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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

Suggested Citation

  • W. Viscusi & William Evans, 2006. "Behavioral Probabilities," Journal of Risk and Uncertainty, Springer, vol. 32(1), pages 5-15, January.
    • Handle: RePEc:kap:jrisku:v:32:y:2006:i:1:p:5-15
    DOI: 10.1007/s10797-006-6663-6
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    References listed on IDEAS

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    8. Viscusi, W Kip, 1989. "Prospective Reference Theory: Toward an Explanation of the Paradoxes," Journal of Risk and Uncertainty, Springer, vol. 2(3), pages 235-263, September.
    9. V. Kerry Smith & Donald H. Taylor & Frank A. Sloan & F. Reed Johnson & William H. Desvousges, 2001. "Do Smokers Respond To Health Shocks?," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 675-687, November.
    10. Trudy Cameron, 2005. "Updating Subjective Risks in the Presence of Conflicting Information: An Application to Climate Change," Journal of Risk and Uncertainty, Springer, vol. 30(1), pages 63-97, January.
    11. Viscusi, W. Kip, 1998. "Rational Risk Policy: The 1996 Arne Ryde Memorial Lectures," OUP Catalogue, Oxford University Press, number 9780198293637.
    12. 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, May.
    13. Chilton, Susan & Covey, Judith & Hopkins, Lorraine & Jones-Lee, Michael & Loomes, Graham & Pidgeon, Nick & Spencer, Anne, 2002. "Public Perceptions of Risk and Preference-Based Values of Safety," Journal of Risk and Uncertainty, Springer, vol. 25(3), pages 211-232, November.
    14. Viscusi, W. Kip, 1985. "A Bayesian perspective on biases in risk perception," Economics Letters, Elsevier, vol. 17(1-2), pages 59-62.
    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.
    16. 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.
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    Cited by:

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    2. Kim Kaivanto, 2014. "Visceral emotions, within-community communication, and (ill-judged) endorsement of financial propositions," Working Papers 69123498, Lancaster University Management School, Economics Department.
    3. 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 of Labor Economics (IZA).
    4. James Tremewan & Chloé Le Coq & Alexander D. Wagner, 2013. "Social Centipedes: the Impact of Group Identity on Preferences and Reasoning," Vienna Economics Papers 1305, University of Vienna, Department of Economics.
    5. 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.
    6. Kim Kaivanto, 2014. "The Effect of Decentralized Behavioral Decision Making on System‐Level Risk," Risk Analysis, John Wiley & Sons, vol. 34(12), pages 2121-2142, December.
    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. Jacqueline Volkman-Wise, 2015. "Representativeness and managing catastrophe risk," Journal of Risk and Uncertainty, Springer, vol. 51(3), pages 267-290, December.
    9. Steffen Andersen & John Fountain & Glenn Harrison & E. Rutström, 2014. "Estimating subjective probabilities," Journal of Risk and Uncertainty, Springer, vol. 48(3), pages 207-229, June.
    10. Chen Li, 2017. "Are the poor worse at dealing with ambiguity?," Journal of Risk and Uncertainty, Springer, vol. 54(3), pages 239-268, June.
    11. Le Coq, Chloé & Tremewan, James & Wagner, Alexander K., 2015. "On the effects of group identity in strategic environments," European Economic Review, Elsevier, vol. 76(C), pages 239-252.
    12. Katherine Carman & Peter Kooreman, 2014. "Probability perceptions and preventive health care," Journal of Risk and Uncertainty, Springer, vol. 49(1), pages 43-71, August.
    13. Kassahun, Habtamu Tilahun & Nicholson, Charles F. & Jacobsen, Jette Bredahl & Steenhuis, Tammo S., 2016. "Accounting for user expectations in the valuation of reliable irrigation water access in the Ethiopian highlands," Agricultural Water Management, Elsevier, vol. 168(C), pages 45-55.
    14. W. Kip Viscusi, 2019. "Utility functions for mild and severe health risks," Journal of Risk and Uncertainty, Springer, vol. 58(2), pages 143-166, June.
    15. 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, WZB Berlin Social Science Center.
    16. 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.
    17. 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.
    18. Stefan Trautmann & Peter P. Wakker, 2018. "Making the Anscombe-Aumann approach to ambiguity suitable for descriptive applications," Journal of Risk and Uncertainty, Springer, vol. 56(1), pages 83-116, February.

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