Extreme Outcomes Research Articles

Choquet expected utility with affine capacities

This paper studies decisions under ambiguity when attention is paid to extreme outcomes. In a purely subjective framework, we propose an axiomatic characterization of affine capacities, which are Choquet capacities consisting in an affine transformation of a subjective probability. Our main axiom restricts the well-known Savage’s Sure-Thing Principle to a change in a common intermediate outcome. The representation result is then an affine combination of the expected utility of the valued act and its maximal and minimal utilities.

RISK CONSEQUENCES OF TAX-MOTIVATED CHOICE OF ORGANIZATIONAL FORM IN THE BANKING INDUSTRY

We examine the risk consequences of the S-corporation election, a tax-motivated organizational form, on banks' risk-taking behaviors and extreme adverse outcomes. S-corporations' single level of taxation increases access to after-tax internal capital and likely enhances S-corporation monitoring efforts. However, S-corporations face strict organizational restrictions on the number and type of allowable shareholders. Given banks' rigid capital criteria and active regulatory environment, this differential access to external capital is likely to influence S-corporations' risk-taking behavior. Our evidence suggests that the organizational restrictions necessary to qualify for S-corporation status reduce risk-taking behaviors and limits some extreme adverse outcomes.

Extreme Risk Interdependence

Tail interdependence is defined as the situation where extreme outcomes for some variables are informative about such outcomes for other variables. We extend the concept of multi-information to quantify tail interdependence at different levels of extremity, decompose it into systemic and residual part and measure the contribution of a constituent to the interdependence of a system. Further, we devise statistical procedures to test: a) tail independence; b) whether an empirical interdependence structure is generated by a theoretical model; and c) symmetry of the interdependence structure in the tails. The application of this approach to multidimensional financial data confirms some known and uncovers new stylized facts on extreme returns.

The effect of communication channels on dishonest behavior

The present research investigates the effects of various communication channels on dishonest behavior. We rely on a simple truth-telling experiment (i.e., a repeated coin-flip) and let subjects report their outcome through communication channels that differ in distance and anonymity (face-to-face, in-lab telephone, in-lab web-form, and home web-form). We find dishonest behavior across all communication channels, with important treatment differences. Reporting of extreme outcomes that maximize payoff increases in distance and anonymity. To the contrary, partial lying decreases in distance and anonymity. Furthermore, we find gender to moderate the effects and women tend to drive these results. The findings have important implications for the design of real-world communication structures that are relevant when honest reporting is particularly relevant, for example in insurance claims, income reports for tax purposes, or applicant screenings in labor markets.

A study of resilience and social problem solving in urban Indian adolescents

This paper investigates the relation between resilience and social problem solving among Indian adolescent boys and girls from a north Indian urban area. With the advent of information technology tools, multinational brands and privatisation of higher education in India, there has been a surge in the ambitions of the millennial Indian youth. This has also resulted in extreme competition, failure and non resilient outcomes for many. This study was conducted to find the level of correlation between resilience and social problem solving skills. The study revealed that adolescents high on resilience were significantly better on social problem solving skills, superior positive orientation towards problems in general and a rational approach towards solving them as well. Since resilience is a dynamic construct, problem solving training can be used to enhance resilience in adolescents facing mental health issues arising out of the typical urban Indian milieu.

Workforce Effects and the Evolution of Complex Sociality in Wild Damaraland Mole Rats.

Explaining the evolution of eusocial and cooperatively breeding societies demands that we understand the effects of workforce size on the reproductive success of breeders. This challenge has yet to be addressed in the family that arguably exhibits the most extreme outcomes of vertebrate social evolution, the African mole rats (Bathyergidae), leaving the ultimate causes of their many unusual adaptations open to debate. Here we report-using a 14-year field study of wild Damaraland mole rats, Fukomys damarensis-that workers appear to have strong but unusual effects on offspring. Groups with larger workforces exhibited substantially higher rates of offspring recruitment while maintaining high juvenile survival rates, relationships that may have favored the evolution of the delayed dispersal, cooperation, morphological specialization, and unusual patterns of longevity that characterize such societies. Offspring reared by larger workforces also showed slower growth, however. That reduced offspring growth in larger groups has also been documented under ad lib. food conditions in the laboratory raises the possibility that this reflects socially induced growth restraint rather than simple constraints on resource availability. Our findings shed new light on the evolution of complex sociality in this enigmatic clade and highlight further departures from the norms reported for other cooperative vertebrates.

