DUCHENE Sebastien

We assess the impact of environmental externalities on portfolio decisions in a lab-inthe-field experiment on finance professionals and students. Subjects show pro-environmental preferences, with a strong asymmetry because of the sign of the externality. They are prone to accept lower return for positive environmental impact, but not to bear increased risk. Finance professionals are more pro-environmental than students, particularly regarding negative externalities, and less influenced by a ranking signal about environmental performance. Additional control tasks show that pro-social and pro-environmental preferences have much less influence on portfolio composition than market practices for finance professionals, but they are significant predictors for students.

Recently quantum probability theory started to be actively used in studies of human decision-making, in particular for the resolution of paradoxes (such as the Allais, Ellsberg, and Machina paradoxes). Previous studies were based on a cognitive metaphor of the quantum double-slit experiment - the basic quantum interference experiment. In this paper, we report on an economics experiment based on a three-slit experiment design, where the slits are menus of alternatives from which one can choose. The test of nonclassicality is based on the Sorkin equality (which was only recently tested in quantum physics). Each alternative is a voucher to buy products in one or more stores. The alternatives are obtained from all disjunctions including one, two or three stores. The participants have to reveal the amount for which they are willing to sell the chosen voucher. Interference terms are computed by comparing the willingness to sell a voucher built as a disjunction of stores and the willingness to sell the vouchers corresponding to the singleton stores. These willingness to sell amounts are used to estimate probabilities and to test both the law of total probabilities and the Born Rule. Results reject neither classical nor quantum probability. We discuss this initial experiment and our results and provide guidelines for future studies.

Currently, countries across the world are applying policies designed to combat the COVID-19 pandemic, such as lockdowns, international travel restrictions, subsectoral closures, and adjustments in public transportation. Although these restrictions can be effective in controlling the epidemiological dynamics, they also need to be assessed in terms of their acceptability by populations. The preferences of populations should matter, particularly after months of efforts, and the new requirements of lockdowns in several European countries despite these efforts.

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In many countries, private health insurance companies are allowed to vary their premiums based on some information on individuals. This practice is intuitively justified by the idea that people should pay the premium corresponding to their own known risk. However, one may consider this as a form of discrimination or wrongful differential treatment. Our goal in this paper is to assess whether profiling is ethically permissible in health insurance. We go beyond the existing literature in considering a wide range of parameters, be they genetic, non-genetic, or even non-medical such as age or place of living. Analyzing several ethical concerns, and tackling the difficult question of responsibility, we argue that profiling is generally unjust in health insurance.

Socially responsible investment, green bonds, extra-financial rating agencies: ‘climate finance’ has developed over the last few years. Without State involvement, will these tools suffice to finance the transition toward a carbon neutral global economy?

Individuals are required to cope with uncertain, dispersed, incomplete, and incompatible sources of information in real life. We devised an experiment to reveal empirical “anomalies” in the process of acquisition, elaboration and retrieval of economic related information. Our results support the existence of a dual process in memory that is posited by the Fuzzy Trace Theory: acquisition of information leads to the formation of a gist representation which may be incompatible with the exact verbatim information stored in memory. We gave participants complex and complete information and then measured their cognitive ability. We conclude that individuals used their gist representation rather than processing verbatim information appropriately to make an evaluation Finally, we provide evidence that subjects with low cognitive abilities tend to demonstrate more often this specific behavior.

This paper studies the influence of allowing borrowing and short selling on market prices and traders’ forecasts in an experimental asset market. We verify, although not statistically significantly so, that borrowing tends to increase asset overvaluation and price orecasts, while short selling tends to reduce these measures. We also show that a number of results on beliefs, traders’ types, cognitive sophistication, and earnings obtained in earlier experimental studies in which borrowing and short selling are not possible, generalize to markets with borrowing and short sales.

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In many countries, private health insurance companies are allowed to vary their premiums based on some information on individuals. This practice is intuitively justified by the idea that people should pay the premium corresponding to their own known risk. However, one may consider this as a form of discrimination or wrongful differential treatment. Our goal in this paper is to assess whether profiling is ethically permissible in health insurance. We go beyond the existing literature in considering a wide range of parameters, be they genetic, non-genetic, or even non-medical such as age or place of living. Analyzing several ethical concerns, and tackling the difficult question of responsibility, we argue that profiling is generally unjust in health insurance.

