Preferred Allocation Research Articles

What determines risk tolerance?

It is important for financial planners to understand what drives risk tolerance as it directly influences the portfolio allocation preference of clients. We hypothesize that habit formation, loss aversion and investor sentiment account for significant variation in risk tolerance. We analyze average monthly scores from a widely used risk tolerance questionnaire. We find that the habit formation, loss aversion, and sentiment proxies account for -1.06%, 38.51%, and 13.21% of the variation in average monthly risk tolerance, respectively. Habit formation did not account for additional variation in average monthly risk tolerance when controlling for loss aversion and sentiment.

Arguments in Favour of Tax Neutral Cost Allocation

When considering corporate taxes in a cost allocation context a trade‐off is generated for shareholders. On the one hand, accelerated depreciation increases the value of a project due to the depreciation tax shield. On the other hand, accelerated depreciation most likely does not induce robust goal congruency between managers and shareholders when utilizing residual income as an incentive system and, as a consequence, over‐ or underinvestment could result. In this context, the literature suggests the application of particular allocation rules. When extending the relative marginal benefits cost allocation rule (Reichelstein, 1997; Rogerson, 1997) to include corporate taxes we find it to be tax neutral and to maintain its properties of generating robust incentives. As a consequence the over‐/underinvestment problem is solved, but the depreciation tax shield is often not maximized. However, we illustrate that in competitive markets shareholders ought to prefer a tax neutral allocation scheme over an accelerated depreciation schedule. Thus, we show that shareholders as well as regulators have—for different reasons—a preference for tax neutral cost allocation.

Industry Allocation of Equity Funds

Industry allocation preferences of equity fund managers are examined to identify how style investing from industry-dimensions influence fund performance and flows. Using Australian equity fund data, we show that the level of Industry Activeness, Industry Rotation and Industry Rotation Sensitivity, which are three market-relative industry allocation metrices, significantly affect both the performance and flows of retail and wholesale equity funds. These findings illustrate the significance of industry allocations in the role of style investing.

Public acceptance of different approaches to determine drug reimbursement prices and whether it is influenced by framing

Purpose– In Germany, the Institute for Quality and Efficiency in Health Care (Institut für Qualität und Wirtschaftlichkeit im Gesundheitswesen (IQWiG)) makes recommendations for reimbursement prices of drugs based on an evaluation of the relationship between incremental costs and effects. In 2009, the German government (“Koalitionsvertrag”) announced its intention to evaluate the transparency and acceptability of IQWiG's work. The purpose of this paper is to conduct a survey of a sample of the German population: to check the acceptance of the IQWiG's decision rule compared to a decision rule used in countries such as England and Wales; and to test if the way the IQWiG's decision rule is presented affects its acceptance.Design/methodology/approach– A questionnaire was developed eliciting acceptability of IQWiG's decision rule and a single cost-effectiveness threshold applying to all diseases (i.e. absolute rule (AR)). To check for a framing effect IQWiG's decision rule was presented in two ways. One version presented it, based on IQWiG's official publication, as a constant ratio between incremental costs and effects within a therapeutic area (proportional rule (PR), Version 1). The other version presented it in terms of a proportional relationship between costs and effects within a therapeutic area (PR, Version 2).χ2goodness of fit test and two-proportionz-test tested for differences between acceptance rates of decision rules.Findings– A sample of 108 persons from the general public (average age: 41 years, 48 per cent male) filled out the questionnaire. Acceptance rates for AR, PR Version 1, and PR Version 2 were 33, 48, and 39 per cent, respectively. Direct comparisons show that acceptance of PR Version 1 was significantly higher than acceptance of AR (p=0.026) and that there was a clear trend towards higher acceptance of PR Version 1 compared to Version 2 (p=0.22). The difference between PR Version 2 and AR was not significant (p=0.32).Research limitations/implications– In our study, different presentations of the IQWiG decision rule did not significantly alter its acceptance, although there was a clear trend towards accepting IQWiG's official version. Furthermore, the acceptance of the IQWiG's official version was significantly higher than AR. Because of the relevance of the research question we recommend additional research for confirmation and explanation of the choices made.Originality/value– This is one of the few studies on the impact of framing on allocation preferences in health care.

