Knowledge that Transforms

Incentives, Contracting, Specialist information, Profit sharing

Quarterly earnings, Interim reporting, Time-series, Forecasting content

Auditing, Sampling, Substantive test, Dollar-Unit sampling

Disclosures, Cloze readability, Narrative disclosures, Understandability of disclosures

Financial reporting, Multidimensional Graphics, Schematic faces, Financial performance

It is well known that the returns on various betting opportunities at a racetrack are determined by a competitive bidding of the bettors in a natural environment of their decision making. In this paper, two simple bets of unknown but identical winning probabilities are identified. An analysis of 1,089 observations shows the data are consistent with the hypothesis that both bets are identically priced, an implication of an efficient speculative market.

Finite horizon sequential decision problems with a temporal von NeumannMorgenstern criterion are analyzed. This criterion, as developed in [7], is a generalization of von Neumann-Morgenstern (expected) utility of the vector of rewards, wherein an individual's preferences concerning the timing of the resolution of uncertainty are taken into account. The preference theory underlying this criterion is reviewed and then extended in natural fashion to yield preferences for strategies in sequential decision problems. The main result is that value functions for sequential decision problems can be defined by a dynamic programming recursion using the functions which represent the original preferences, and these value functions represent the preferences defined on strategies. This permits citation of standard results from the dynamic programming literature, concerning the existence of (memoryless) strategies which are optimal with respect to the given preference relation.

[In this paper we consider the lognormal, gamma, beta, and Singh-Maddala functions as descriptive models for the distribution of family income for 1960 and 1969 through 1975. Least squares and two efficient estimation techniques are used to estimate the unknown parameters. Alternative functional forms for comparable estimation techniques can then be contrasted and estimation techniques for a given functional form can be compared. We note that estimates of population characteristics depend upon the functional form and estimation technique selected.]

2Bayesian paradigm. Following it, probability assessments and utility functions are defined independently. It seems reasonable to suggest that groups adopt a similar approach.3 That is, the group should deal separately with the two areas of potential disagreement. By some prescribed procedure, the group aggregates the individual probability assessments into a group probability assessment. Similarly, a group utility function is constructed by aggregating individual utility functions. The group probability assessment and utility function are multiplied in the usual manner to give expected utilities. The action offering the highest expected utility is chosen.4 Most real world decision processes, we recognize, make less than conscientious attempts to separate beliefs from values, either in debate or at time of decision.5