Yoram Halevy

Associate Professor

Yoram Halevy’s research interests are individual and strategic decision making. He studies behavioral choice patterns using theoretical and experimental tools. His research covers choice under uncertainty and over time, bargaining behavior when the parties are not-necessarily self-interested, and most recently – what can be learned from experimental and market data about preferences. Halevy received his PhD in Economics from the Hebrew University of Jerusalem before joining UBC. He is teaching microeconomic theory, behavioral economics and experimental economics for undergraduates and graduate students.

Halevy is the Director of the Experimental Lab at the VSE (ELVSE).
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PUBLICATIONS

Revealed preference theory is brought to bear on the problem of recovering approximate parametric preferences from consistent and inconsistent consumer choices. We propose measures of the incompatibility between the revealed preference ranking implied by choices and the ranking induced by the considered parametric preferences. These incompatibility measures are proven to characterize well-known inconsistency indices. We advocate a recovery approach that is based on such incompatibility measures, and demonstrate its applicability for misspecfication measurement and model selection. Using an innovative experimental design we empirically substantiate that the proposed revealed-preference-based method predicts choices significantly better than a standard distance-based method.

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Choices from linear budget sets are often used to recover consumer's preferences. The classic method uses revealed preference theory to construct non-parametric bounds on the indifference curve that passes through a given bundle. We show that these bounds do not apply to non-convex preferences, and therefore may lead to erroneous prediction and welfare analysis. We suggest an alternative that is based on the assumption of monotonicity of preferences.

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We evaluate data on choices made from Convex Time Budgets (CTB) in Andreoni and Sprenger (2012a) and Augenblick et al (2015), two influential studies that proposed and applied this experimental technique. We use the Weak Axiom of Revealed Preference (WARP) to test for external consistency relative to pairwise choice, and demand, wealth and impatience monotonicity to test for internal consistency. We find that choices made by subjects in the original Andreoni and Sprenger (2012a) paper violate WARP frequently; violations of all three internal measures of monotonicity are concentrated in subjects who take advantage of the novel feature of CTB by making interior choices. Wealth monotonicity violations are more prevalent and pronounced than either demand or impatience monotonicity violations. We substantiate the importance of our desiderata of choice consistency in examining effort allocation choices made in Augenblick et al (2015), where we find considerably more demand monotonicity violations, as well as many classical monotonicity violations which are associated with time inconsistent behavior. We believe that the frequency and magnitude of WARP and monotonicity violations found in the two studies pose important confounds for interpreting and structurally estimating choice patterns elicited through CTB. We encourage researchers employing CTB in present and future experiments to include consistency tests in their design and pre-estimation analysis.

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A sequence of experiments documents static and dynamic "preference reversals" between sooner-smaller and later-larger rewards, when the sooner reward could be immediate. The theoretically-motivated design permits separate identification of time-consistent, stationary and time-invariant choices. At least half of the subjects are time consistent, but only three-quarters of them exhibit stationary choices. About half of subjects with time inconsistent choices have stationary preferences. These results challenge the view that present-bias preferences are the main source of time inconsistent choices.

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Decision makers tend to exhibit a higher degree of impatience when considering a delay to an immediate reward than when contemplating an identical delay to an equal future reward. This work argues that diminishing impatience originates from the distinction between the certain present and the risky future. A simple functional representation of preferences, exhibiting time inconsistency when the future is uncertain, is derived. Experimental evidence, which is inconsistent with other formulations that account for diminishing impatience, supports the proposed approach. The new theory uncovers a tight relation between diminishing impatience and well-known behavioral regularities in choice under risk and uncertainty.

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An extension to Ellsberg's experiment demonstrates that attitudes to ambiguity and compound objective lotteries are tightly associated. The sample is decomposed into three main groups: subjective expected utility subjects, who reduce compound objective lotteries and are ambiguity neutral, and two groups that exhibit different forms of association between preferences over compound lotteries and ambiguity, corresponding to alternative theoretical models that account for ambiguity averse or seeking behavior.

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The Ellsberg paradox demonstrates that people's beliefs over uncertain events might not be representable by subjective probability. We show that if a risk averse decision maker, who has a well defined Bayesian prior, perceives an Ellsberg type decision problem as possibly composed of a bundle of several positively correlated problems, she will be uncertainty averse. We generalize this argument and derive sufficient conditions for uncertainty aversion.

