitions, and directing our research efforts.

PurposeThis study aims to examine that personality traits are associated with the investor’s ability to exhibit disposition effect, herding behavior and overconfidence. It also explores how risk-attitude can modify investor behavior by moderating the association between personality traits, disposition effect, herding and overconfidence.Design/methodology/approachData were collected from 396 respondents by using personally administrated survey. Confirmatory factor analysis (CFA) was used to confirm the validity and reliability of data. Regression analysis was used to test the proposed hypotheses.FindingsThe results supported the proposed hypotheses and showed that extravert investors were more likely to exhibit disposition effect, herding and overconfidence. The conscientiousness trait was associated with disposition effect and overconfidence, while neuroticism was associated with herding behavior. The results confirmed the moderating effect of risk aversion on the association between personality traits, disposition effect, herding and overconfidence.Originality/valueThis study demonstrates how risk aversion modes the strength of association between psychological characteristics (represented by personality traits) and cognitive biases (disposition effect, herding and overconfidence). The results support the “auction” interpretation of investors' behavior by suggesting that personality traits are associated with investment decision-making and that investors are marginal price setters.

Abstract: Introduction: This study analyzes the effects of personality traits on the stockpiling of groceries in the United Kingdom during the COVID–19 pandemic. The sample is representative of the UK population in terms of age, gender, and residential area. Methods: We collected the data through five rounds of web surveys during the spring of 2020 ( N = 1025). We used the Big Five Inventory (BFI–10) to measure personality traits. We analyzed the data using independent t-tests and logistic regression. Results: The independent t-tests show that “stockpilers” have a higher degree of Neuroticism and a lower degree of Agreeableness and Conscientiousness than “nonstockpilers.” Logistic regressions moreover show that differences in Neuroticism are related to other personality traits, and that differences in Agreeableness are largely related to age and residential area. The low degree of Conscientiousness among “stockpilers” remains, after we controlled for other factors in the model (i.e., personality traits, gender, age, and residential area). Discussion: We discuss the findings regarding previous research. Understanding personality traits and stockpiling is important to prepare and manage similar extraordinary situations that may occur in the future.

This paper demonstrates gender differences in risk aversion and ambiguity aversion. It also contributes to a growing literature relating economic preference parameters to psychological measures by asking whether variations in preference parameters among persons, and in particular across genders, can be accounted for by differences in personality traits and traits of cognition. Women are more risk averse than men. Over an initial range, women require no further compensation for the introduction of ambiguity but men do. At greater levels of ambiguity, women have the same marginal distaste for increased ambiguity as men. Psychological variables account for some of the interpersonal variation in risk aversion. They explain none of the differences in ambiguity.