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Behavioral Probabilities

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  • W. Viscusi

    ()

  • William Evans

Abstract

This article introduces the concept of behavioral probabilities, along with an econometric procedure for jointly estimating these probabilities as well as individual utility functions. Behavioral probabilities that guide decisions differ from posterior probabilities that are reported after receiving risk information. The underlying process that generates behavioral probabilities reflects a behavioral anomaly as the new risk information takes on an excessive role. While utility function estimates are consistent with theoretical predictions, considering behavioral probabilities alters their implications. Copyright Springer Science + Business Media, Inc. 2006

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File URL: http://hdl.handle.net/10.1007/s10797-006-6663-6
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Bibliographic Info

Article provided by Springer in its journal Journal of Risk and Uncertainty.

Volume (Year): 32 (2006)
Issue (Month): 1 (January)
Pages: 5-15

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Handle: RePEc:kap:jrisku:v:32:y:2006:i:1:p:5-15

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Web page: http://www.springerlink.com/link.asp?id=100299

Related research

Keywords: Behavioral probability; Risk perceptions; Expected utility; Bayesian;

References

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  1. Viscusi, W Kip, 1989. " Prospective Reference Theory: Toward an Explanation of the Paradoxes," Journal of Risk and Uncertainty, Springer, vol. 2(3), pages 235-63, September.
  2. Smith, V. Kerry & Taylor, Donald H., Jr. & Sloan, Frank A. & Johnson, F. Reed & Desvousges, William H., 2000. "Do Smokers Respond to Health Shocks?," Working Papers 00-08, Duke University, Department of Economics.
  3. Evans, William N & Viscusi, W Kip, 1991. "Estimation of State-Dependent Utility Functions Using Survey Data," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 94-104, February.
  4. Terrance Hurley & Jason Shogren, 2005. "An Experimental Comparison of Induced and Elicited Beliefs," Journal of Risk and Uncertainty, Springer, vol. 30(2), pages 169-188, January.
  5. William N. Evans & W. Kip Viscusi, 1993. "Income Effects and the Value of Health," Journal of Human Resources, University of Wisconsin Press, vol. 28(3), pages 497-518.
  6. Viscusi, W. Kip, 1985. "A Bayesian perspective on biases in risk perception," Economics Letters, Elsevier, vol. 17(1-2), pages 59-62.
  7. Chilton, Susan, et al, 2002. " Public Perceptions of Risk and Preference-Based Values of Safety," Journal of Risk and Uncertainty, Springer, vol. 25(3), pages 211-32, November.
  8. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  9. Viscusi, W Kip & Evans, William N, 1990. "Utility Functions That Depend on Health Status: Estimates and Economic Implications," American Economic Review, American Economic Association, vol. 80(3), pages 353-74, June.
  10. Gallant, A. Ronald, 1975. "Seemingly unrelated nonlinear regressions," Journal of Econometrics, Elsevier, vol. 3(1), pages 35-50, February.
  11. Trudy Ann Cameron, 2001. "Updating Subjective Risks in the Presence of Conflicting Information: An Application to Climate Change," University of Oregon Economics Department Working Papers 2003-8, University of Oregon Economics Department, revised 14 Jul 2001.
  12. Viscusi, W. Kip, 1996. "Fatal Tradeoffs: Public and Private Responsibilities for Risk," OUP Catalogue, Oxford University Press, number 9780195102932, September.
  13. Petter Lundborg & Bj–rn Lindgren, 2004. "Do They Know What They are Doing? Risk Perceptions and Smoking Behaviour Among Swedish Teenagers," Journal of Risk and Uncertainty, Springer, vol. 28(3), pages 261-286, 05.
  14. Viscusi, W Kip & O'Connor, Charles J, 1984. "Adaptive Responses to Chemical Labeling: Are Workers Bayesian Decision Makers?," American Economic Review, American Economic Association, vol. 74(5), pages 942-56, December.
  15. Ahmed Khwaja & Frank Sloan & Sukyung Chung, 2006. "The Effects of Spousal Health on the Decision to Smoke: Evidence on Consumption Externalities, Altruism and Learning Within the Household," Journal of Risk and Uncertainty, Springer, vol. 32(1), pages 17-35, January.
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Citations

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Cited by:
  1. Mohammed Abdellaoui & Han Bleichrodt & Olivier L’Haridon, 2008. "A tractable method to measure utility and loss aversion under prospect theory," Journal of Risk and Uncertainty, Springer, vol. 36(3), pages 245-266, June.
  2. Akay, Alpaslan & Martinsson, Peter & Medhin, Haileselassie & Trautmann, Stefan T., 2009. "Attitudes toward Uncertainty among the Poor: Evidence from Rural Ethiopia," IZA Discussion Papers 4225, Institute for the Study of Labor (IZA).
  3. Vieider, Ferdinand M. & Chmura, Thorsten & Martinsson, Peter, 2012. "Risk attitudes, development, and growth: Macroeconomic evidence from experiments in 30 countries," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2012-401, Social Science Research Center Berlin (WZB).
  4. Mohammed Abdellaoui & Olivier L’Haridon & Horst Zank, 2010. "Separating curvature and elevation: A parametric probability weighting function," Journal of Risk and Uncertainty, Springer, vol. 41(1), pages 39-65, August.
  5. Aurélien Baillon & Laure Cabantous & Peter Wakker, 2012. "Aggregating imprecise or conflicting beliefs: An experimental investigation using modern ambiguity theories," Journal of Risk and Uncertainty, Springer, vol. 44(2), pages 115-147, April.
  6. Le Coq, Chloe & Tremewan, James & Wagner, Alexander K., 2013. "Social Centipedes: the Impact of Group Identity on Preferences and Reasoning," SITE Working Paper Series 24, Stockholm Institute of Transition Economics, Stockholm School of Economics.
  7. Frank Sloan & Alyssa Platt & Lindsey Chepke & Claire Blevins, 2013. "Deterring domestic violence: Do criminal sanctions reduce repeat offenses?," Journal of Risk and Uncertainty, Springer, vol. 46(1), pages 51-80, February.
  8. Gregory DeAngelo & Gary Charness, 2012. "Deterrence, expected cost, uncertainty and voting: Experimental evidence," Journal of Risk and Uncertainty, Springer, vol. 44(1), pages 73-100, February.

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