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An Experimental Investigation of Alternatives to Expected Utility Using Pricing Data

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Author Info
Andrea Morone () (Università degli studi di Bari)
Ulrich Schmidt () (University of Kiel and Kiel Institute for the World Economy)

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Abstract

Experimental research on decision making under risk has until now always employed choice data in order to evaluate the empirical performance of expected utility and the alternative non-expected utility theories. The present paper performs a similar analysis which relies on pricing data instead of choice data. Since pricing data lead in many cases to a different ordering of lotteries than choices (e.g. the preference reversal phenomenon) our analysis may have fundamental different results than preceding investigations. We elicit three different types of pricing data: willingness-to-pay, willingness-to-accept and certainty equivalents under the Becker-DeGroot-Marschak (BDM) incentive mechanism. One of our main result shows that the comparative performance of the single theories differs significantly under these three types of pricing data.

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File URL: http://economicsbulletin.vanderbilt.edu/2008/volume4/EB-08D80020A.pdf
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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 4 (2008)
Issue (Month): 20 ()
Pages: 1-12
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ebl:ecbull:v:4:y:2008:i:20:p:1-12

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Related research
Keywords: experiments; WTP; WTA; BDM; expected utility; non-expected utility;

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Find related papers by JEL classification:
D8 - Microeconomics - - Information, Knowledge, and Uncertainty
C9 - Mathematical and Quantitative Methods - - Design of Experiments

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. John D Hey & Andrea Morone & Ulrich Schmidt, 2007. "Noise and Bias in Eliciting Preferences," Discussion Papers 07/04, Department of Economics, University of York. [Downloadable!]
    Other versions:
  2. 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. [Downloadable!] (restricted)
  3. Chris Starmer, 2000. "Developments in Non-expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 332-382, June. [Downloadable!] (restricted)
  4. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December. [Downloadable!] (restricted)
  5. Gul, Faruk, 1991. "A Theory of Disappointment Aversion," Econometrica, Econometric Society, vol. 59(3), pages 667-86, May. [Downloadable!] (restricted)
  6. Harless, David W & Camerer, Colin F, 1994. "The Predictive Utility of Generalized Expected Utility Theories," Econometrica, Econometric Society, vol. 62(6), pages 1251-89, November. [Downloadable!] (restricted)
  7. Andrea Morone, 2007. "Comparison of Mean-Variance Theory and Expected-Utility Theory through a Laboratory Experiment," series 0019, Dipartimento di Scienze Economiche - Università di Bari, revised Oct 2007. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Annamaria Fiore & M. Vittoria Levati & Andrea Morone, 2006. "Voluntary contributions with imperfect information: An experimental study," Papers on Strategic Interaction 2006-30, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
    Other versions:
  2. Meroz, Yael & Morone, Andrea & Morone, Piergiuseppe, 2009. "Eliciting environmental preferences of Ghanaians in the laboratory: An incentive-compatible experiment," MPRA Paper 17107, University Library of Munich, Germany. [Downloadable!]
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