Activity in the Nucleus Accumbens and Amygdala Underlies Individual Differences in Prosocial and Individualistic Economic Choices

Much decision-making requires balancing benefits to the self with benefits to the group. There are marked individual differences in this balance such that individualists tend to favor themselves whereas prosocials tend to favor the group. Understanding the mechanisms underlying this difference has important implications for society and its institutions. Using behavioral and fMRI data collected during the performance of the ultimatum game, we show that individual differences in social preferences for resource allocation, so-called "social value orientation," is linked with activity in the nucleus accumbens and amygdala elicited by inequity, rather than activity in insula, ACC, and dorsolateral pFC. Importantly, the presence of cognitive load made prosocials behave more prosocially and individualists more individualistically, suggesting that social value orientation is driven more by intuition than reflection. In parallel, activity in the nucleus accumbens and amygdala, in response to inequity, tracked this behavioral pattern of prosocials and individualists. In addition, we conducted an impunity game experiment with different participants where they could not punish unfair behavior and found that the inequity-correlated activity seen in prosocials during the ultimatum game disappeared. This result suggests that the accumbens and amygdala activity of prosocials encodes "outcome-oriented emotion" designed to change situations (i.e., achieve equity or punish). Together, our results suggest a pivotal contribution of the nucleus accumbens and amygdala to individual differences in sociality.

Extending Donor Criteria in Lung Transplantation - Donors 70 Years and Older.

Historically, donor age for lung transplantation must not exceed 55 years. That has increased to 65 years, however, older donors are also considered. There is no well-defined upper cut off, and there are no convincing absolute contraindications against the transplantation of older donor lungs. Since 05/2010, we accepted 70+ year old donor lungs on a regular basis in our program and here we present outcomes of these transplantations and compare to that of donors <70 years. Lung transplantations performed at our centre between 05/2010 and 06/2013 were retrospectively analyzed. Outcome parameters included amongst others freedom from primary graft dysfunction grade 3 (PGD3; ISHLT classification) and 1-year mortality. Seventeen patients (lung fibrosis n=7, emphysema n=5, idiopathic pulmonary artery hypertension n=2, GvHD n=2, sarcoidosis n=1) received lung transplants from donors 70 years of age or older. Median donor age was 71 [range 70-76]. During the same time period 329 lung transplantations were performed from donors 69 years of age or younger (median 46 years [range 1-69]) in our program. Median recipient age was 61 [range 49-64] vs. 51 [range 4-67] years, indicating preferred allocation of 70+ donor lungs to older recipients. Important postoperative indicators of transplant outcome are freedom from PGD3 at any time: 14/17 (82.4%) in the older donor and 279/329 (84.8%) in the regular donor cohort; and median duration of postoperative mechanical ventilation: 29.0 hours vs. 24.0 hours. The median postoperative intensive care stay was 4 vs. 3 days and the total hospital stay 25 vs. 23 days. Hospital mortality was 0.0% vs. 5.2% (p=0.65; Kaplan-Meier-survival curves) and overall survival of the recipients was 100% in the older donor and 92.05% in the regular donor group at 1 year (p=0.44, Kaplan-Meier-survival). Two late deaths beyond one year occurred in the older donor group at days 389 and 523, both in patients that had developed bronchiolitis obliterans syndrome. Lungs from donors 70 years of age and older can be used for transplantation. Early outcome is equivalent to what can be expected from transplantation of lungs from younger donors and thus we intend to continue our practice. While common sense may advise to preferentially allocate older donors towards older recipients, there is no direct evidence dictating for doing so.

Decision-making on intra-household allocation of bed nets in Uganda: do households prioritize the most vulnerable members?