No summary available.

Socially responsible investment, green bonds, extra-financial rating agencies: in recent years, "climate finance" has been developing. Without government involvement, will these tools be sufficient to finance the transition to a carbon-neutral global economy?

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In this paper, we will put forward an original experiment to reveal empirical “anomalies” in the process of acquisition, elaboration and retrieval of information in the context of reading economic related content. Our results support the existence of the memory dual process suggested in the Fuzzy Trace Theory: acquisition of information leads to the formation of a gist representation which may be incompatible with the exact verbatim information stored in memory. We give to subjects complex and complete information and evaluate their cognitive ability. To answer some specific questions, individuals used this gist representation rather than processing verbatim information appropriately.

This paper studies the influence of allowing borrowing and short selling on market prices and traders’ forecasts in an experimental asset market. We verify, although not statistically significantly so, that borrowing tends to increase asset overvaluation and price orecasts, while short selling tends to reduce these measures. We also show that a number of results on beliefs, traders’ types, cognitive sophistication, and earnings obtained in earlier experimental studies in which borrowing and short selling are not possible, generalize to markets with borrowing and short sales.

This thesis addresses the topic of bounded rationality through four chapters, combining theoretical models, laboratory experiments and statistical and econometric analyses. In the first two chapters, we test the validity of new models in economics that use the mathematical formalism of quantum mechanics to account for cognitive biases. In chapter 1, we consider models explaining the order effect and derive new experimental predictions. In Chapter 2, we propose an original experiment to test a wide range of quantum models that account for the conjunction error. Both groups of models fail our empirical tests. We then discuss possible ways to improve these models. Chapter 3 explores how individuals process successive, complex and abundant economic information. Our experimental results show the inability of subjects to combine such information, which confirms the fuzzy trace theory. Finally, Chapter 4 is a chapter of experimental finance. It studies how buying on margin (respectively selling short) increases (decreases) the price level, volatility, market heterogeneity and price expectations of traders as well as how it changes trading strategies. Our results highlight the clear consequences of each of these techniques separately, and identify unexpected phenomena when they are combined. Our analyses pave the way for regulators to take better account of these destabilizing interactions.

Classical probability theory requires that the probability of the conjunction of two events be lower than the probability of one of the events alone. However, empirically, subjects do not always judge this way: this is the conjunction error. One of the currently promising explanations of this paradox is based on so-called "quantum" models, developed from the mathematical tools of quantum mechanics. But which versions of these models can precisely be used? In particular, can the simplest versions, called non-degenerate, be sufficient? This paper tests these non-degenerate versions through some of their experimental predictions, using an original experimental protocol. The results obtained in the laboratory suggest that non-degenerate models are not empirically adequate, and that future research concerning quantum models should be directed towards degenerate models.

Human agents happen to judge that a conjunction of two terms is more probable than one of the terms, in contradiction with the rules of classical probabilities—this is the conjunction fallacy. One of the most discussed accounts of this fallacy is currently the quantum-like explanation, which relies on models exploiting the mathematics of quantum mechanics. The aim of this paper is to investigate the empirical adequacy of major quantum-like models which represent beliefs with quantum states. We first argue that they can be tested in three different ways, in a question order effect configuration which is different from the traditional conjunction fallacy experiment. We then carry out our proposed experiment, with varied methodologies from experimental economics. The experimental results we get are at odds with the predictions of the quantum-like models. This strongly suggests that this quantum-like account of the conjunction fallacy fails. Future possible research paths are discussed.

Lately, so-called “quantum” models, based on parts of the mathematics of quantum mechanics, have been developed in decision theory and cognitive sciences to account for seemingly irrational or paradoxical human judgments. We consider here some such quantum-like models that address question order effects, i.e. cases in which given answers depend on the order of presentation of the questions. Models of various dimensionalities could be used. can the simplest ones be empirically adequate? From the quantum law of reciprocity, we derive new empirical predictions that we call the Grand Reciprocity equations, that must be satisfied by several existing quantum-like models, in their non-degenerate versions. Using substantial existing data sets, we show that these non-degenerate versions fail the GR test in most cases, which means that, if quantum-like models of the kind considered here are to work, it can only be in their degenerate versions. However, we suggest that the route of degenerate models is not necessarily an easy one, and we argue for more research on the empirical adequacy of degenerate quantum-like models in general.

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