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It is shown that interim dynamically consistent trade may be supported among agents who have resolute (non-consequential) choice preferences.

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We analyze the organization of employment in nonsimultaneous shifts, considering the shift composition of manufacturing employment, both in the business cycle frequency and in the long run. With regard to the short run, we argue that shiftwork would be procyclical and that this, combined with the inherent lumpiness of shifts, may help resolve the puzzle of the procyclicality of labor productivity. With regard to the long run, we identify channels that may account for the increase in shiftwork in the past half-century and for the nonnegative cross-country correlation between shiftwork and the level of income.

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WORKING PAPERS

Many decisions are made in environments where outcomes are determined by the realization of multiple random events. A decision maker may be uncertain how these events are related. We identify and experimentally substantiate behavior that intuitively reflects a lack of confidence in their joint distribution. Our findings suggest a dimension of ambiguity which is different from that in the classical distinction between risk and "Knightian uncertainty."

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We demonstrate how the standard usage of the random incentive system in ambiguity experiments is not incentive compatible if the decision maker is ambiguity averse. We propose a slight modification of the procedure in which the randomization takes place before decisions are made and the state is realized and prove that if subjects evaluate the experimental environment in that way (first - risk, second - uncertainty), incentive compatibility may be restored.

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We experimentally study the effect of embedding pairwise choices between lotteries within a choice list on measured risk attitude. Using an experiment with online workers, we find that subjects choose the risky lottery rather than the sure payment significantly more often when responding to a choice list. This failure of incentive compatibility can be rationalized by the interaction between non-expected utility and the random incentive system, as suggested by Karni and Safra (1987).

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The paper establishes a tight relation between non-standard behaviors in the domains of risk and time by considering a decision maker with non-expected utility preferences who believes that only present consumption is certain while any future consumption is uncertain. We provide the first complete characterization of the two-way relations between i) certainty effect and present bias, and, ii) common ratio effect and the common difference effect. A corollary to our results is that hyperbolic discounting implies the Common Ratio Effect and that quasi-hyperbolic discounting implies the Certainty Effect.

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This note discusses whether cash payments (as used in Halevy, 2015) are appropriate to elicit time preferences.

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A decision maker with time consistent preferences may exhibit diminishing impatience, when uncertain lifetime is accounted for. Uncertain lifetime captures not only the risk of mortality, but also the possibility that a promise for a delayed reward might be breached, or a postponed consumption might not be realized. The restrictions that time consistency imposes on additive intertemporal preferences are characterized. It is shown that if the hazard rate of mortality is diminishing, then a time consistent agent will exhibit diminishing impatience. A demographic model that allows for unobservable heterogeneity in frailty (risk of mortality) accommodates diminishing impatience, even in the presence of stationarity and time consistency.

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If preferences and beliefs are appropriately parametrized, different theories of "other-regarding'' preferences possess equilibria that are consistent with experimental results in a variety of setting. Our goal is to experimentally separate between those theories, by studying their comparative-static performance in the neighborhood of the classic Ultimatum Game, whose results are extremely robust. In order to perform this exercise, we first characterize monotone Perfect Bayesian Equilibia in the Ultimatum Game if preferences are interdependent. We then show that in this model, setting a lower bound to the offer a proposer can make, may decrease the proposer's offer and increase the responder's acceptance probability. Outcome-based theories and intentions-based models have (weakly) opposite predictions. We then design and execute an experiment that facilitates almost instantaneous learning and convergence by both proposers and responders. The experimental results are consistent with the predictions of the interdependent-preferences model.

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We examine coordination in private provision of public goods when agents’ contributions are complementary. When complementarity is sufficiently high an additional full-contribution equilibrium emerges. We experimentally investigate subjects’ behavior using a between-subject design that varies complementarity. When two equilibria exist, subjects coordinate on the full-contribution equilibrium. When complementarity is sizable but only a zero-contribution equilibrium exists, subjects persistently contribute above it. Observed choices and other nonchoice data indicate heterogeneity among subjects and two distinct types. Homo pecuniarius maximizes profits by best-responding to beliefs, while Homo behavioralis identifies this strategy but chooses to deviate from it – sacrificing pecuniary rewards to support altruism or competitiveness.

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