BackgroundAccess to insecticide-treated bed nets has increased substantially in recent years, but ownership and use remain well below 100% in many malaria endemic areas. Understanding decision-making around net allocation in households with too few nets is essential to ensuring protection of the most vulnerable. This study explores household net allocation preferences and practices across four districts in Uganda.MethodsData collection consisted of eight focus group discussions, twelve in-depth interviews, and a structured questionnaire to inventory 107 sleeping spaces in 28 households.ResultsIn focus group discussions and in-depth interviews, participants almost unanimously stated that pregnant women, infants, and young children should be prioritized when allocating nets. However, sleeping space surveys reveal that heads of household sometimes receive priority over children less than five years of age when households have too few nets to cover all members.ConclusionsWhen asked directly, most net owners highlight the importance of allocating nets to the most biologically vulnerable household members. This is consistent with malaria behaviour change and health education messages. In actual allocation, however, factors other than biological vulnerability may influence who does and does not receive a net.

Impact of non-homogenous distributor's preferred allocation on shortages in hospitals

Purpose – Hospitals procure high volumes of medical supplies through large distributors in order to leverage economies of scale. However, when shortages hit, hospitals incur high penalty costs by purchasing from secondary markets. In this paper, the authors counter the hospital's typical purchasing strategy that a collaborative relationship with a large, Tier I medical supply distributor is beneficial under all conditions. The paper finds that during shortages the more beneficial strategy is for the hospital to add a medium-sized, Tier II distributor who offers a transactional relationship and is willing to provide a “preferred allocation” in return for a pre-committed annual purchase contract. The paper aims to discuss these issues. Design/methodology/approach – The authors assume availability of order volume to be a stochastic process and formulate the problem as a two-stage stochastic programming model, with optimal allocation in the second stage. The authors analyze the first-stage objective function using full-factorial numerical experimentation and perform a complete search for optimal volume mix. In addition, the model accounts for purchasing relationship, shortage cost, and varying price discount schedules. Findings – Under no shortage situation, hospitals purchase its entire order volume from Tier I distributor. However, during shortages, for any increase in preferred allocation from the Tier II distributor, hospitals purchase high volumes from the Tier II distributor except when preferred allocation and availability is high. The paper finds that the average cost savings for the use of preferred allocation is 16.14 percent. Originality/value – Existing purchasing literature focusses on the benefit of using single/multiple homogenous distributors under all conditions. In this paper, the authors examine the benefit of using non-homogenous distributors under conditions of shortage when one of them is willing to provide preferred allocation under varying price discount schedules.

Application of the Ordered Weighted Averaging (OWA) method to the Caspian Sea conflict

This study proposes a promising allocation mechanism of the Caspian Sea natural resources, which are presently shared among five countries. To date, these nations have been unable to reach an allocation agreement. We apply a methodology to propose the most appropriate solution under different risk attitudes of the states. This research is different from other studies regarding the Caspian Sea negotiations in that it employs risk-based fuzzy multi attribute decision making methods for simulating the risk attitudes or optimism/pessimism degrees of the decision makers. The ordered weighted averaging (OWA) approach, which considers the optimism/pessimism degree quantitatively, is used to take into account the effects of different risk attitudes of the negotiators on the final outcome. We demonstrate how one could obtain a range of alternatives under different multi attribute and risk attitudes. The induced OWA (IOWA) method is also used to determine the relative power of these states bordering the Caspian Sea by considering several attributes, including different risk attitudes of agents. Results indicate that taking into account the risk attitude (prone, neutral, averse) of the states can affect the overall ranking of the proposed solutions. The findings from this study may facilitate negotiation regarding the most preferred allocation mechanism for the Caspian Sea.

