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This paper develops a new laboratory test of the hypothesis that individual investors sell winners too early and ride losers too long. In the experiment, subjects invest in a risky asset, whose price evolves in near-continuous time, and they are provided with the option to liquidate it at a fixed salvage value. Optimal behavior is characterized by an upper and a lower stopping thresholds in the asset price space, thus producing a clear rational benchmark and eliminating known confounds. This design allows me to detect and quantify the disposition effect in a sample of 108 subjects.

AbstractIn this work we solve in a closed form the problem of an agent who wants to optimise the inter-temporal recursive utility of both his consumption and leisure by choosing: (1) the optimal inter-temporal consumption, (2) the optimal inter-temporal labour supply, (3) the optimal share of wealth to invest in a risky asset, and (4) the optimal retirement age. The wage of the agent is assumed to be stochastic and correlated with the risky asset on the financial market. The problem is split into two sub-problems: the optimal consumption, labour, and portfolio problem is solved first, and then the optimal stopping time is approached. We compute the solution through both the so-called martingale approach and the solution of the Hamilton–Jacobi–Bellman partial differential equation. In the numerical simulations we compare two cases, with and without the opportunity, for the agent, to work after retirement, at a lower wage rate.

In stopping problems, the decision maker receives a sequence of candidates and decides whether to select the current candidate and thereby stop the search or whether to continue surveying. Some examples include searching for an apartment, selecting an employee for a job, or choosing a new product or service from a sequence of vendors. Most of the literature on stopping problems assumes that the decision maker can perfectly evaluate the candidate when surveyed. We consider practical variations where surveying a candidate may provide no further information or imperfect information about its value. We show how the stopping problem can be considered an extension of the two-action (go/no-go) problem and present threshold optimal policies for the general problem. For the case where surveying candidates provides no further information and the uncertain values of candidates are normally distributed, we present analytical results that highlight how the value of information is affected by the parameters. With the help of an illustrative example, we demonstrate how a model that ignores sequential decisions could potentially severely underestimate the value of information. We also present a data-driven application of our results by studying the value of reports to a potential used car buyer.

AbstractWe investigate a class of optimal stopping problems for dynamical systems described by one‐dimensional differential equations with an additive Poisson disturbance. The rate of the disturbance may depend upon the current state of the system. A dynamic programming equation for the optimal stopping cost is derived along with conditions which must be met at the boundary of the optimal stopping set. These boundary conditions depend upon whether or not the stopping set may be entered by smooth motion.

Targeting policy is treated as a marginal capping of seigniorage and government expenditures, respectively. Appropriate policies of stabilization might be performed by the government rather independently due to existence of a distorted and asymmetric financial market in a transition economy. Feasible strategies are represented as solutions to the Bellman equation in the optimal stopping problem for stochastic processes of budget expenditures and government borrowing on the open market. Respective options to stop spending and borrowing prescribe the optimal policy for budget expenditures as well as for seigniorage targeting. Implementation of such a policy is, in essence, an imposition of the call provisions on the government debt, the optimal value of which is equal to the value of the opportunity to borrow at the optimal point.

"Empirisch-theoretische Unsicherheiten der Psychologie beziehen sich im wesentlichen auf Probleme der Gewinnung einer sicheren Datenbasis zur Entwicklung und Prüfung bedürfnistheoretischer Konstruktionen. Diese Unsicherheiten sind teils gegenstandspezifisch, teils aber auch Ausdruck allgemeiner erkenntnistheoretischer Probleme. Angesichts des hohen Stellenwertes, der dem Bedürfnisbegriff in der politischen Planung eingeräumt wird, sollte der Aufweis solcher doch recht fundamentalen Probleme alamierend wirken. - Es soll zunächst versucht werden, die angesprochene Problematik in ihren verschiedenen Facetten zu entfalten. In einem weiteren Schritt soll geprüft werden, inwieweit die für eine empirische Bedürfnisforschung charakteristischen Probleme sich für die empirische Wertforschung stellen. Schließlich soll dargelegt werden, welche Implikationen diese Probleme für die Konzeption von 'Modellen optimaler Entwicklung' haben, an denen sich Maßnahmen zur planmäßigen Verbesserung der Bedingungen menschlichen Lebens und Zusammenlebens orientieren können." (Autorenreferat)