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Testing New Theories of Choice under Uncertainty Using the Common Consequence Effect

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  • Starmer, Chris

Abstract

A generalized common consequence problem is used to contrast the predictions of expected utility theory and several new theories of choice under uncertainty. An experiment designed to test these predictions is reported. Systematic violations of expected utility theory are detected but, although a consistent pattern emerges from the data, it offers little support for any of the new theories. The analysis is extended to test predictions that are unique to regret theory and significant regret effects are detected. Copyright 1992 by The Review of Economic Studies Limited.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 59 (1992)
Issue (Month): 4 (October)
Pages: 813-30

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Handle: RePEc:bla:restud:v:59:y:1992:i:4:p:813-30

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References

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  1. 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.
  2. Holt, Charles A, 1986. "Preference Reversals and the Independence Axiom," American Economic Review, American Economic Association, vol. 76(3), pages 508-15, June.
  3. Kagel, John H & MacDonald, Don N & Battalio, Raymond C, 1990. "Tests of "Fanning Out" of Indifference Curves: Results from Animal and Human Experiments," American Economic Review, American Economic Association, vol. 80(4), pages 912-21, September.
  4. Loomes, Graham & Sugden, Robert, 1987. "Testing for Regret and Disappointment in Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 97(388a), pages 118-29, Supplemen.
  5. Loomes, Graham & Sugden, Robert, 1986. "Disappointment and Dynamic Consistency in Choice under Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 53(2), pages 271-82, April.
  6. Fishburn, Peter C., 1983. "Transitive measurable utility," Journal of Economic Theory, Elsevier, vol. 31(2), pages 293-317, December.
  7. Loomes, Graham & Sugden, Robert, 1987. "Some implications of a more general form of regret theory," Journal of Economic Theory, Elsevier, vol. 41(2), pages 270-287, April.
  8. Conlisk, John, 1989. "Three Variants on the Allais Example," American Economic Review, American Economic Association, vol. 79(3), pages 392-407, June.
  9. Camerer, Colin F, 1989. " An Experimental Test of Several Generalized Utility Theories," Journal of Risk and Uncertainty, Springer, vol. 2(1), pages 61-104, April.
  10. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-24, December.
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Citations

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Cited by:
  1. Bruno S. Frey, 2005. "Knight Fever – Towards an Economics of Awards," CESifo Working Paper Series 1468, CESifo Group Munich.
  2. Grant, Simon & Kajii, Atsushi, 1998. "AUSI expected utility: An anticipated utility theory of relative disappointment aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 37(3), pages 277-290, November.
  3. Trabelsi, Mohamed Ali, 2006. "Les nouveaux modèles de décision dans le risque et l’incertain : quel apport ?
    [The new models of decision under risk or uncertainty : What approach?]
    ," MPRA Paper 25442, University Library of Munich, Germany.
  4. Blavatskyy, Pavlo R., 2006. "Violations of betweenness or random errors?," Economics Letters, Elsevier, vol. 91(1), pages 34-38, April.
  5. John Conley & Simon Wilkie, 2012. "The ordinal egalitarian bargaining solution for finite choice sets," Social Choice and Welfare, Springer, vol. 38(1), pages 23-42, January.
  6. Larry G. Epstein & Angelo Melino, 1993. "A Revealed Preference Analysis of Asset Pricing Under Recursive Utility," NBER Working Papers 4524, National Bureau of Economic Research, Inc.
  7. John Hey, 2005. "Why We Should Not Be Silent About Noise," Experimental Economics, Springer, vol. 8(4), pages 325-345, December.
  8. Pavlo R. Blavatskyy, . "A Stochastic Expected Utility Theory," IEW - Working Papers 231, Institute for Empirical Research in Economics - University of Zurich.
  9. Bethany Weber, 2007. "The effects of losses and event splitting on the Allais paradox," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 2, pages 115-125, April.
  10. Blavatskyy, Pavlo R., 2013. "The reverse Allais paradox," Economics Letters, Elsevier, vol. 119(1), pages 60-64.
  11. Wakker, Peter P., 2005. "Decision-foundations for properties of nonadditive measures: general state spaces or general outcome spaces," Games and Economic Behavior, Elsevier, vol. 50(1), pages 107-125, January.
  12. Humphrey, Steven J., 2000. "The common consequence effect: testing a unified explanation of recent mixed evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 41(3), pages 239-262, March.
  13. Robin Cubitt & Chris Starmer & Robert Sugden, 1998. "On the Validity of the Random Lottery Incentive System," Experimental Economics, Springer, vol. 1(2), pages 115-131, September.

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