Life cycle assessment of camelina oil derived biodiesel and jet fuel in the Canadian Prairies

This study evaluated the environmental impact of biodiesel and hydroprocessed renewable jet fuel derived from camelina oil in terms of global warming potential, human health, ecosystem quality, and energy resource consumption. The life cycle inventory is based on production activities in the Canadian Prairies and encompasses activities ranging from agricultural production to oil extraction and fuel conversion. The system expansion method is used in this study to avoid allocation and to credit input energy to co-products associated with the products displaced in the market during camelina oil extraction and fuel processing. This is the preferred allocation method for LCA analysis in the context of most renewable and sustainable energy programs. The results show that greenhouse gas (GHG) emissions from 1MJ of camelina derived biodiesel ranged from 7.61 to 24.72g CO2 equivalent and 3.06 to 31.01kgCO2/MJ equivalent for camelina HRJ fuel. Non-renewable energy consumption for camelina biodiesel ranged from 0.40 to 0.67MJ/MJ; HRJ fuel ranged from −0.13 to 0.52MJ/MJ. Camelina oil as a feedstock for fuel production accounted for the highest contribution to overall environmental performance, demonstrating the importance of reducing environmental burdens during the agricultural production process. Attaining higher seed yield would dramatically lower environmental impacts associated with camelina seed, oil, and fuel production. The lower GHG emissions and energy consumption associated with camelina in comparison with other oilseed derived fuel and petroleum fuel make camelina derived fuel from Canadian Prairies environmentally attractive.

What Determines Risk Tolerance?

It is important for financial planners to understand what drives risk tolerance as it directly influences the portfolio allocation preference of clients. Possible explanations for determinants of risk tolerance include habit formation, loss aversion and investor sentiment. We hypothesize that these three factors account for significant variation in risk tolerance. We analyze average monthly scores from a widely used risk tolerance questionnaire that spans the global financial crisis (January 2003 - December 2010). We find that the habit formation, loss aversion, and sentiment proxies account for -1.06%, 38.51% and 13.21% of the variation in average monthly risk tolerance, respectively. Habit formation did not account for additional variation in average monthly risk tolerance when controlling for loss aversion and sentiment. Implications for financial planners are discussed.

Wealth Shocks, Credit-Supply Shocks, and Asset Allocation: Evidence from Household and Firm Portfolios

We use a unique dataset with bank clients’ security holdings for all German banks to examine how macroeconomic shocks affect asset allocation preferences of households and non-financial firms. Our analysis focuses on two alternative mechanisms which can influence portfolio choice: wealth shocks, which are represented by the sovereign debt crisis in the Euro area, and credit-supply shocks which arise from reductions in borrowing abilities during bank distress. While households with large holdings of securities from stressed Euro area countries (Greece, Ireland, Italy, Portugal, and Spain) de-crease the degree of concentration in their security portfolio as a result of the Euro area crisis, non-financial firms with similar levels of holdings from stressed Euro area countries do not. Credit-supply shocks at the bank level result in lower concentration, for both households and non-financial corporations. Only shocks to corporate credit bear ramifications on bank clients’ portfolio concentration. Our results are robust to falsification tests, and instrumental variables estimation.

Multiresource Allocation: Fairness–Efficiency Tradeoffs in a Unifying Framework

Quantifying the notion of fairness is underexplored when there are multiple types of resources and users request different ratios of the different resources. A typical example is data centers processing jobs with heterogeneous resource requirements on CPU, memory, network bandwidth, etc. In such cases, a tradeoff arises between equitability, or fairness, and efficiency. This paper develops a unifying framework addressing the fairness-efficiency tradeoff in light of multiple types of resources. We develop two families of fairness functions that provide different tradeoffs, characterize the effect of user requests' heterogeneity, and prove conditions under which these fairness measures satisfy the Pareto efficiency, sharing incentive, and envy-free properties. Intuitions behind the analysis are explained in two visualizations of multiresource allocation. We also investigate people's fairness perceptions through an online survey of allocation preferences.

