Edi Karni

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Edi Karni
עדי קרני
Born (1944-03-20) March 20, 1944 (age 79)
CitizenshipIsrael
Alma mater The University of Chicago
Scientific career
Fields Economics
Doctoral advisor Milton Friedman
Gary Becker
Stanley Fischer

Edi Karni (born March 20, 1944 in Tel Aviv) is an Israeli born American economist and decision theorist. Karni is the Scott and Barbara Black Professor of Economics at Johns Hopkins University. He is a Fellow of the Econometric Society and an Economic Theory Fellow of the Society for the Advancement of Economic Theory. [1]

He earned his B.A. in Economics and Political Science from The Hebrew University of Jerusalem, in 1965 and his Ph.D. from The University of Chicago, in 1971, under the supervision of Milton Friedman, Gary Becker and Stanley Fischer. Karni began his academic career at Tel Aviv University in 1972, where he attained the rank of full professor. In 1976-77 he was a fellow at the Institute of Advanced Studies at the Hebrew University of Jerusalem. In 1982 he left Tel Aviv University for Johns Hopkins University. In the years 2013-2019 Karni was Distinguished professor at the Warwick Business School. [2]

Karni's main contributions are in the fields of individual decision making under uncertainty, social choice theory and the economics of information.

In the field of decision-making under uncertainty, he has worked on the measurement of risk aversion, [3] [4] [5] [6] the modeling state-dependent preferences [7] and the definition of subjective probability, [8] the modeling of awareness and awareness of unawareness [9] and the introduction of the notion of ‘reverse Bayesianism’. In the field of economics of information, Karni's contribution include the introduction of the notion of credence-quality goods and the explanation of the existence of fraud in competitive market to asymmetric information due to expert knowledge. [10] In the field of social choice theory Karni's contributions include the axiomatization and representation of individual behavior that is motivated, in part, by a sense of fairness and interpersonal comparisons of variations in well-being.

Related Research Articles

<span class="mw-page-title-main">Risk aversion</span> Economics theory

In economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more certain outcome.

<span class="mw-page-title-main">Prospect theory</span> Theory of behavioral economics and behavioral finance

Prospect theory is a theory of behavioral economics, judgment and decision making that was developed by Daniel Kahneman and Amos Tversky in 1979. The theory was cited in the decision to award Kahneman the 2002 Nobel Memorial Prize in Economics.

<span class="mw-page-title-main">Loss aversion</span> Overall description of loss aversion theory

Loss aversion is a psychological and economic concept which refers to how outcomes are interpreted as gains and losses where losses are subject to more sensitivity in people's responses compared to equivalent gains acquired. Kahneman and Tversky (1992) have suggested that losses can be twice as powerful, psychologically, as gains. When defined in terms of the utility function shape as in the cumulative prospect theory (CPT), losses have a steeper utility than gains, thus being more "painful" than the satisfaction from a comparable gain as shown in Figure 1. Loss aversion was first proposed by Amos Tversky and Daniel Kahneman as an important framework for prospect theory – an analysis of decision under risk.

The expected utility hypothesis is a foundational assumption in mathematical economics concerning decision making under uncertainty. It postulates that rational agents maximize utility, meaning the subjective desirability of their actions. Rational choice theory, a cornerstone of microeconomics, builds this postulate to model aggregate social behaviour.

In decision theory, subjective expected utility is the attractiveness of an economic opportunity as perceived by a decision-maker in the presence of risk. Characterizing the behavior of decision-makers as using subjective expected utility was promoted and axiomatized by L. J. Savage in 1954 following previous work by Ramsey and von Neumann. The theory of subjective expected utility combines two subjective concepts: first, a personal utility function, and second a personal probability distribution.

In decision theory, the Ellsberg paradox is a paradox in which people's decisions are inconsistent with subjective expected utility theory. John Maynard Keynes published a version of the paradox in 1921. Daniel Ellsberg popularized the paradox in his 1961 paper, "Risk, Ambiguity, and the Savage Axioms". It is generally taken to be evidence of ambiguity aversion, in which a person tends to prefer choices with quantifiable risks over those with unknown, incalculable risks.

<span class="mw-page-title-main">Single-crossing condition</span>

In monotone comparative statics, the single-crossing condition or single-crossing property refers to a condition where the relationship between two or more functions is such that they will only cross once. For example, a mean-preserving spread will result in an altered probability distribution whose cumulative distribution function will intersect with the original's only once.

In decision theory and economics, ambiguity aversion is a preference for known risks over unknown risks. An ambiguity-averse individual would rather choose an alternative where the probability distribution of the outcomes is known over one where the probabilities are unknown. This behavior was first introduced through the Ellsberg paradox.

