Search

In March 1982 the fares on the London underground and buses were doubled and became the highest transit fares in the world. The preceding October, the socialist-dominated Greater London Council had cut fares by 25 percent and had increased property taxes to cover the lost revenue. This attempt to shift the costs from the relatively poor (users of public transportation) to the relatively rich (owners of property) failed when Britain's highest court ruled that the tax increase was illegal. To make up lost revenues, the authorities at London Transport doubled transit fares. Are the new fares fair?

A decision problem specially constructed by M. Allais has attracted the attention of a number of students of decision theory. It has been called a 'paradox' because it presumably leads to a set of choices that are inconsistent with the usual norms of decision theory. In a recent paper, D. Morrison attempts to revise decision theory so that such choices would be considered as consistent. This revision involves the incorporation of an individual's asset position. While the consideration of an individual's personal states--including his non-financial states--appears to be a fruitful direction for future research, some theoretical and practical difficulties with this particular formulation are discussed. Whether the Allais problem can be considered as a paradox is an empirical question; however, no formal empirical findings have yet been published. Hence, we present the results of three Allais-type problems given to business executive subjects. While about 35% of the initial choices were inconsistent, there are indications that this tends to be considerably reduced as the subjects understand the implications of the decision theory norms. This latter aspect is after all the more relevant one for a theory that is intendedly normative. We conclude by discussing some training considerations in the context of different representations of Allais-type problems. (Author)

A procedure is presented for empirically determining indifference curves. Individuals are taught to directly represent their preferences graphically. Provision is made for motivating them to give their true preferences, and techniques based on the notation of dominance are used to simplify the problem where appropriate. Experimental results from a pilot study are given for two sets of two-commodity bundles. These results show the ease with which indifference curves can be obtained, and also reflect some interesting similarities and differences in the preferences for the commodities used. (Author)

The study deals with decision making under uncertainty, and more specifically with a set of postulates (based on the concepts of utility and personal probability) for consistent decision making. It explores the degree to which these postulates are good descriptions of actual behavior and the degree to which they seem to be good norms. Experiments in the form of decision problems based on each of the postulates were given to experienced business executives. In addition to obtaining basic responses to these problems, a systematic follow-up was made both in written and later in oral form in order to probe the normative implications of the postulates. It is concluded, based on the basic responses, that the decision making theory under study is not a very good description. However--and this is the important point--the subjects tend to regard most of the deviations from the theory as mistakes and if given the opportunity will correct them. This suggests the importance of the postulates in training decision makers in both how to structure decision problems and also how to police their own decisions. (Author), Prepared in cooperation with Carnegie Inst. of Tech., Pittsburgh, Pa., Working Paper-21R. Prepared for presentation at International Economic Association Conference on 'Risk and Uncertainty', Smolenice Castle (Czechoslovakia), 30 Mar-5 Apr 66.