How Party Polarization Affects Governance

The purpose of this review is to take stock of how party polarization affects governance in the United States. The article begins by defining polarization and discussing the means by which it can be measured. It is undeniable that the two parties have grown more sharply differentiated. Some evidence suggests that the substantive policy preferences of liberals and conservatives diverge more widely, but the case for ideological polarization in the spatial sense is not definitive. Effects on the institutional processes of US government have entailed a hardening of party divisions and a tendency toward centralization of power. Nevertheless, these more cohesive parties are not more effective than their predecessors at enacting policies or managing routine governing responsibilities. The consequences for public policy seem best characterized as “drift” ( Hacker 2004 , p. 246). There is little evidence that party polarization has promoted ideologically extreme policy outcomes or has systematically advantaged either liberalism or conservatism.

Endosymbiont evolution: predictions from theory and surprises from genomes.

Genome data have created new opportunities to untangle evolutionary processes shaping microbial variation. Among bacteria, long-term mutualists of insects represent the smallest and (typically) most AT-rich genomes. Evolutionary theory provides a context to predict how an endosymbiotic lifestyle may alter fundamental evolutionary processes--mutation, selection, genetic drift, and recombination--and thus contribute to extreme genomic outcomes. These predictions can then be explored by comparing evolutionary rates, genome size and stability, and base compositional biases across endosymbiotic and free-living bacteria. Recent surprises from such comparisons include genome reduction among uncultured, free-living species. Some studies suggest that selection generally drives this streamlining, while drift drives genome reduction in endosymbionts; however, this remains an hypothesis requiring additional data. Unexpected evidence of selection acting on endosymbiont GC content hints that even weak selection may be effective in some long-term mutualists. Moving forward, intraspecific analysis offers a promising approach to distinguish underlying mechanisms, by testing the null hypothesis of neutrality and by quantifying mutational spectra. Such analyses may clarify whether endosymbionts and free-living bacteria occupy distinct evolutionary trajectories or, alternatively, represent varied outcomes of similar underlying forces.

State-Dependent Risk Preferences: Evidence from Individual Choices and Applications in Investment Behavior

Using trading data from a sports-wagering market, we estimate individual risk preferences within the prospect-theory paradigm. This market's experimental-like features greatly facilitate preference estimation, while our long panel enables us to study whether preferences vary across individuals and depend on earlier outcomes. Our estimates i) extend support for existing experimental findings — mild utility curvature, moderate loss aversion, probability overweighting of extreme outcomes — to a real market that shares similarities with traditional financial markets, ii) reveal that risk attitude is heterogeneous and history-dependent, and iii) indicate that prospect theory can better explain the prevalence of the disposition effect than previously thought.

Corporate entrepreneurship strategy: extending the integrative framework through the lens of complexity science

Whereas our understanding of corporate entrepreneurship (CE) and corporate entrepreneurship strategy (CES) continues to expand, there has been little theoretical development to support the most extensive framework to date: the integrative model of CES as proposed by Ireland et al. (Entrep Theory Pract 33(1):19–46, 2009). According to the model, CES is built upon the “three foundational elements of an entrepreneurial strategic vision, a pro-entrepreneurship organizational architecture, and entrepreneurial processes and behaviors as exhibited throughout the organization” (Ireland et al. 2009, p. 38). The purpose of this study is to present a broad, overarching theory—complexity science—to examine the key elements and propositions of the CES model. Complexity science—founded on assumptions of interdependent heterogeneous agents and nonlinear interactions, as well as non-deterministic and potentially extreme outcomes—offers established multi-level concepts, theoretical boundary conditions, and methodological guidance for scholars to build and test future studies on CE and CES. Though our complexity perspective draws extensively from conceptual work on complex adaptive systems and agent-based models, we ground our arguments on the empirical ubiquity of power law distributions in all constructs and levels of analysis within the CES model. We conclude with a detailed research agenda, as well as a prescriptive discussion related to theory development, quantitative analysis, and practical applications to guide future studies on CE.

