Testing models of stochastic choice in health state valuation data
AbstractExpected Utility (EU) theory is the standard economic model of individual preferences under uncertainty. However, observed violations of the axioms of EU have generated interest in the incorporation of a stochastic element into deterministic models of decision-making. Previous empirical investigation of the theories of stochastic choice has involved monetary gambles in risky conditions using convenience samples of students. The aim of this study is to test generalisations of these models in the context of eliciting the preferences of the general public over health states under conditions of certainty. Our findings lend support to the `white noise´ stochastic specification of Hey and Orme (1994) which indicates that the stronger the preferences of an individual, the less likely they are to make a mistake and attach a lower value to their truly preferred alternative. JEL Classification: D0 Key words: Stochastic preferences, utility assessment, expected utility theory.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2005017.
Length: 22 pages
Date of creation: Nov 2005
Date of revision: Nov 2005
Stochastic preferences; utility assessment; expected theory;
Find related papers by JEL classification:
- D0 - Microeconomics - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-17 (All new papers)
- NEP-DCM-2007-03-17 (Discrete Choice Models)
- NEP-HEA-2007-03-17 (Health Economics)
- NEP-UPT-2007-03-17 (Utility Models & Prospect Theory)
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.:
- 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.
- Selten, Reinhard & Joachim Buchta, 1994. "Experimental Sealed Bid First Price Auctions with Directly Observed Bid Functions," Discussion Paper Serie B 270, University of Bonn, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Georgios Efthyvoulou).
If references are entirely missing, you can add them using this form.