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Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk

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  • Chris Starmer

Abstract

This article reviews recent developments in the economic theory of individual decision making under risk. Since the 1950s it has been known that individual choices violate the standard model of expected utility in predictable ways. Considerable research effort has now been devoted to the project of developing a superior descriptive model. Following an overview of non-expected utility theories which distinguishes between "conventional" and "non-conventional" approaches, the paper seeks to assess these alternative models in terms of empirical success (using laboratory and field data) and theoretical usefulness. The closing sections reflect on some new directions emerging in this literature.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jel.38.2.332
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 38 (2000)
Issue (Month): 2 (June)
Pages: 332-382

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Handle: RePEc:aea:jeclit:v:38:y:2000:i:2:p:332-382

Note: DOI: 10.1257/jel.38.2.332
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  1. Lattimore, Pamela K. & Baker, Joanna R. & Witte, Ann D., 1992. "The influence of probability on risky choice: A parametric examination," Journal of Economic Behavior & Organization, Elsevier, vol. 17(3), pages 377-400, May.
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  8. Jullien Bruno & Green Jerry G, 1988. "Ordinal independence in non-linear utility theory," CEPREMAP Working Papers (Couverture Orange) 8818, CEPREMAP.
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  17. Thaler, Richard, 1980. "Toward a positive theory of consumer choice," Journal of Economic Behavior & Organization, Elsevier, vol. 1(1), pages 39-60, March.
  18. Hey, John D & Orme, Chris, 1994. "Investigating Generalizations of Expected Utility Theory Using Experimental Data," Econometrica, Econometric Society, vol. 62(6), pages 1291-1326, November.
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  20. Battalio, Raymond C & Kagel, John H & Jiranyakul, Komain, 1990. " Testing between Alternative Models of Choice under Uncertainty: Some Initial Results," Journal of Risk and Uncertainty, Springer, vol. 3(1), pages 25-50, March.
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  22. Wu, George, 1994. "An Empirical Test of Ordinal Independence," Journal of Risk and Uncertainty, Springer, vol. 9(1), pages 39-60, July.
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