Lionel Wilfred McKenzie was an American economist. He was the Wilson Professor Emeritus of Economics at the University of Rochester. He was born in Montezuma, Georgia. He completed undergraduate studies at Duke University in 1939 and subsequently moved to Oxford that year as a Rhodes Scholar. McKenzie worked with the Cowles Commission while it was in Chicago and served as an assistant professor at Duke from 1948 to 1957. Having received his Ph.D. at Princeton University in 1956, McKenzie moved to Rochester where he was responsible for the establishment of the graduate program in economics.

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Eva Elisabet Rutström is a Swedish born experimental economist, and an accomplished field researcher in individual decision making and interactive group behaviors. Over the last 40 years she has worked as an instructor and researcher at universities in Canada, the United States, and Sweden. She currently serves as the program director of field experiments at Georgia State University’s Robinson College of Business.

Joel Sobel is an American economist and currently professor of economics at the University of California, San Diego. His research focuses on game theory and has been seminal in the field of strategic communication in economic games. His work with Vincent Crawford established the game-theoretic concept of cheap talk.

In economic theory, the Wilson doctrine stipulates that game theory should not rely excessively on common knowledge assumptions. Most prominently, it is interpreted as a request for institutional designs to be "detail-free". That is, mechanism designers should offer solutions that do not depend on market details because they may be unknown to practitioners or are subject to intractable change. The name is due to Nobel laureate Robert Wilson, who argued:

Game theory has a great advantage in explicitly analyzing the consequences of trading rules that presumably are really common knowledge; it is deficient to the extent it assumes other features to be common knowledge, such as one agent's probability assessment about another’s preferences or information. I foresee the progress of game theory as depending on successive reductions in the base of common knowledge required to conduct useful analyses of practical problems. Only by repeated weakening of common knowledge assumptions will the theory approximate reality.

Fractional social choice is a branch of social choice theory in which the collective decision is not a single alternative, but rather a weighted sum of two or more alternatives. For example, if society has to choose between three candidates: A B or C, then in standard social choice, exactly one of these candidates is chosen, while in fractional social choice, it is possible to choose "2/3 of A and 1/3 of B". A common interpretation of the weighted sum is as a lottery, in which candidate A is chosen with probability 2/3 and candidate B is chosen with probability 1/3. Due to this interpretation, fractional social choice is also called random social choice, probabilistic social choice, or stochastic social choice. But it can also be interpreted as a recipe for sharing, for example:

In economics, a utility representation theorem asserts that, under certain conditions, a preference ordering can be represented by a real-valued utility function, such that option A is preferred to option B if and only if the utility of A is larger than that of B.

References

  1. "Economic Theory Fellows – SAET" . Retrieved 2019-06-25.
  2. "Distinguished professor at WBS" (PDF). WBS Website. Archived (PDF) from the original on 2017-12-15.
  3. Karni, Edi; Safra, Zvi (1987). ""Preference Reversal" and the Observability of Preferences by Experimental Methods". Econometrica. 55 (3): 675. doi:10.2307/1913606. ISSN   0012-9682. JSTOR   1913606.
  4. Karni, Edi (1979). "On Multivariate Risk Aversion". Econometrica. 47 (6): 1391–1401. doi:10.2307/1914007. ISSN   0012-9682. JSTOR   1914007.
  5. Hong, Chew Soo; Karni, Edi; Safra, Zvi (1987). "Risk aversion in the theory of expected utility with rank dependent probabilities". Journal of Economic Theory. 42 (2): 370–381. doi: 10.1016/0022-0531(87)90093-7 . ISSN   0022-0531.
  6. "Subjective Expected Utility With Incomplete Preferences". Econometrica. 81 (1): 255–284. 2013. doi: 10.3982/ecta9621 . ISSN   0012-9682.
  7. Karni, Edi. (1985). Decision making under uncertainty : the case of state-dependent preferences. Cambridge, Mass.: Harvard University Press. ISBN   0674195256. OCLC   11812479.
  8. Karni, Edi (2012-02-02). "Bayesian decision theory with action-dependent probabilities and risk attitudes". Economic Theory. 53 (2): 335–356. CiteSeerX   10.1.1.360.2882 . doi:10.1007/s00199-012-0692-4. ISSN   0938-2259. S2CID   28407506.
  9. Karni, Edi Vierø, Marie-Louise (2014). Awareness of Unawareness: A Theory of Decision Making in the Face of Ignorance. Kingston, Ont.: Queen's Economics Dep., Queen's Univ. OCLC   951025796.{{cite book}}: CS1 maint: multiple names: authors list (link)
  10. Darby, Michael R.; Karni, Edi (1973). "Free Competition and the Optimal Amount of Fraud". The Journal of Law and Economics. 16 (1): 67–88. doi:10.1086/466756. ISSN   0022-2186. S2CID   53667439.