Making time for literacy: teacher knowledge and time allocation in instructional planning

This study examined how K-5 general and special educators (N = 102) would choose to allocate time in a 2-h language arts block if they could do so as they wished, and how these choices related to their knowledge base for reading instruction. Preferences for time allocation were assessed through an open grid on which participants listed descriptions of planned instructional activities and amount of time for each activity; teacher knowledge was assessed via a multiple-choice measure involving questions about assessment and instruction in the five components of reading. Results showed that many teachers planned little or no time for areas such as assessment, vocabulary, phonemic awareness, and spelling; also, relatively little time was devoted to basic writing skills and virtually none to writing processes such as planning or revision. There were few significant differences between general and special educators in time allocation on the grid, although there were more differences by grade level (e.g., grids for Grades K-1 vs. Grades 4–5). Teacher knowledge did predict teachers’ time allocation plans, particularly for teachers with relatively high knowledge of phonemic awareness and phonics. Overall, however, many teachers chose to allocate time in ways inconsistent with scientific recommendations, in writing as well as in reading. The study highlights the importance of research-based, targeted teacher professional development in literacy, as well as the need for schools to provide comprehensive, research-based core reading and writing curricula to educators, with attention to fidelity of implementation.

Climate Change Triage

Climate change is the first global triage crisis. It is caused by the overuse of a severely limited natural resource — the atmosphere’s capacity to absorb greenhouse gases — and millions of lives depend on how international law allocates this resource among nations. This Article is the first to explore solutions for climate change mitigation through the lens of triage ethics, drawing on law, philosophy, moral theory, and economics. The literature on triage ethics — developed in contexts such as battlefield trauma, organ donation, emergency medicine, and distribution of food and shelter — has direct implications for climate policy, yet it has been overlooked by climate change scholars. The triage lens rules out climate policies (including the current emissions path) that will lead to catastrophic warming, and it puts options on the table that are marginalized in the current United Nations negotiations on a climate change agreement. This Article examines three potential allocation principles that could potentially apply in climate change triage — utilitarianism, egalitarianism, and a market-based distribution — it concludes that egalitarianism is the preferable allocation principle from the standpoint of ethics and international law. This Article ends by exploring four major policy implications that emerge from viewing climate change through the lens of triage.

Public preferences for donor kidney allocation: a study in Iran

Fair allocation of donor organs is essential to maintain public trust in a public healthcare system. A study of the public's views and opinions of this could clarify non-medical prioritization criteria. We report our survey of public opinion of criteria for donor kidney allocation. This was a cross-sectional study using random digit dialing to phone interview 706 Tehran residents. Patient scenarios were presented to determine interviewee opinions on nine recipient criteria: probability for survival, previous transplant history, time on the waiting list, age, an individual's role in developing their kidney failure, gender, marital status, social status, and financial situation. Each scenario introduced two patients and interviewees then chose the better candidate for transplantation. More than 50% of the participants chose length of waiting time, a patient's role in causing their disease, age, and survival time after transplantation as important allograft allocation criteria. This study disclosed other criteria in addition to the likelihood for successful transplantation-the patient's role in the development of their disease and patient age-which should be prioritization considerations.

Does the Color of Feedback Affect Investment Decisions?

This paper presents a multi-period experiment that extends a classic experiment on investment allocation preferences by adding colors to the feedback returned to participants. The results show that investors allocate the same proportion of their investment to the stock and the bond funds without regard to the colors. However, red feedback activates an avoidance motivation (vs. an approach motivation), and this reduces chasing past returns. The authors also found that the color of the feedback affected the time needed to make a decision. Financial institutions might use colored feedback to encourage approach or avoidance motivations in their clients.

Community preferences for the allocation of deceased donor organs for transplantation: a focus group study

Solid organ transplantation is the treatment of choice for those with organ failure, but suitable organs are a limited community resource. Little is known about community preferences for the allocation of those organs. We aimed to determine community preferences for organ allocation and reasons for their choices. Participants were recruited from the community in four states in Australia. In focus groups, they identified and discussed attributes that they believed were important for allocating organs to potential recipients. Transcripts were analysed thematically. Thirteen focus groups with 114 participants were conducted. Four major themes emerged: (i) saving and improving the lives; (ii) lowering the risk of lost opportunities; (iii) fairness and (iv) accountability. While happy to discuss general principles, many were not comfortable making organ allocation decisions and were happy to defer to health professionals; this reticence tended to disappear when discussing the use of their own organs. Participants wanted to save as many lives as possible as well as lower the risk of lost opportunities for those on the waiting list by maximizing the chances of success of every donation. A rational utilitarian ethical model of organ allocation, therefore, appeared to be the dominant framework adopted by the community. Key considerations were compatibility, high chance of peri-operative survival and favouring those with positive lifestyle and self-management choices. Communication between the transplant community and general community about organ allocation could be undertaken to create trust and shared understanding, which may ultimately increase organ donation rates in the future.