Climate and agricultural risk: measuring the effect of ENSO on U.S. crop insurance

AbstractPredictive models of climatic phenomena can aid in insurance program design and decision making. Extreme weather outcomes have been linked to the El Niño Southern Oscillation (ENSO), which globally impacts agricultural production. This study demonstrates that extreme ENSO events alter cotton yield distributions in the Southeastern United States. These impacts translate into economically meaningful effects on crop insurance premium rates. Commercial insurers can use publicly available information to determine if government‐set premium rates are mispriced, and in turn extract economic rents via the federally mandated Standard Reinsurance Agreement. By ceding underpriced policies in El Niño and La Niña years, we find that private insurance companies can reduce paid indemnities by 10–15% on average.

Making a Difference: The Causes and Effects of Leader Heterogeneity

The impact of leaders has long been a topic in social science. Previous research has examined leader impact by comparing leaders to their predecessors and successors, but leader impact may be best analyzed counterfactually, by comparing leaders to what others might have done. Conceptualizing leader impact in this way narrows the scope of potential impact while also changing its nature. Leader selection systems tend to produce candidates who fit a type and would make similar decisions, so even leaders with considerable discretion can have little impact. When leaders do take actions that are substantially different from those that others might have made in the same situation, however, these actions are likely to result in extreme outcomes that are either highly positive or negative for their organization. The paper introduces two constructs, unique impact, the marginal difference between what a leader did and what likely alternates would have done, and filtration, the extent to which the selection system has evaluated a leader and can predict what he or she will do in power. The less filtered a leader, the higher his or her unique impact is likely to be. This paper then develops a theory of leader filtration to explain the conditions under which individual leaders can have a high unique impact and what the consequences for their organizations are when they do. It predicts that when compared to filtered leaders, unfiltered leaders and the organizations they head are likely to have performance distributions with lower means and negative skew, but higher variance and kurtosis.

Optimized Prediction of Extreme Treatment Outcomes in Ovarian Cancer.

Ovarian cancer is the fifth leading cause of death among female cancers. Front-line therapy for ovarian cancer is platinum-based chemotherapy. However, the response of patients is highly nonuniform. The TCGA database of serous ovarian carcinomas shows that ~10% of patients respond poorly to platinum-based chemotherapy, with tumors relapsing in seven months or less. Another 10% or so enjoy disease-free survival of three years or more. The objective of the present research is to identify a small number of highly predictive biomarkers that can distinguish between the two extreme responders and then extrapolate to all patients. This is achieved using the lone star algorithm that is specifically developed for biological applications. Using this algorithm, we are able to identify biomarker panels of 25 genes (of 12,000 genes) that can be used to classify patients into one of the three groups: super responders, medium responders, and nonresponders. We are also able to determine a discriminant function that can divide the entire patient population into two classes, such that one group has a clear survival advantage over the other. These biomarkers are developed using the TCGA Agilent platform data and cross-validated on the TCGA Affymetrix platform data, as well as entirely independent data from Tothill et al. The P-values on the training data are extremely small, sometimes below machine zero, while the P-values on cross-validation are well below the widely accepted threshold of 0.05.

Work-Life Balance Demystified

Today's fast paced life has ushered in an ‘Era of Transformation'. One is accomplishing professional success at a much early stage of his/her life and is proud to be acclaimed as ‘Successful'. However, somewhere in this race to success, one is also witnessing many cases of early burnout, depression, isolation from our social circles and in some cases extreme outcomes like suicide. Such a phenomenon is not limited to men, and today's women are also facing such challenges. The presence of women pursuing professional careers is on the increase. Dual career couples, single parents and nuclear family are a common feature today. Similarly, the organisations also more demanding of their employees, and the internet and mobile phones have made it possible for the organisations to keep in a constant touch with the employees both during the day and at night. Women employees are not only managing their career but also manage their family, children, social life and also personal interests and hobbies. Thus, they are at crossroads of balancing time, involvement and satisfaction in their professional and family life. The need of a balance between one's professional life and personal life has never been as palpable as it is now. Organisations and individuals, individually and collectively, are working out ways and means to ensure that a homogenous balance is established between the work and personal demands which are being faced by individuals.

