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Testing between Alternative Models of Choice under Uncertainty: Some Initial Results

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  • Battalio, Raymond C
  • Kagel, John H
  • Jiranyakul, Komain

Abstract

Experiments have identified a number of well-known violations of expected utility theory, giving rise to alternative models of choice under uncertainty, all of which are able to explain these violations. In this article, predictions of several prominent rival formulations are examined. No single alternative consistently organizes choices. Among the more important inconsistencies, we identify conditions generating systematic fanning in or indifference curves in the unit probability triangle, and find risk-loving over a number of gambles with all positive payoffs, in cases where prospect theory predicts risk aversion. Copyright 1990 by Kluwer Academic Publishers

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Bibliographic Info

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

Volume (Year): 3 (1990)
Issue (Month): 1 (March)
Pages: 25-50

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Handle: RePEc:kap:jrisku:v:3:y:1990:i:1:p:25-50

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

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  1. Battalio, Raymond C & Kagel, John H & MacDonald, Don N, 1985. "Animals' Choices over Uncertain Outcomes: Some Initial Experimental Results," American Economic Review, American Economic Association, vol. 75(4), pages 597-613, September.
  2. Camerer, Colin F, 1989. " An Experimental Test of Several Generalized Utility Theories," Journal of Risk and Uncertainty, Springer, Springer, vol. 2(1), pages 61-104, April.
  3. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, Econometric Society, vol. 55(1), pages 95-115, January.
  4. Schoemaker, Paul J H, 1982. "The Expected Utility Model: Its Variants, Purposes, Evidence and Limitations," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 529-63, June.
  5. Segal, Uzi, 1987. "Some remarks on Quiggin's anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 8(1), pages 145-154, March.
  6. Hong, Chew Soo & Karni, Edi & Safra, Zvi, 1987. "Risk aversion in the theory of expected utility with rank dependent probabilities," Journal of Economic Theory, Elsevier, vol. 42(2), pages 370-381, August.
  7. Grether, David M. & Plott, Charles R., . "Economic Theory of Choice and the Preference Reversal Phenomenon," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 152, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, Econometric Society, vol. 47(2), pages 263-91, March.
  9. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 92(368), pages 805-24, December.
  10. Sugden, Robert, 1986. "New Developments in the Theory of Choice under Uncertainty," Bulletin of Economic Research, Wiley Blackwell, vol. 38(1), pages 1-24, January.
  11. 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.
  12. Holt, Charles A, 1986. "Preference Reversals and the Independence Axiom," American Economic Review, American Economic Association, vol. 76(3), pages 508-15, June.
  13. Machina, Mark J, 1982. ""Expected Utility" Analysis without the Independence Axiom," Econometrica, Econometric Society, Econometric Society, vol. 50(2), pages 277-323, March.
  14. Karni, Edi & Safra, Zvi, 1987. ""Preference Reversal' and the Observability of Preferences by Experimental Methods," Econometrica, Econometric Society, Econometric Society, vol. 55(3), pages 675-85, May.
  15. Loomes, Graham, 1988. "When Actions Speak Louder Than Prospects," American Economic Review, American Economic Association, vol. 78(3), pages 463-70, June.
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