Development of efficient cutting patterns to maximize value with a log-allocation constraint

This research investigates an economic component of harvesting operations not previously studied for steep-slope thinning harvests in Douglas-fir (Pseudotsuga menziesii) stands. Pacific Northwest log manufacturing was explored to evaluate revenue improvement through bucking-to-value strategies. A previous study evaluated a reduced set of log lengths that approach computer-generated optimal values and the potential for development of a bucking decision tool for field crews. This study sought value optimization with a log-allocation constraint through the application of a simulated annealing (SA) heuristic approach for the reduced set of log lengths to create the bucking pattern cutting instruction card. A reduced set of five log lengths (two mill-length logs and three woods-lengths resulting from combinations of the mill lengths) was evaluated for value recovery. Resulting values obtained 96 and 98% of full set optimal values for 45- and 65-year-old stands, respectively. Value recovery exceeded current unaided bucking practices. A modified SA heuristic achieved 99.93 to 100% of the known maximum for the unconstrained optimization. The SA-generated bucking solutions improved value recovery by $0.92 to $0.96 per cubic meter ($2.61 to $2.73 per 100 cubic feet) while meeting the preferred log allocation. The resulting bucking patterns were easily incorporated into a cutting card based on length to merchantable top. This approach reduced the number of logs handled, increased mill-preferred long logs, decreased pattern count, and increased recovered value. Improved revenues may cover increased costs associated with thinning harvests, mobilizations between scattered stands, and other expenses in a dynamic economy.

Rapid ontogenetic niche expansions in invasive Chinese tallow tree permit establishment in unfavourable but variable environments and can be exploited to streamline restoration

Summary Reinvasion pressure is the rate of new exotic recruitment following mature exotic removal and it can vary broadly among similarly invaded habitats. Reinvasion pressure drives restoration outcomes and costs but is difficult to predict and poorly understood. Chinese tallow tree Triadica sebifera is a major invader demonstrating broad variation in average reinvasion pressure. We hypothesize this variation arises from differences in moisture regimes among habitats, which drive differences in Triadica recruitment but are masked because Triadica exhibits ontogenetic niche expansions (increases in niche breadth during development) that enable dominance in habitats where average recruitment success is low. We began testing this hypothesis by quantifying Triadica's capacity for ontogenetic moisture niche expansions. We performed greenhouse experiments examining how soil moisture affects germination likelihood and timing and how soil moisture and seedling age influenced seedling survival and performance, plus a field experiment quantifying survival and performance of differently aged seedlings within a restoration site that has exhibited low average reinvasion pressure. Moisture requirements for germination were the most constrained of any life stage. No germination occurred in saturated or flooded soils despite high seedling survival in comparable conditions. Germination timing varied among suitable moisture treatments. Seedling survival increased rapidly with age across moisture treatments and in the field. Above‐ground biomass increased with age; tissue‐specific performance metrics also increased but reflected seed provisioning, age‐specific carbon allocation preferences, or tissue shedding for survival. Crucial moisture*age interactions that signify ontogenetic niche expansions were significant for all survival metrics and all but one performance metric. Survival and performance were generally highest in intermediate moistures, modestly reduced in saturated conditions and lowest in water‐limited conditions. Synthesis and applications. Our results show Triadica exhibits rapid ontogenetic moisture niche expansions, which could decouple mature Triadica density and average reinvasion pressure. Therefore, density is an unreliable predictor of reinvasion but is commonly used to guide Triadica management, and cryptic opportunities exist for inexpensive and straightforward restorations. Reliable moisture niche‐based estimates of Triadica's average reinvasion pressure are feasible and may improve restoration efficacy and efficiency by informing site selection and optimal management strategies.