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We take Cumulative Prospect Theory (CPT) seriously by rigorously estimating structural models using the full set of CPT parameters. Much of the literature only estimates a subset of CPT parameters, or more simply assumes CPT parameter values from prior studies. Our data are from laboratory experiments with undergraduate students and MBA students facing substantial real incentives and losses. We also estimate structural models from Expected Utility Theory (EUT), Dual Theory (DT), Rank-Dependent Utility (RDU), and Disappointment Aversion (DA) for comparison. Our major finding is that a majority of individuals in our sample locally asset integrate. That is, they see a loss frame for what it is, a frame, and behave as if they evaluate the net payment rather than the gross loss when one is presented to them. This finding is devastating to the direct application of CPT to these data for those subjects. Support for CPT is greater when losses are covered out of an earned endowment rather than house money, but RDU is still the best single characterization of individual and pooled choices. Defenders of the CPT model claim, correctly, that the CPT model exists “because the data says it should.” In other words, the CPT model was borne from a wide range of stylized facts culled from parts of the cognitive psychology literature. If one is to take the CPT model seriously and rigorously then it needs to do a much better job of explaining the data than we see here.

We evaluate the hypothesis of temporal stability in risk preferences using two recent data sets from longitudinal lab experiments. Both experiments included a combination of decision tasks that allows one to identify a full set of structural parameters characterizing risk preferences under Cumulative Prospect Theory (CPT), including loss aversion. We consider temporal stability in those structural parameters at both population and individual levels. The population-level stability pertains to whether the distribution of risk preferences across individuals in the subject population remains stable over time. The individual-level stability pertains to within-individual correlation in risk preferences over time. We embed the CPT structure in a random coefficient model that allows us to evaluate temporal stability at both levels in a coherent manner, without having to switch between different sets of models to draw inferences at a specific level.

A semiparametric stochastic frontier model is proposed for panel data, incorporating several flexible features. First, a constant elasticity of substitution (CES) production frontier is considered without log-transformation to prevent induced non-negligible estimation bias. Second, the model flexibility is improved via semiparameterization, where the technology is an unknown function of a set of environment variables. The technology function accounts for latent heterogeneity across individual units, which can be freely correlated with inputs, environment variables, and/or inefficiency determinants. Furthermore, the technology function incorporates a single-index structure to circumvent the curse of dimensionality. Third, distributional assumptions are eschewed on both stochastic noise and inefficiency for model identification. Instead, only the conditional mean of the inefficiency is assumed, which depends on related determinants with a wide range of choice, via a positive parametric function. As a result, technical efficiency is constructed without relying on an assumed distribution on composite error. The model provides flexible structures on both the production frontier and inefficiency, thereby alleviating the risk of model misspecification in production and efficiency analysis. The estimator involves a series based nonlinear least squares estimation for the unknown parameters and a kernel based local estimation for the technology function. Promising finite-sample performance is demonstrated through simulations, and the model is applied to investigate productive efficiency among OECD countries from 1970–2019.

Risk preferences play a critical role in almost every facet of economic activity. Experimental economists have sought to infer the risk preferences of subjects from choice behavior over lotteries. To help mitigate the influence of observable, and unobservable, heterogeneity in their samples, risk preferences have been estimated at the level of the individual subject. Recent work has detailed the lack of statistical power in descriptively classifying individual subjects as conforming to Expected Utility Theory (EUT) or Rank Dependent Utility (RDU). I discuss the normative consequences of this lack of power and provide some suggestions to improve the accuracy of normative inferences about individual-level choice behavior.

There is growing empirical evidence that firm heterogeneity is technologically non-neutral. This chapter extends the Gandhi, Navarro, and Rivers (2020) proxy variable framework for structurally identifying production functions to a more general case when latent firm productivity is multi-dimensional, with both factor-neutral and (biased) factor-augmenting components. Unlike alternative methodologies, the proposed model can be identified under weaker data requirements, notably, without relying on the typically unavailable cross-sectional variation in input prices for instrumentation. When markets are perfectly competitive, point identification is achieved by leveraging the information contained in static optimality conditions, effectively adopting a system-of-equations approach. It is also shown how one can partially identify the non-neutral production technology in the traditional proxy variable framework when firms have market power.

