KPEGLI.Y.T., Corgnet B., Zylbersztejn A.(2023). All at Once! A Comprehensive and Tractable Semi-parametric Method to Elicit Prospect Theory Components.Journal of Mathematical Economics .(Rank 1, CNRS) . PDF SLIDES CODES
MANE. P. Y. A., DIAGNE. A.,KPEGLI.Y.T.(2019).Modeling the Macroeconomic Effects of Noncommunicable Diseases: Extension and Application to Senegal. Economics Bulletin. Vol. 39 No. 4 pp. 2904-2912. (Rank 3, CNRS). PDF POLICY BRIEF
NDIAYE. A. A., KONTE. M. A., KPEGLI. Y. T.(2017). The Solow model augmented with the net capital inflows to-GDP-ratio.Economics Bulletin. Vol 37. No 3 pp. 2020-2029. (Rank 3, CNRS). PDF
KPEGLI. Y. T., ANNE.B. (2019). Poisson-model analysis of power alternation in Africa. International Journal of Economics and Financial Issues, 9(1), 116-120. PDF
Ambiguity preferences and likelihood insensitivity for asymmetric events (with Erazo D. M. A.). PDF
Abstract. We show that existing methods for measuring ambiguity attitudes for asymmetric events (i.e. unequally likely events) are prone to downward bias and misspecification. To address this, we propose a more robust approach and test it experimentally using both asymmetric and symmetric events (i.e. equally likely events) within the contexts of trust and coordination games. Our findings reveal that individuals i) prefer asymmetric events, showing lower ambiguity aversion compared to symmetric events, and ii) demonstrate greater likelihood insensitivity, as forming beliefs is more cognitively demanding for asymmetric events. These findings explain social ambiguity and strategic uncertainty in our experiment. We identify betrayal aversion as a disutility associated with trust decisions.
Stocks as Lotteries? An Experimental Test of Expected Utility vs Behavioral Models (with Brice Corgnet and Jacopo Magnani).
Abstract. Our study provides the first causal test of classical and behavioral asset pricing models that incorporate skewness pricing. In line with these models, our experimental markets show that skewness is systematically priced thus confirming the need for asset pricing models accounting for asset skewness. Our findings also reveal that positively skewed assets available in small supply exhibit negative expected returns which is consistent with prospect theory but not with expected utility models. In line with the underlying mechanism of prospect theory models, we also show that the negative returns of the positively skewed asset are most pronounced during market sessions where traders overweight the low probability of receiving a large payoff.
Against the Odds! The Tradeoff Between Risk and Incentives is Alive and Well! (with Corgnet B., Hernán-González R. & Zylbersztejn A.). PDF SLIDES
Abstract. The risk-incentives tradeoff (RIT) is a fundamental result of principal-agent theory. Yet, empirical evidence has been elusive. This could be due to a lack of robustness of the theory outside of the standard expected utility framework (EUT) or to confounding factors in the empirical tests. First, we theoretically study the existence of RIT under alternative theories: Rank-Dependent Utility (RDU) and Mean-Variance-Skewness (MVS). We show that RIT is remarkably robust under RDU, but not under MVS. Second, we use a novel experimental design that eliminates confounding factors and find evidence for RIT even in the case of risk-seeking agents, which is a distinct prediction of RDU. Our results provide support for the risk-incentives tradeoff and suggest that it applies to a broad range of situations including cases in which agents are risk-seeking (e.g., executive compensation).
Non-parametric Measurement of Prospect Theory: Random Probability Weighting Approach. PDF
Abstract. Non-parametric measurements of prospect theory rely on random utility methods or deterministic methods. Random utility methods define response errors at the utility scale and are vulnerable to extreme concave utility issues. Also, deterministic methods adopt the unrealistic assumption of the absence of response errors. This paper introduces a new approach--- random probability weighting --- that defines response errors on the probability weighting scale. The new approach is immune to the extreme concave utility issues. Leveraging this new approach, the paper develops a non-parametric method for measuring the Cumulative Prospect Theory, the main descriptive model for decision-making under risk and uncertainty. We apply the method to the seminal data of Tversky and Kahneman (1992) and Gonzalez and Wu (1999). We found concave utility in the gain domain and linear utility in the loss domain, leading to the rejection of (partial) reflection. We found evidence for a sign-independent weighting function, which supports the original prospect theory but contrasts with the duality condition of rank-dependent utility theories. We found evidence for loss aversion, with an index equal to 1.64.
Impact of out-of-pocket health payments on poverty and alignment of public and external health financing in Guinea. (with Porgo T. V. and Kouanda Z. K., World Bank Working paper). PDF (English) PDF (French)
Abstract. There has been limited data on the impact of out-of-pocket health payments (OOPs) on extreme poverty in Guinea. Yet, these data are necessary for making informed decisions in the fight against poverty. This paper aimed to (i) measure the impact of OOPs on extreme poverty in Guinea,(ii) compare this impact with that of other household expenditure categories, and (iii) assess the alignment of health financing with this impact. The paper utilized data from the 2018–19 Living Standards Measurement Study and the 2020–24 health financial commitments of the State and its partners, and is based on the impoverishing expenditure method. The three most common poverty measures were used: (i) prevalence, which refers to the number of people in a given population living below a given poverty line;(ii) normalized gap,which estimates the amount needed to eradicate poverty in a given population; and (iii) severity, which indicates whether the gaps between the income of the poor and the poverty line in a given population are equal. OOPs increased the prevalence, normalized gap, and severity of extreme poverty by 2.1 percentage points (pp), 0.7 pp (or 66 million international dollars), and 0.3 pp, respectively. The groups most affected by the extreme poverty severity increase were Faranah (0.7 pp), N’Zérékoré (0.4 pp), Kindia (0.4 pp), and Labé (0.4 pp); as well as individuals aged ≥60 years (0.5 pp) and <1 year (0.4 pp). OOPs had an equal or greater impact than other sectors that receive more funding such as education (prevalence: 0.4 pp; normalized gap: 0.1 pp; and severity: 0.0 pp). The concentration indexes of health financing with respect to the impact of OOPs on extreme poverty were -0.35 (prevalence), -0.34 (normalized gap), and -0.41 (severity), indicating a misalignment. Guinea urgently needs universal health coverage, which will necessitate improved allocative efficiency. Groups most affected by the extreme poverty severity increase could serve as priority groups.
Simulation Model of the Effects of Cigarette Tax Increases in ECOWAS Countries. PDF (English) PDF (French) USER'S GUIDE EXCEL
Abstract. Tobacco use is one of the major risk factors for non-communicable diseases such as heart disease, stroke, chronic lung disease, and many types of cancer that cause the majority of deaths worldwide. Taxation is recognized as the most effective way to reduce tobacco use. This paper proposes for the West African countries (ECOWAS), a simulation model to quantify the effects on cigarette price(s), quantities consumed, tax revenues, cigarette prevalence, and the number of lives saved following an increase in ad valorem excise duty rates and/or a specific excise duty.