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Modelling the Stochastic Component of Behaviour in Experiments: Some Issues for the Interpretation of Data

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  • Graham Loomes

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    Abstract

    This paper considers some of the questions raised by the fact that people's behaviour—including their behaviour in experimental environments—has a stochastic component. The nature of this component may be crucial to the interpretation of the patterns of data we observe and the choice of statistical criteria for favouring one hypothesis at the expense of others. However, it is arguable that insufficient consideration has been given to the way(s) in which the stochastic element is modelled. The paper aims to explore some of the issues involved. Copyright Springer Science + Business Media, Inc. 2005

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    File URL: http://hdl.handle.net/10.1007/s10683-005-5372-9
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    Bibliographic Info

    Article provided by Springer in its journal Experimental Economics.

    Volume (Year): 8 (2005)
    Issue (Month): 4 (December)
    Pages: 301-323

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    Handle: RePEc:kap:expeco:v:8:y:2005:i:4:p:301-323

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    Web page: http://www.springerlink.com/link.asp?id=102888

    Related research

    Keywords: stochastic choice; decision error; imprecision; anomalies;

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    1. Ochs Jack, 1995. "Games with Unique, Mixed Strategy Equilibria: An Experimental Study," Games and Economic Behavior, Elsevier, vol. 10(1), pages 202-217, July.
    2. Ballinger, T Parker & Wilcox, Nathaniel T, 1997. "Decisions, Error and Heterogeneity," Economic Journal, Royal Economic Society, vol. 107(443), pages 1090-1105, July.
    3. Loomes, Graham & Moffatt, Peter G & Sugden, Robert, 2002. " A Microeconometric Test of Alternative Stochastic Theories of Risky Choice," Journal of Risk and Uncertainty, Springer, vol. 24(2), pages 103-30, March.
    4. Jacob Goeree & Charles Holt & Thomas Palfrey, 2005. "Regular Quantal Response Equilibrium," Experimental Economics, Springer, vol. 8(4), pages 347-367, December.
    5. Jacob K. Goeree & Charles A. Holt, 2001. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," American Economic Review, American Economic Association, vol. 91(5), pages 1402-1422, December.
    6. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages S251-78, October.
    7. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
    8. Barry Sopher & Mattison Narramore, 2000. "Stochastic Choice and Consistency in Decision Making Under Uncertainty: An Experimental Study," Departmental Working Papers 199626, Rutgers University, Department of Economics.
    9. 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.
    10. Richard Mckelvey & Thomas Palfrey, 1998. "Quantal Response Equilibria for Extensive Form Games," Experimental Economics, Springer, vol. 1(1), pages 9-41, June.
    11. Loomes, Graham & Sugden, Robert, 1998. "Testing Different Stochastic Specifications of Risky Choice," Economica, London School of Economics and Political Science, vol. 65(260), pages 581-98, November.
    12. 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.
    13. Machina, Mark J, 1985. "Stochastic Choice Functions Generated from Deterministic Preferences over Lotteries," Economic Journal, Royal Economic Society, vol. 95(379), pages 575-94, September.
    14. 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.
    15. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
    16. Loomes, Graham & Starmer, Chris & Sugden, Robert, 1991. "Observing Violations of Transitivity by Experimental Methods," Econometrica, Econometric Society, vol. 59(2), pages 425-39, March.
    17. Sopher & Narramore, 2000. "Stochastic Choice and Consistency in Decision Making Under Risk: An Experimental Study," Theory and Decision, Springer, vol. 48(4), pages 323-349, June.
    18. Tversky, Amos & Slovic, Paul & Kahneman, Daniel, 1990. "The Causes of Preference Reversal," American Economic Review, American Economic Association, vol. 80(1), pages 204-17, March.
    19. 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.
    20. Seidl, Christian, 2002. " Preference Reversal," Journal of Economic Surveys, Wiley Blackwell, vol. 16(5), pages 621-55, December.
    21. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    22. Loomes, Graham & Taylor, Caron, 1992. "Non-transitive Preferences over Gains and Losses," Economic Journal, Royal Economic Society, vol. 102(411), pages 357-65, March.
    23. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2003. "Risk averse behavior in generalized matching pennies games," Games and Economic Behavior, Elsevier, vol. 45(1), pages 97-113, October.
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