The empirical reality of entrepreneurship: How power law distributed outcomes call for new theory and method

Entrepreneurship researchers typically assume that normal (i.e., Gaussian) distributions characterize the outcomes of interest. Our research challenges this assumption by examining a sample of 6,530 firms to uncover the shape of the distribution for two key variables in entrepreneurial firms: number of employees and revenues. Results show highly skewed power law distributions. Future researchers need to recognize the relevance of power laws and extreme outcomes and then search for the underlying generative causes.

Reward context determines risky choice in pigeons and humans.

Whereas humans are risk averse for monetary gains, other animals can be risk seeking for food rewards, especially when faced with variable delays or under significant deprivation. A key difference between these findings is that humans are often explicitly told about the risky options, whereas non-human animals must learn about them from their own experience. We tested pigeons (Columba livia) and humans in formally identical choice tasks where all outcomes were learned from experience. Both species were more risk seeking for larger rewards than for smaller ones. The data suggest that the largest and smallest rewards experienced are overweighted in risky choice. This observed bias towards extreme outcomes represents a key step towards a consilience of these two disparate literatures, identifying common features that drive risky choice across phyla.

Capnography monitoring in procedural sedation for bronchoscopy.

Capnography monitoring in procedural sedation for bronchoscopy.

In meta-analyses of proportion studies, funnel plots were found to be an inaccurate method of assessing publication bias

ObjectiveTo assess the utility of funnel plots in assessing publication bias (PB) in meta-analyses of proportion studies. Study Design and SettingMeta-analysis simulation study and meta-analysis of published literature reporting peri-operative mortality after abdominal aortic aneurysm (AAA) repair. Data for the simulation study were stochastically generated. A literature search of Medline and Embase was performed to identify studies for inclusion in the published literature meta-analyses. ResultsThe simulation study demonstrated that conventionally constructed funnel plots (log odds vs. 1/standard error [1/SE]) for extreme proportional outcomes were asymmetric despite no PB. Alternative funnel plots constructed using study size rather than 1/SE showed no asymmetry for extreme proportional outcomes. When used in meta-analyses of the mortality of AAA repair, these alternative funnel plots highlighted the possibility for conventional funnel plots to demonstrate asymmetry when there was no evidence of PB. ConclusionConventional funnel plots used to assess for potential PB in meta-analyses are inaccurate for meta-analyses of proportion studies with low proportion outcomes. Funnel plots of study size against log odds may be a more accurate way of assessing for PB in these studies.

Per-protocol effect of earlier non-pneumatic anti-shock garment application for obstetric hemorrhage

Obstetric hemorrhage is the primary cause of maternal mortality worldwide, especially in lower-resource settings that are characterized by treatment delays [1]. The non-pneumatic anti-shock garment (NASG) is a first-aid device used to stabilize women in shock from obstetric hemorrhage until they can receive definitive care. The authors conducted a cluster-randomized trial (CRT) to evaluate NASG application at the primary health clinic prior to referral hospital transfer on maternal outcomes. Control participants received the NASG upon arrival at the referral hospital. The intent-to-treat analysis (ITT) reported a non-statistically significant 46% reduction in mortality, 54% reduction in extreme adverse outcomes, and a significant 25% faster recovery from shock associated with earlier NASG intervention [2]. However, protocol violations occurred, potentially diluting the intervention effect. Thus, the effect of earlier NASG application was evaluated using 2 per-protocol analysis strategies.

Delaying the Buck: Timing and Strategic Advantages in Executive-Legislative Bargaining over Appropriations

Delay is a common feature of appropriations politics. Although members of Congress and the president often decry lengthy delays in the passage of appropriations bills, we investigate whether such delays might confer strategic advantages, and if so, to whom. We draw from bargaining theory to understand how the relationship between the duration of negotiations and outcomes depends on the underlying distribution of bargaining power and the nature of the bargaining process. In our empirical analysis, we find that delay is associated with greater concessions to the president, but not with more extreme outcomes. We also find that the House and Senate concede more to presidents who prefer less spending, while the Senate is more responsive to presidential needs during presidential election years. These results suggest that the president's power comes from the asymmetry of veto and proposal rights, rather than from symmetric bargaining with proposals and counterproposals or a “war of nerves.”