The study responds to the common concerns of authors, reviewers, and editors on writing and publishing high-quality literature review (LR) studies. First, we evolved the background and decision elements on the five parameters of a quality LR paper: Planning, Operationalizing, Writing, Embedding, and Reflecting (POWER), from the editorials and guiding literature. Statistical procedure and refinement of 256 responses from writers, reviewers, and editors revealed 37 decision elements. Finally, a multicriteria-decision-making approach was applied to the detailed responses from the lead editors of ABDC, Scopus, ABS, and WoS journals, and 31 decision elements were found strong enough to represent these five parameters on the quality of LR studies. All five parameters are found important to be considered. However, a high priority is suggested for embedding (the results coming out of the review) and operationalizing (the process of conducting the review), whereas reflection, writing, and planning of LR papers still remain important. The purpose of the POWER framework is to overcome the challenges and decision dilemmas faced by writers and decision-makers. The POWER framework acts as a guiding tool to conduct LR studies in general and business management scholars in specific ways. In addition, this study provides a checklist (Table 6) and template (Appendix A1) of a quality LR study to its stakeholders.

Adsorption parameters (e.g. Langmuir constant, mass transfer coefficient and Thomas rate constant) are involved in the design of aqueous-media adsorption treatment units. However, the classic approach to estimating such parameters is perceived to be imprecise. Herein, the essential features and performances of the ant colony, bee colony and elephant herd optimisation approaches are introduced to the experimental chemist and chemical engineer engaged in adsorption research for aqueous systems. Key research and development directions, believed to harness these algorithms for real-scale water treatment (which falls within the wide-ranging coverage of the Sustainable Development Goal 6 (SDG 6) ‘Clean Water and Sanitation for All’), are also proposed. The ant colony, bee colony and elephant herd optimisations have higher precision and accuracy, and are particularly efficient in finding the global optimum solution. It is hoped that the discussions can stimulate both the experimental chemist and chemical engineer to delineate the progress achieved so far and collaborate further to devise strategies for integrating these intelligent optimisations in the design and operation of real multicomponent multi-complexity adsorption systems for water purification.

This study explores the implementation of sustainable finance in an Indonesian state-owned bank (“ABC Bank” or “ABC”). A case study approach is employed to deeply analyze the implementation using data collected through interviews and through a review of company documents. The frameworks from Soppe (2004) and Indonesia Regulation POJK 51 were used to examine the sustainable finance implementation. The findings show that ABC Bank exercises a sustainability commitment in implementing sustainable finance long before the government regulation is imposed on several banks as early adopters in Indonesia. The regulation requires selected banks to apply the eight principles of sustainable finance and prepare a sustainable financial action plan and sustainability report. ABC’s commitment is mainly driven by its status as a government-owned bank, thus facilitating the awareness of achieving public welfare while maintaining profitability. Social implication of this study is that developing countries often face more severe consequences of climate change than developed countries. Hence, the sustainable finance implementation can have a significant social impact to reduce the negative effect. This study contributes to the literature by exploring the initial adoption of sustainable finance by a state-owned bank attempting to balance the interests of the public and management. It also provides insights into other financial institutions adopting sustainable finance as mandated by the local obligation POJK 51.

This chapter wants to understand under which circumstances and conditions non-traditional aids are effective in the strategic process. This study builds an agent-based computational simulation model – the S-uFUNK 2.1.0 – to explore the research question. The model features a group of managers that seeks to interpret environmental cues using both traditional and non-traditional tools. When interpretations converge, the group then settles on different focus areas to define a business strategy for their organization. The process is set in a way such that 11 parameters can be manipulated to explore the different conditions under which non-traditional aids are of use. Results suggest that non-traditional aids differ from traditional aids only in limited circumstances and that social dynamics and dispositions within the group are crucial. In general, the simulation helps us reflect on the way in which we consider traditional aids to strategy. In fact, if they are no different than non-traditional aids, their effectiveness is directly challenged.

The standard method to estimate a stochastic frontier (SF) model is the maximum likelihood (ML) approach with the distribution assumptions of a symmetric two-sided stochastic error v and a one-sided inefficiency random component u. When v or u has a nonstandard distribution, such as v follows a generalized t distribution or u has a χ2 distribution, the likelihood function can be complicated or untractable. This chapter introduces using indirect inference to estimate the SF models, where only least squares estimation is used. There is no need to derive the density or likelihood function, thus it is easier to handle a model with complicated distributions in practice. The author examines the finite sample performance of the proposed estimator and also compare it with the standard ML estimator as well as the maximum simulated likelihood (MSL) estimator using Monte Carlo simulations. The author found that the indirect inference estimator performs quite well in finite samples.