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Testing Different Stochastic Specifications of Risky Choice

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Author Info
Loomes, Graham
Sugden, Robert

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Abstract

The Harless-Camerer (HC), Hey-Orme (HO), and random preference (RP) models of stochastic variation in choice under uncertainty are compared. Implications of these models, including some that are independent of the deterministic theory with which they are combined, are tested in an experiment in which participants respond to decision problems twice. The HC model generally performs poorly; the HO model predicts more violations of dominance than are observed; while the RP model fails to account for those few violations which do occur. Additional regularities are observed which are inconsistent with all three models when combined with expected utility theory. Copyright 1998 by The London School of Economics and Political Science

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Publisher Info
Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 65 (1998)
Issue (Month): 260 (November)
Pages: 581-98
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Handle: RePEc:bla:econom:v:65:y:1998:i:260:p:581-98

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  1. Robin P. Cubitt & Chris Starmer & Robert Sugden, 2001. "Discovered preferences and the experimental evidence of violations of expected utility theory," Journal of Economic Methodology, Taylor and Francis Journals, vol. 8(3), pages 385-414, November. [Downloadable!] (restricted)
  2. Wilcox, Nathaniel, 2007. "Stochastically more risk averse: A contextual theory of stochastic discrete choice under risk," MPRA Paper 11851, University Library of Munich, Germany. [Downloadable!]
  3. Pavlo Blavatskyy, 2007. "Stochastic expected utility theory," Journal of Risk and Uncertainty, Springer, vol. 34(3), pages 259-286, June. [Downloadable!] (restricted)
  4. Jinkwon Lee, 2008. "The effect of the background risk in a simple chance improving decision model," Journal of Risk and Uncertainty, Springer, vol. 36(1), pages 19-41, February. [Downloadable!] (restricted)
  5. Peter Moffatt, 2005. "Stochastic Choice and the Allocation of Cognitive Effort," Experimental Economics, Springer, vol. 8(4), pages 369-388, December. [Downloadable!] (restricted)
  6. Peter Moffatt & Simon Peters, 2001. "Testing for the Presence of a Tremble in Economic Experiments," Experimental Economics, Springer, vol. 4(3), pages 221-228, December. [Downloadable!] (restricted)
  7. John K. Dagsvik, 2005. "Choice under Uncertainty and Bounded Rationality," Discussion Papers 409, Research Department of Statistics Norway. [Downloadable!]
  8. Henry Stott, 2006. "Cumulative prospect theory's functional menagerie," Journal of Risk and Uncertainty, Springer, vol. 32(2), pages 101-130, March. [Downloadable!] (restricted)
  9. Glenn W Harrison, 2008. "Neuroeconomics: A Critical Reconsideration," Levine's Working Paper Archive 122247000000001915, David K. Levine. [Downloadable!]
  10. Pavlo R. Blavatskyy, . "A Stochastic Expected Utility Theory," IEW - Working Papers iewwp231, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  11. Glen Archibald & Nathaniel Wilcox, 2002. "A New Variant of the Winner's Curse in a Coasian Contracting Game," Experimental Economics, Springer, vol. 5(2), pages 155-172, October. [Downloadable!] (restricted)
  12. Booij, Adam S. & van Praag, Bernard M. S. & van de Kuilen, Gijs, 2009. "A Parametric Analysis of Prospect Theory's Functionals for the General Population," IZA Discussion Papers 4117, Institute for the Study of Labor (IZA). [Downloadable!]
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  13. Graham Loomes, 2005. "Modelling the Stochastic Component of Behaviour in Experiments: Some Issues for the Interpretation of Data," Experimental Economics, Springer, vol. 8(4), pages 301-323, December. [Downloadable!] (restricted)
  14. Bruno S. Frey, . "Knight Fever towards an Economics of Awards," IEW - Working Papers iewwp239, Institute for Empirical Research in Economics - IEW. [Downloadable!]
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  15. David J. Butler & Graham C. Loomes, 2007. "Imprecision as an Account of the Preference Reversal Phenomenon," American Economic Review, American Economic Association, vol. 97(1), pages 277-297, March. [Downloadable!]
  16. John Hey, 2005. "Why We Should Not Be Silent About Noise," Experimental Economics, Springer, vol. 8(4), pages 325-345, December. [Downloadable!] (restricted)
  17. John K. Dagsvik, 2006. "Axiomatization of Stochastic Models for Choice under Uncertainty," Discussion Papers 465, Research Department of Statistics Norway. [Downloadable!]
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