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Risk, uncertainty and discrete choice models

  • Andre Palma

    ()

  • Moshe Ben-Akiva
  • David Brownstone
  • Charles Holt
  • Thierry Magnac
  • Daniel McFadden
  • Peter Moffatt
  • Nathalie Picard
  • Kenneth Train
  • Peter Wakker
  • Joan Walker

This paper examines the cross-fertilizations of random utility models with the study of decision making under risk and uncertainty. We start with a description of the Expected Utility (EU) theory and then consider deviations from the standard EU frameworks, involving the Allais paradox and the Ellsberg paradox, inter alia. We then discuss how the resulting Non-EU framework can be modeled and estimated within the framework of discrete choices in static and dynamic contexts. Our objectives in addressing risk and ambiguity in individual choice contexts are to understand the decision choice process, and to use behavioral information for prediction, prescription and policy analysis.

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File URL: http://hdl.handle.net/10.1007/s11002-008-9047-0
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Article provided by Springer in its journal Marketing Letters.

Volume (Year): 19 (2008)
Issue (Month): 3 (December)
Pages: 269-285

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Handle: RePEc:kap:mktlet:v:19:y:2008:i:3:p:269-285
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100312

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  1. Grant, Simon & Chateauneuf, A. & Eichberger, J., 2002. "Choice under Uncertainty with the Best and Worst in Mind: Neo-additive Capacities," Working Papers 2002-10, Rice University, Department of Economics.
  2. 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.
  3. Heckman, James J. & Navarro, Salvador, 2005. "Dynamic Discrete Choice and Dynamic Treatment Effects," IZA Discussion Papers 1790, Institute for the Study of Labor (IZA).
  4. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-87, May.
  5. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  6. Conte, Anna & Hey, John D. & Moffatt, Peter G., 2011. "Mixture models of choice under risk," Journal of Econometrics, Elsevier, vol. 162(1), pages 79-88, May.
  7. van Soest, Arthur & Kapteyn, Arie & Zissimopoulos, Julie, 2007. "Using Stated Preferences Data to Analyze Preferences for Full and Partial Retirement," IZA Discussion Papers 2785, Institute for the Study of Labor (IZA).
  8. Brownstone, David & Small, Kenneth A., 2005. "Valuing time and reliability: assessing the evidence from road pricing demonstrations," Transportation Research Part A: Policy and Practice, Elsevier, vol. 39(4), pages 279-293, May.
  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. Machina, Mark J, 1989. "Dynamic Consistency and Non-expected Utility Models of Choice under Uncertainty," Journal of Economic Literature, American Economic Association, vol. 27(4), pages 1622-68, December.
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  12. Ackerberg, Daniel & Lanier Benkard, C. & Berry, Steven & Pakes, Ariel, 2007. "Econometric Tools for Analyzing Market Outcomes," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 63 Elsevier.
  13. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  14. Lam, Terence C. & Small, Kenneth A., 2003. "The Value of Time and Reliability: Measurement from a Value Pricing Experiment," University of California Transportation Center, Working Papers qt47s4z7z5, University of California Transportation Center.
  15. Grether, David M. & Plott, Charles R., . "Economic Theory of Choice and the Preference Reversal Phenomenon," Working Papers 152, California Institute of Technology, Division of the Humanities and Social Sciences.
  16. Hugo Benítez-Silva & Debra S. Dwyer, 2005. "The Rationality of Retirement Expectations and the Role of New Information," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 587-592, August.
  17. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  18. Thierry Magnac & David Thesmar, 2002. "Identifying Dynamic Discrete Decision Processes," Econometrica, Econometric Society, vol. 70(2), pages 801-816, March.
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  20. Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
  21. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, December.
  22. Small, Kenneth A, 1987. "A Discrete Choice Model for Ordered Alternatives," Econometrica, Econometric Society, vol. 55(2), pages 409-24, March.
  23. Jean-Pierre Dubé & K. Sudhir & Andrew Ching & Gregory Crawford & Michaela Draganska & Jeremy Fox & Wesley Hartmann & Günter Hitsch & V. Viard & Miguel Villas-Boas & Naufel Vilcassim, 2005. "Recent Advances in Structural Econometric Modeling: Dynamics, Product Positioning and Entry," Marketing Letters, Springer, vol. 16(3), pages 209-224, December.
  24. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  25. 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.
  26. Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
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